China vs. India

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Johan Norberg, everyone's favourite Swedish libertarian, is just back from the Asian giants and writes:

India's hidden strength is that the country is already extremely entrepreneurial - but in the informal sector. An Indian friend mentions that most of the cars we see on the roads, and many computers in the offices, are assembled in small, informal factories, outside the law, to avoid the many regulations and taxes that still curbs the Indian economy.

Imagine what the Indians could do if all that energy was legalised. In that case the Chinese have good reasons to see them as serious competitors.

What are the barriers to doing business in India and China? Actually, they are still high in both countries. The Doing Business database ranks China a modest 91st on the overall ease of doing business, with India worse but not dramatically so at 116th. Looking in a little more detail, in China it's quicker to start a business, get goods from factory floor on board a container ship, and register property. But Indians - perhaps surprisingly - seem to have more flexible labour laws and fewer hassles with licences.


Comments are open. How could they not be?

Update: more on China vs. India here and here.

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