Riding on the extreme is the way to go…

How far has ideological difference between India and China factor into shaping the economic progress?

Conventional perception is that Chinese are on a faster path to development than Indians because of the ready, well planned infrastructure that Chinese government planned more diligently than did the Indian administration. While this is by all means a credible and real state of affairs, one must analyze why a democratic country like India which is ruled by free voices has lagged behind communist China in this affair. Yes, a mixed economy and democracy leaves too much for debate and progress is usually slow due to the need to convince all naysayers. China on the other hand could just implement it without contrarian’s resistance. But perhaps the problem is a little deeper than that.
China underwent Cultural Revolution; most people grew up without the kind of religious beliefs – breadth and depth - that almost all Indians hold. When the Chinese implemented policies, they went all the way in embracing them fully. And hence it had a good percolation in the society.
India on the other hand is a mammoth of a nation whose politicians would choose state control over privatization, given a choice. Their cautious and hesitant foray into liberalization reflects how poorly the idea of economic reform through privatization has been implemented. One has to embrace an idea wholly, in order to gain its full benefits. Developed nations assumed capitalism and it worked for them because it was implemented fully. Communist administration in china made certain developments in the infrastructure and economic reforms that set the foundation for future development, and this would have been almost impossible had it followed India’s route of uncertainty. In conclusion, both capitalism and socialism (I stray from using communism!) are adverse or extreme ideologies that bring results. A sharp shift of ideology especially brought in the form of revolution, which which moves even the bottom class of society, has a higher chance of unanimous drive towards achieving widespread development. India did not have a cultural revolution, or a peasant movement or any major uprising after independence. The closest India got to a ‘revolution’ is the green revolution that claimed to have brought prosperity to Indian farmers through scientific improvement in methods of cultivation and financing. Is one such revolution sufficient? Or does it need a revolution every now and then to make a visible shift? If only move towards liberalization is as extreme and far reaching as Chinese cultural revolution, it would do wonders to Indian state of economy. It is the ideational change that is required in India. Difference between china and India is that the former reminds us of relative homogeneity and strength in social movement, while the latter is reminiscent of fragmentation and poor implementation of change. So far we believed the difference existed in the readiness to accept policies - where authoritarian rule wins over democratic one..but It also bogs down to strength of desire or movement of change - like perhaps the strength of Independence movement in early 20th century India.

potential explanation for rise in grain prices..

Have grain prices risen purely due to speculation?
Fact 1: Inventory levels have been consistently reducing, i.e. decline in hoarding
Fact 2: Expanding class of population that is inelastic to rise in grain prices

• Global hoarding of grains – lower buffer stock leads to lower chances of curbing price volatility in grains. it’s been down in 2000-05 and hence there was a dearth of buffer stock to stabilize rise in prices. Why was there a reduction hoarding grains? Speculators didn’t forecast the crop failures in Australia, the spurt in demand in grains and the search for bio-fuels. Secondly, the period between 2000-05 was a high growth period with interest rates in the US consistently appreciating and stock market performing well. Under such a circumstance, it was seen as less rewarding to invest capital to stock up on food grains vis-à-vis other asset classes. Due to this, there seems a real lack of supply from bumper stocks maintained in past. for a graph on opposite trend in inventory level and price of grains in current period, view http://www.imf.org/external/pubs/ft/weo/2008/01/c1/FIG1_20.pdf

• Reduction in the size of the ‘buffer/ shock absorbing class’ - comprising of poor people in India and China for example. In the past, when the price of grains had risen the well off people in the society were inelastic to the change in grain prices as it did not constitute a significant part of their expenditure. The poor however suffered because food expenses constitute more than half of their spending. Hence a huge layer of population in developing nations had to curtail food consumption, and made up for the increase in prices. The average American did not suffer because the price increase was rebalanced by reduction in demand from poor section of world population (which make a big proportion of demographics in underdeveloped and developing nations). Today the tables are turning, with people in India and China being raised to higher income levels, are able to consume more, and grain price rise doesn’t seem to affect them as adversely as it would have had in the past. The small portion of those who are still acutely poor still suffer, but their lowering of consumption is not enough of a ‘buffer’ to alleviate the current hike in grain prices.

Hence, the prices must rise more sharply in order to sustain the demand level. In the process the poor get battered as it falls heavier on them now than ever before.