Difference between India and China

"China is a capitalist country run by socialists and India is a socialist country run by capitalists" - A. Hull 2012

Now it is not true in all senses, but there is enough truth in it, to neatly sum the complex differences between these two growing power houses.

Since moving to India, I continue to be shocked by the sheer volume of rules governing every day life. A classic example this morning, was news that rules surrounding selling packaged goods had been loosened - you could now sell bread up to 100g in weight, in any size you want. Over 100g and you still have to sell in 100g increments. The maximum size of a pack of biscuits has also been increased from 1kg to 5kg.  I guess it's a small step, although I think the biscuit board might be missing the point. These micro rules are everywhere governing all areas of everyday life. These all date back to Nehru who, as India's first prime minister, set out explicitly to copy the Soviet economic model. Despite some liberalisation in the 1990s, and of course the latest biscuit rule changes, India's economy still suffers from a socialist style set of regulations.

Its ruling classes however, don't adhere to these rules. Endemic corruption means that the rich and powerful can get round these rules. India's largest companies, make huge amounts of money, obtaining the licences and consents that they need, while others are kept out. Property development in Mumbai is a good example. It's not rocket science - you buy a piece of land or property in Mumbai, bribe some officials a lot of money for the planning consent, and build a 40 story building. For an average size building, with Mumbai's sky high property prices, that would net you around £100m-£200m. But you have to be rich and connected to do this. It is no coincidence that the son of Mumbai's political leader, Bal Thackeray, owns one of the largest property development companies in Mumbai. This is what I mean by capitalists running and making best use of a socialist style ruled economy.

China on the other hand, has been governed by socialists for decades and for much of it, disastrously - a true socialist economy run by socialists. However, it has now famously changed. China is essentially a rampant capitalist economy, but with the socialists still in charge. Yes, there are still rules to adhere, but not on micro level of India, and there is corruption, but it's not as endemic.

As a result, and from a much lower base after the Cultural Revolution, China is now 4 times richer per capita than India, and still growing faster than India.  My quote sums up why.