Shock leads to a sense of urgency. When India's powerful Planning Commission argued the case for opening up the retail sector to foreign investment, it pointed out that China had benefited from the same move. When government officials launched a controversial slum clearance drive earlier this year in Bombay, they said they wanted to make the city more like Shanghai.
This combination of envy and fear seems most intense in the one place where it has the least reason to exist: Bangalore. India's software companies and call centers, after all, have a huge head start on China. Yet, Chinese could start to close this gap in the outsourcing sector once they have mastered English. Consider it a sign of the times that Chinese Premier Wen Jiabao chose to begin his trip to India with a visit to the high-tech haven of Bangalore before traveling to New Delhi to talk politics.
Reformers like to say that our country needs a good crisis every few years. It was only when we nearly ran out of foreign exchange reserves in 1991 that the government realized that it had to start overhauling the economy. Many in Bangalore now worry that there is a new economic crisis looming: China. This fear may well prove to be baseless and in time, China could become a vast new market for Indian software companies. For now, though, Indian businessmen like Narayan Murthy and politicians like Chidambaram are tactically using the Chinese threat to turn up the heat on those who are blocking reform. In a country where politicians and bureaucrats still use shibboleths accumulated over a half-century of socialism to obstruct progress, the word China works like a charm. That's why Wen, perceived as the emissary of an ominous economic rival, does India so much more better than as the head of a friendly trading partner.
