In 1990, We Were Equals. What Happened?

Part 1 of 5: Learning from China without Losing Our Soul

In 1990, India was slightly richer than China. It wasn’t a big difference, but it mattered to how people saw themselves. Both countries had similar GDP per capita. An average Indian could see an average Chinese and feel they were equals on the development path.

That was thirty-four years ago.

Today, China’s GDP per capita is almost five times higher than India’s. On average, a Chinese citizen earns about $14,730 a year, while an Indian earns $2,934. The gap isn’t closing; it’s getting wider.

This isn’t about destiny or geography. It’s not even just about authoritarianism, even though people often use that as an explanation.

It comes down to choices, how institutions are set up, the incentives in place, and the steady, often unnoticed work of building a capable state.

I’ve spent years advising political and government leaders and observing the Indian government up close. I’ve seen how files move, how bureaucracy can stall progress, and how there’s often a gap between what’s announced and what actually happens. When I look at China’s transformation, I don’t see a culture we can’t understand. I see a country that made different choices—some admirable, some harsh, but many worth learning from.

This five-part series tries to understand what China really did, why it worked, and what India can realistically adapt without taking on the downsides.

Let’s start by looking at the system itself.

They Are Authoritarian. We Are Democratic. Case Closed?

Whenever people talk about China’s rise, the same old argument comes up: they’re authoritarian, we’re a democracy, so the comparison doesn’t count. End of discussion.

That’s a lazy way to think about it.

Before 1978, China was both authoritarian and poor. The Great Leap Forward led to millions of deaths, and the Cultural Revolution wiped out a generation of educated people. So, being authoritarian alone doesn’t explain their success.

Look at South Korea: it went from a war-torn country to a tech powerhouse, first under military rule and then as a democracy. Taiwan industrialised under authoritarian rule and, as a democracy, now produces the world’s most advanced semiconductors. Japan rebuilt itself into an economic superpower while holding regular elections the whole time.

The real question isn’t whether India should become like China. It can’t, and it shouldn’t.

Instead, we should ask: Does democracy have to mean inefficiency? Does federalism have to mean division? Do elections have to cause policy gridlock?

Other democracies have managed significant changes while staying democratic. India doesn’t have to choose between democracy and development. The real choice is between a democracy that works and one that lets people down.

What Deng Actually Did

When Deng Xiaoping took over in 1978, China was in bad shape. Years of Maoist policies had weakened institutions, wiped out expertise, and left the economy stuck. The country was as poor as the poorest in Africa.

Deng didn’t just “open up” China. He changed how the whole state worked by redesigning its incentives.

Take the Township and Village Enterprises (TVE), for example. Beijing didn’t plan these. Local governments, needing money after fiscal changes, started these semi-collective businesses. Deng didn’t invent them, but he saw they worked and expanded them. By 1996, jobs in these enterprises grew from 28 million to 135 million, more than all of India’s formal manufacturing jobs today.

Or look at the Special Economic Zones. In 1980, Shenzhen was just a fishing village with 30,000 people. Deng made it a testing ground for market reforms, while the rest of China stayed socialist. Foreign investment flooded in. By 1985, Shenzhen’s GDP was 14 times higher than it was in 1980. Today, it has nearly 18 million people and a GDP bigger than many countries.

The Shenzhen experiment succeeded because it could fail without risking the whole country. Deng called this approach “crossing the river by feeling the stones.” Try small experiments, see what works, expand the successes, and drop what doesn’t.

India’s planners never really learned this lesson. We made national policies and applied them everywhere, even though states have very different needs and abilities. When things didn’t work, we blamed how they were carried out, not the design itself.

The System India Never Built

There’s one key part of China’s rise that most people overlook: the cadre evaluation system.

In China, local officials aren’t elected; the party appoints them. But to get promoted, they have to show results, especially in GDP growth, which was the primary measure for years.

Scholars call this the “tournament model.” Provincial leaders, mayors, and county heads compete for promotions. Those who deliver the most growth move up, while others get passed over or demoted.

This system turns every local official into a kind of CEO, with their future tied to economic results. They compete to attract investment, build infrastructure, and make it easier to do business. Competition between regions isn’t a flaw in China’s system; it’s the main feature.

Research in the Journal of Public Economics found that mayors in areas with strong innovation were much more likely to be promoted. The system pushed officials to compete not just on GDP, but also on patents, attracting investment, and building good infrastructure.

This is a form of decentralised authoritarianism. The central government sets the rules and judges performance, while local governments compete hard within those rules. Economists call this ‘federalism with political centralisation’, local experiments, but with central oversight.

India doesn’t have anything like this.

Our Chief Ministers answer to voters, not to performance targets. An IAS officer’s career depends more on transfers, postings, and political connections than on whether their district improves. We lack both the competitive pressure of China’s system and real local accountability.

As a result, in state capitals across India, I see bureaucrats who avoid making decisions, Chief Ministers who announce new schemes but can’t deliver, and a constant gap between promises and results.

When India Tried, and It Worked

Before anyone calls this defeatist, let me share a positive example from India itself.

In 2001, Gujarat was recovering from one of India’s worst earthquakes. The state was also facing a drought, and cooperative banks were failing. Then came the Godhra incident and its aftermath.

When Narendra Modi became Chief Minister in October 2001, most people thought Gujarat was finished as a place to invest. Who would put money into a state hit by disaster and violence?

What happened next is worth noting.

In 2003, Modi started the Vibrant Gujarat Summit to attract global investors. The first event was small, with 125 foreign delegates and 200 NRI business leaders. But it set a new standard: Indian states could and should compete hard for investment.

They offered single-window clearance, set timelines for approvals, made land available, and ensured power supply; the basics every investor looks for, but only a few Indian states could actually provide.

From 2003 to 2014, Gujarat attracted investment proposals worth Rs 16.28 lakh crore. Investments in the auto sector grew ninefold compared to 2001, and manufacturing output increased twelvefold. Gujarat also became India’s largest diamond-processing hub, handling 70% of the world’s diamonds.

Was it perfect? No. Gujarat’s progress in human development, nutrition, and education remained average, and growth was concentrated in certain sectors and regions. But the Vibrant Gujarat model showed that an Indian state could compete for investment, keep its promises, and build infrastructure quickly.

Modi basically set up a competition within the state. Districts competed for investment, bureaucrats were judged on how fast they cleared projects, and the Chief Minister’s office tracked progress closely.

This wasn’t Chinese-style authoritarianism. It was active, state-level governance within a democracy. Other states, such as Tamil Nadu, Andhra Pradesh, and Karnataka, have shown similar strengths in specific sectors.

The real question is why this kind of success is still rare instead of common.

Accountability Without Fear Is Toothless

One part of China’s state capacity that Indians rarely talk about is enforcement.

Since 2012, Xi Jinping’s anti-corruption campaign has punished over 6.2 million party members. The Central Commission for Discipline Inspection acts like an internal intelligence agency, investigating officials at all levels. Fear is a fundamental tool in their system.

I’m not saying we should copy this model. The campaign has also been used to remove political rivals and silence critics. The human cost is real.

But look at what the campaign actually did: it made corruption truly risky. Officials who were used to taking bribes suddenly faced real consequences. The sense that they could get away with anything was broken.

In contrast, India’s CBI and ED are often seen as tools for political harassment rather than as real anti-corruption agencies. People know that who gets investigated depends on which party is in power. This sense of selective enforcement makes the system worse than useless; it completely undermines anti-corruption efforts.

If we want to learn from China, we have to face an uncomfortable truth: accountability without fear doesn’t work. In theory, democratic systems, like open elections, fair courts, and a free press, should provide this. In reality, they often don’t.

Germany Builds. Japan Delivers. We Delay.

The most significant visible difference between China's and India’s state capacity is speed.

In China, land acquisition is simple because the state owns all the land. Environmental approvals are fast because courts rarely get involved. Projects stay on schedule because officials face consequences if they’re late.

India’s systems are set up to prevent the worst outcomes: people being displaced without compensation, environmental harm without review, and government actions without checks. These protections matter. I’ve seen what happens when governments push projects through without listening to people.

But our system is built only to stop bad things from happening, not to help good things get done. So, both good and bad projects face the same delays. Honest and corrupt officials deal with the same red tape. The system can’t tell the difference between someone raising a genuine concern and someone just blocking things for personal gain.

This isn’t just a problem with democracy. Germany builds infrastructure, Japan runs trains on time, and Singapore develops land efficiently. All of them are democracies or semi-democracies with strong property and environmental protections.

What they have is administrative capacity, the ability to make decisions, stick to deadlines, and hold people responsible for results.

The Real Lesson

Let me be clear about what I’m not saying.

I’m not saying India should give up democracy. I’m not saying we should copy China’s authoritarianism. I’m not saying the ends justify the means.

What I am saying is that we should stop using democracy as an excuse for poor performance.

China’s transformation occurred because of specific factors: competition among local officials, careful experiments in SEZs, strict accountability through the cadre system, and a focus on results rather than ideology.

None of these things requires authoritarianism. They all need political will, good institutions, and steady effort over many years.

States like Gujarat under Modi have shown that high-performance governance is possible in India. The real question is whether we can turn these pockets of success into a nationwide transformation.

The stakes are enormous. In 1990, we were equals. Now, China is almost five times richer. If things keep going this way, the gap will only get bigger.

We have the world’s largest youth population, a working democracy, and entrepreneurial energy that matches any country.

What we’re missing is the state capacity to turn these strengths into tangible results.

The next article will look at how China built its infrastructure: roads, ports, power plants, and railways, which turned it into the world’s manufacturing centre. We’ll also discuss what India needs to do to catch up.

Next: Part 2 – The Hardware State

Sources and Credits: This article draws on research from the World Bank, Paulson Institute, academic papers on China's cadre evaluation system from the Journal of Public Economics and China Quarterly, official data from Shenzhen Municipal Bureau of Statistics and the Government of India, and contemporary analysis from CaixaBank Research, Focus Economics, and the Observer Research Foundation. The Gujarat data draws from records of the Vibrant Gujarat Summit and Government of Gujarat publications.