'We shouldn't be arrogant or dismissive about China because they are not democratic'

So what are the five major changes that you have seen in India?

Self-confidence is probably at the top. The people are really feeling strong, and they feel they can compete with anybody in the world, and that India has reached a place where there's no going back. No stops. It is progress from here on now. That's all five wrapped into one really.

But do you think this self-confidence has lead to some amount of cockiness, that we are neglecting some basic issues?

I don't think you are cocky. You better not get cocky. But you might be on the verge of it. I think China's getting cocky. China's feeling very strong and very smart, and they better start worrying a little bit.

Just watch this conference here. The Chinese here (at the Asia Society conference) are very senior people. I have been talking to a lot of them. They are heads of trade and industry from their province, the senior adviser to (Chinese leader and former president) Jiang Zemin was here. And you know, most of them don't speak English. They don't know what's being said at the prime minister's speech, they are looking very insecure in this environment outside of China.

Then Bush just came here, and they are seeing this India-American nexus. So I think they are a little bit concerned. That will be good for China, it will take some of its burgeoning arrogance away.

I don't find the Indians are being cocky, but some of the businessmen I see are dismissive of China. And that's wrong. They will say: 'well look, China's got 40 per cent of non-performing loans in its state banks. It has built all this infrastructure that they don't need yet, there are highways that are not full yet, what a waste of money.' Don't dismiss that. Because first off, do you have any doubt that China will grow into that infrastructure?

Somebody told me the difference between China and India, one great difference, is that in India, the private people have the money, while in China, the government has the money. So they can build infrastructure, and they have no obstacles to building it. As for those state bank loans, that's China's welfare system. Because they give loans to factories that may not be making money, but they keep those workers employed while they transition their economy to more of the private sector. If they lay them off, they have disturbances that could destabilise the whole country.

Never doubt for a moment that the Chinese are not among the shrewdest financial managers on earth. You talk to their central bank governor, you talk to their premier, all down the line, these people know what they are doing. Their public rhetoric may be one thing. But you get them at a table, they know what their problems are, they know where they have got to fix it.

They are focused from the top down. And they are all sticking together and fixing it. And that is what India has got to learn from China.

When I was here with Dow Jones, I think it was 1998, it was an Asia Society conference, and there was a prime minister, I don't even remember his name. When he heard I was from China, he said, 'Oh, we have this great advantage over China, because we have our democracy and our court systems.' Actually, that's your disadvantage, because your court system and your democracy seems to protect the old guard and not allow entrepreneurs to rise. Whereas in China, their courts may not always be that strong, but it's all about entrepreneurship and opportunity.

But now, of course, it has turned around. I hope that what's going in China makes India's democracy more efficient, in that you can't have one group of people stand in the way of progress of the whole country. America's democracy got some problems too right now. So we shouldn't be arrogant or dismissive about China because they are not democratic. And they don't need us to teach them how to be democratic, they'll find their own way.

Image: Indian employees at the Quark call center during their night shift in Mohali, Punjab. Companies such as Texas-based Dell Computers and India's second largest software and outsourcing firm Infosys Technologies have built state-of-the-art offices in remote cities in India.

'India has the greatest wastage of manpower'

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