Besides Diaspora - Domestic confidence also matters

The Indian Diaspora is the largest in the world to-day after China and has roots in every country in the globe. According to Sunil Prasad, Economist with International Confederation of Free Trade Unions (ICFTU) and President of GOPIO-Belgium, the Chinese Diaspora numbers about 55 million and contributes almost 60 per cent of China’s total foreign direct investment, while Indians with 20 million contribute less than 10 per cent.

According to Sadananda Sahoo, Dept of Sociology University of Hyderabad, the Chinese Diaspora is dispersed in 136 other countries; but of all the Overseas Chinese, over half live in Southeast Asia. The Indian Diaspora is dispersed in 110 countries without concentrating on any particular region. Chinese emigrants fall into three distinct patterns i.e. indentured labour, free artisans and traders. They are a very diverse group of people, representing over 150 cultural and linguistic groups. These Chinese are largely Buddhist and Taoist, but represent the Christian, Islamic, and Jewish faiths as well. A majority of Indian immigrants belong to the class of the educated and professional elite such as engineers, scientists and college teachers as well as accountants and businessmen. However, recent emigration of the Indians to the West Asian countries is basically oriented to labor and servicing occupations on a contract basis. Indian immigrants are also a very diverse group of people representing different religion, ethnic, occupational and caste groups.

Chinese Diaspora's role in rural development in China is significant. The China Foundation, Inc. is a unique non-profit and charitable organization established in 1997. The mission of the Foundation is to raise funds for improving basic health services and elementary education programs in underdeveloped rural areas in China. In India, the Diaspora’s participation to rural development is confined to Punjab, Gujrat, Tamil Nadu, Andhra Pradesh, and Kerala.

Although the Indian Diaspora has miles to go to match their Chinese counterparts in fostering the economic development of their native country; India cannot just blame its Diaspora for showing lack of confidence. This is because, we have evidence to suggest that domestic Chinese population is doing a lot more than domestic Indian population to accelerate economic growth.

Consider the example of Chinese corporations who have listed their stocks in domestic capital markets and in Hong Kong stock exchange. All most all of these stocks enjoy premium valuation in domestic exchanges compared to multiples on the Hong Kong exchange – suggesting higher confidence and exuberance on the part of domestic Chinese investors, when compared to foreign investors who invest in Hong Kong. The magnitude of valuation differential was so high that Chinese regulators had to eventually intervene and allow for arbitrage trades between the exchanges in the hope of achieving price equilibrium. Despite the regulatory intervention; the valuation differential still persists – fueled by ever increasing appetite of domestic Chinese investors.

The opposite is true of Indian companies who have listed their stocks in domestic exchanges and in the US (via ADRs) and global capital markets (vis GDRs). All most all of these stocks trade at a discount in domestic exchanges compared to multiples attributed to their respective ADRs/GDRs – possibly suggesting lower confidence on the part of domestic Indian investors, when compared to foreign investors who invest in ADRs/GDRs of India Inc.

The higher confidence levels among domestic Chinese investors, relative to domestic Indian investors, could be another significant factor that will determine the difference in growth profiles of the two economies.