We need to look into the background before I come to real answer. Today when we look back at those times it is difficult to visualize how much world was divided between capitalism and socialism/communism. It was believed that rich people were source of misery of all the poor people. This naturally meant that socialism/communism found favour with poor people across the world particularly in the countries which were ruined by direct colonization (India in this case) or through influence of colonial powers (China). After Second World War colonial power had lost their hold on the colonies and countries were getting independence. India (1947) and China (China) gained their independence and current systems around the same time. Both were following socialist policies because of aforementioned reasons. China was communist where all the resources were with state and India was having “Nehruvian Socialism”, where state was all powerful but private property was allowed thanks to our robust constitution. Nehru dominated Indian and Mao virtually owned China.
India got its chance before China when Nehru died in 1964 but Shastri died soon after and Nehru’s daughter proved to be more socialist and dictatorial than Nehru himself. India got another chance in 1977 when Janta Party came to power and tried to move towards market economics, but again it was short-lived and Indira came back to power in 1980, which meant those same policies continued till beginning of 1990s when P V Narsimha Rao came to power. Although Rao belonged to Congress party of Gandhi Nehru dynasty, he started the reforms, which were more or less forced upon him because of financial conditions of the country at that time.
China got their chance in 1976 when Mao died and in 1978 Deng Xiaoping was elevated to top position. He was the guiding force for next 15 years, which resulted in continuity of the policies. He called for "four modernizations" (economy, agriculture, scientific and technological development and national defense), and announced an ambitious plan of opening and liberalizing the economy. He was visionary and put forward the three steps suitable for China's economic development strategy within 70 years: the first step, to double the 1980 GNP and ensure that the people have enough food and clothing, was attained by the end of the 1980s; second step, to quadruple the 1980 GNP by the end of the 20th century, was achieved in 1995 ahead of schedule; the third step, to increase per capita GNP to the level of the medium-developed countries by 2050, at which point, the Chinese people will be fairly well-off and modernization will be basically realized.
Unfortunately, we did not have that kind of visionary and missed the two chances that we got before China. So China had a head start of at least thirteen years over India. If you go through GDP, GNP, Infrastructure data, you will find that till 1980, India and China were at par with each other.
Another advantage that China had was that of political system. I am not advocating one party system here but our democracy had thrown some roadblocks with unstable governments. Now we are moving in right direction. Even though different political dispensations have ruled in last 25 years since P V Narsimha Rao started the reform process, broad direction has been same under successive governments, may be at slower pace than desired. When I am writing this answer we have a majority government at center for the first time since reforms started in India. One with clear mandate.
Originally written for Quora
https://www.quora.com/Policy-question-Why-did-India-fail-to-make-necessary-economic-reforms-during-1970s-and-1980s-while-China-took-full-advantage-of-the-opportunity
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