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As professor of strategy at Harvard Business School, Khanna startled his peers when he wrote a provocative article in the July-August issue of Foreign Policy entitled It's India Above China in the New World Order. His thesis: India could overtake China. On his visit to India for the recent India Today Conclave, Khanna spoke to BT's Ashish Gupta. Q. You have spoken of India overtaking China as a leading power; what makes you so optimist about India's prospects? A. While the two countries had embarked on different strategies of development and have achieved different rates of growth, China has discouraged or actively undermined local entrepreneurship in favour of an FDI-dependent approach. India, on the other hand, has allowed entrepreneurship and free enterprise to thrive. In fact, there is much more private sector initiative in India----be it in advertising, publishing, non-governmental organizations (NGOs). Hence, I am so optimist about India's future. The real issue isn't where China and India are today, but where they will be tomorrow. Q. What are your major concerns, though, on India? A. There are many issues that concern us. For instance, how will India rein in the fiscal deficit? How will India discipline its political class? One challenge that India faces is deregulation, because India remain quite over-regulated compared to other countries at its level of per capita income. Q. How does foreign investment affect the economic outlook for India and China? A. In general, FDI has been positive for both economies. It has, after all, provided goods and services that did not otherwise exist. But China got more FDI because it liberalised the external sector much before India did. Q. Are you satisfied with the Indian pace of reforms? A. Not at all. The government should speed up its reforms in the internal sector, rather than scale back external sector reform.
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