I read an editorial from Forbes that discussed how many Indians widely believe that India is the next superpower. The recent surge of Indian offshore IT companies, entrepreneurial ventures, and acquisitions coupled with a regular 8% growth in domestic output since it became an open market superficially look like the signs of economic success. But if you look beneath the surface you see a populace that is largely suffering.
The editorial goes over the reasons why India’s desire to call itself the second most influential country in the world misguided and unlikely. Among those reasons include:
* 47 percent of Indian children under the age of five are either malnourished or stunted.
* The adult literacy rate is 61 percent (behind Rwanda and barely ahead of Sudan). Even this is probably overstated, as people are deemed literate who can do little more than sign their name.
* Only 10 percent of the entire Indian labor force works in the formal economy; of these fewer than half are in the private sector.
* The enrollment of six-to-15-year-olds in school has actually declined in the last year. About 40 million children who are supposed to be in school are not.
* About a fifth of the population is chronically hungry; about half of the world’s hungry live in India.
* More than a quarter of the India population lives on less than a dollar a day.
* India has more people with HIV than any other country.
It appears that they’re focused on the economic growth without the longterm efforts it takes to sustain growth like building infrastructure and developing the middle class. Of course, with such a large population this is a behemoth of a task!
The 2006 UN Human Development Report, which ranks countries according to a variety of measures of human health and welfare, placed India 126th out of 177 countries. India was only a few places ahead of rival Pakistan (134th) and hapless Cambodia (129) and behind such not-about-to-be-superpowers as Equatorial Guinea (120), and Tajikistan (122).
As these and other numbers suggest, Indian triumphalism (a notable 126,000 hits on Google) is not only premature, it is misguided. Yes, growth has been brisk, and of course growth is necessary to make a dent in poverty. But as Edward Luce, author of the excellent, “In Spite of the Gods: The Strange Rise of Modern India,” noted in a recent talk, poverty in India is not falling nearly as fast as its brisk rate of growth might anticipate.
The reason for this is that Indian growth has been capital-intensive, driven by the growth in high-value services such as IT. This is a good thing, but what it does not do is create stable and reasonably paid employment for not particularly skilled people - and this matters a lot, considering eight to 10 million Indians enter the labor force every year. Luce estimates that there are 7 million Indians working in the formal manufacturing sector in India - and 100 million in China.
To look at it another way, the 1 million Indians working in IT account for less than one-half of one percent of the entire working population. This helps build reserves (and national confidence, and tax revenues) but is not the poverty buster that labor-intensive development is. As Prime Minister Singh told Luce, “Our biggest single problem is the lack of jobs for ordinary people.”
It’s interesting to see how many countries focus on what they look like to the rest of the world without dealing with the issues at home. I know the U.S. is guilty of the same. But I think most of our county’s gains in terms of wealth and power came as a matter of circumstance and strategy. The fact the U.S. started with the idea of freedom does a lot in our favor. It took us a couple hundred years or so to figure it out. But here we are, and we still haven’t gotten it right yet.
Investors: What is next for India?
LOL. In case you are completely confused as to why I would post something about India. Two words: Silicon Valley.
