India and China have finally signed an agreement on civil aviation. The Beijing-Delhi air link will start on March 28. There is a depressing history to this as the recently released Volume 27 of the Selected Works of Jawaharlal Nehru reveals. This volume contains detailed accounts of Nehru's meetings with Mao, Zhou and other Chinese leaders during his only visit to China.

On October 21, 1954, Zhou told Nehru: "We desire that Indian Airlines should come into Canton via Hong Kong so that they can be connected with China ... Similarly, on the basis of equality our airlines should extend to Calcutta. Of course, we will not be having any airlines to India immediately while India may be able to start airlines to China immediately. But since we are friendly countries Indian extension can start and we are giving it as a gesture to a friendly country." Nehru replied, "The question of airlines requires careful consideration."

Well, the matter took 47 years to be resolved and the roles are reversed. Then, India would have started the service first. Today, China will be first off the block. This episode reflects the India-China economic story of the past five decades, a tale of missed opportunities for us, opportunities that continue to get lost entirely because of poor infrastructure, rigid labour laws, small-scale reservation and other policy bottlenecks.

In the 1950s and '60s the two countries were roughly on a par and in many areas India was even visibly ahead of China. But from the mid-1970s, China raced ahead and the gap increased spectacularly in the 1990s largely because of China's stunning performance in exports and in investment. Barring software exports, there is no area where India's performance is superior. China is the second-largest economy in the world and India is the fourth largest, measured in terms of purchasing power parity. On present reckoning, by 2010, India could overtake Japan to occupy third place while China could overtake the US by 2030. But the India-China gap would remain. The extraordinary success of China in labour-intensive mass manufacturing has given it the big edge over India, an edge that cannot be compensated for by our current leadership in knowledge-based industries. In any case, this leadership is itself under threat, reflected in Premier Zhu Rongji's recent pilgrimage to Bangalore, following a trip there by Li Peng last year.

India scores over China in its commitment to political democracy and in its celebration of social diversity. But that is no excuse for being left behind in economic development where China has outstripped India thanks to vastly superior political leadership. As an example, no political party in India has seen it fit to do what the Chinese Communist Party (CCP) has done: set up a training institute. For the past five years, this school was run like any American graduate school by Hu Jintao who soon takes over from Ziang Zemin as general secretary of the CCP.

Are India and China natural adversaries? A new book by the noted American Sinologist John Garver, Protracted Contest: Sino-Indian Rivalry in the Twentieth Century, thinks so. It is a work of formidable scholarship and is unusual for the use of primary Chinese source material. Garver's thesis is that India and China have a fundamentally conflicting relationship. Their political and military strategies are such that their interests clash-in relation to the western and eastern borders, Tibet, Nepal, Bhutan, Pakistan, Myanmar and the Indian Ocean. Garver's conclusion is that "unless India is able to alter its lacklustre development record and to work out a skilful and confident programme employing Indian national capabilities in the South Asian region, India could well conclude that the prudent way to enhance its security is to assume a role as junior partner to an emerging Chinese superpower".

Of course, Garver's thesis has its critics. India and China, written by C.V. Ranganathan, India's foremost Sinologist, and Vinod Khanna, appeared last year. The duo recognised the deep differences between India and China but had argued for India's engagement with the Chinese across a broad spectrum of areas. But are we ready for it? Since August 1999, Ranganathan has been spearheading a non-official "Kunming Initiative" that seeks to build economic linkages between India's north-east, China's south-west, Myanmar and Bangladesh. But nothing concrete has materialised so far.

The pace of implementation of the two historic Sino-Indian agreements on the border in September 1993 and November 1996 has been disappointing and we have to share a good part of the blame for this. V.V. Paranjpe, who was the interpreter and note taker during Nehru's trip, wrote last week in the Hindustan Times that India is befogged with prejudice and misunderstanding about China. What India needs is the boldness of a Rajiv Gandhi who, ignoring many of his advisers, radically redefined our relationship with China with his revolutionary trip to Beijing 34 years after his grandfather's journey.

(The author is with the Congress party. These are his personal views)