All entries for Thursday 10 November 2005
November 10, 2005
Last month India surprised the world’s economists by growing at the pace of 8.1% in the last quarter. Initially predicted to be around 6–7%, India’s economy it seems is unstoppable. However, despite the excessive positivism surrounding its economy, things are not as smooth sailing as they seem on the surface. Although everyone speaks of China and India as the tiger economies of today, India’s heavily corrupt political system has ensured progress is by and large left to the initiative of the private enterprise, leaving India effectively light years behind China.
The fact remains that India desperately lacks the basic infrastructure required for progress. A six hour power cut in the sweltering heat of summer is nothing unusual in New Delhi, neither is a four hour traffic jam during evening rush hour in Kolkata. And Projects essential to development are delayed by decades, take for example the international airport in Bangalore. It was originally thought up in the early 90’s, yet the actual building work has only begun this year.
Arrive at any one of India’s airports and it is hard to imagine that this is a country actually making economic headway. Delhi airport, which is one of the only two profit making airports in India resembles a highly disorganized market more than an airport. Unnecessary Immigration delays are to be expected and losing luggage in the airport is far from uncommon. What is annoying is that a nation with such vast resources and extensive knowledge is not able to utilize its resources well. Indians are involved in major projects to design highways, airports, bridges, power plants in every corner of the world. From Singapore to Los Angeles, Indians provide hard labor as well as high quality technical support, and Indian companies outsource to 300 of the top fortune 500 companies. What India lacks is not knowledge, resources or skill but decent, educated and professional leaders.
The problem ultimately lies with the Indian government. Mot only is it painfully slow in making decisions; it simply refuses to make any right ones. Take for example privatization. Public companies are a paint in the arse for the Indian government, and yet precious tax money is going into ensuring inefficiency, over employment and huge losses. Essential VAT tax reforms were protested against rigorously, before finally being implemented earlier this year and most state governments still want nothing to do with it. India is at a crucial juncture, today it is almost halfway to meeting its goals of becoming a developed nation by 2020, but as usual not enough is being done.
Thankfully, all isn’t lost as yet. Thankfully left to its own devices, the private sector in India has ensured the much-needed boom of the Indian economy. Consumer confidence in India is at its highest ever and there is a burgeoning middle class willing to spend all the money they have. Last year its imports crossed $100 billion, and its service sector exports alone have blossomed into a $20 billion industry, and Industry growing at its fastest rate since independence. Along with the business aspect, India has the developing world’s most stringent and highly developed English based education curriculum. From Bill Clinton to the Economist, India’s landmark institutions especially the Indian Institute of Technology (IIT) and the Indian Institute of Management (IIM), have received unfaltering praise. In fact, it is estimated that the net-worth of IIT graduates alone in USA is estimated at more than $30 Billion.
If India ever wants to be a serious candidate to challenge China, it needs some radical reforms and the Indian government needs highly educated people such as India’s Oxford educated prime minister Dr.Manmohan Singh who is credited with introducing the reforms that kick-started the Indian economy back in 1992. Eventually though it must be said that China has a huge advantage over India simply because it has a government that wants their country to develop quickly and is taking the required actions to do so. Not only that, but because of lack of opposition it can implement policies without fifteen years of debate, that is currently the norm in India. Some people may think it is hypocritical for China to have a communist government and a capital market. Ironically, the communist government of China has a far more pragmatic, progressive and open minded approach to capitalism than comrades in New Delhi, the world’s largest ‘Democracy”. The Chinese government knows what it needs to do, it does it, and as a result China is and in all likelihood in the future also will be economically more successful than India