Recently, addressing a gathering of Indian industrialists, a union minister opined that it was not fair to compare the progress of the Indian economy with that of China as the former was restricted in its maneuvers, being a democracy. Is there merit in the minister's assertion? Is a democratic setup a dampener to economic growth? Let us examine this further. Data showing how the Chinese dragon has left the Indian elephant far behind in economic performance abound. It is estimated that the Indian economy would need 13 years of 8% y-o-y growth to reach the current size of the Chinese economy. By then, the Chinese economy would have grown even faster, widening the gap further.
China is a country with severely restricted individual liberty, while Indians are perhaps endowed with the greatest degree of freedom that a developing nation can offer - sometimes even bordering on licentiousness.
Most of the developing nations that have made rapid progress in the last quarter of the twentieth century have had a significant democracy deficit. Does this scarcity of democracy really give them any advantage vis -vis economic development? Perhaps, in some ways, it does.
Countries like China with authority vested in a small central body are capable of taking decisions quickly. In democratic societies like India and Brazil, the smallest of decisions often has to undergo detailed scrutiny from different sections. In the communication age that we live in, the importance of speedy decision making can hardly be overemphasized.
Further, centralized governments can be decisive in their actions. Rollbacks, on the other hand, are a constant headache for genuine democracies, and Indians are only too aware of it. The absence of haggling in decision making is also necessary for effective centrally planned resource allocation - an instrument that democratic nations often resort to. Countries like China can afford to adopt optimizing policies while the lot of democratic governments has been observed to be satisficing in their approach.