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India's paradoxes
Tuesday, 07 August 2012 07:37

India is a land of many paradoxes.  It is a country of remarkable high technology, world class multinational companies, and a leader in business process offshoring.  But it is also a country with a corrupt and incompetent government, and with 80% of its population living on less than $2 a day.

How can we understand this country?

India demonstrated its technological prowess in April this year when it launched its first intercontinental ballistic missile, "Agni V".  It was capable of carrying a nuclear warhead for distances of up to 5000 kilometres, putting major Chinese cities within striking distance of Indian nuclear weapons.

The "land of Bhārata" leads the emerging world in terms of multinational companies dominating international markets.  Tata with its over 100 operating companies in communications and information technology, engineering, materials, services, energy, consumer products and chemicals had the nerve to buy Corus, Jaguar and LandRover. ArcelorMittal is the world's largest steel producing company.  Reliance is the largest polyester yarn and fiber producer in the world and among the top five to ten producers of major petrochemical products. 

Infosys is a Bangalore-based global IT consulting giant.  Ranbaxy is India's largest pharma company, and is now in the global top 10 generics companies with exports to 150 countries.  Biocon is Asia's largest biotechnology company, the world's largest biotech employer, with a presence in 75 countries.   Suzlon is the world's third largest supplier of wind turbines, spread across 21 countries.  The list could go on. 

Then there is Bollywood, which is one of the world's largest centers of film production.  India is also home to the glizy Indian Premier League cricket competition, the highest paying cricket event in the world. 

At this stage of our reading, we have the impression of a great, advanced, dynamic country.  Nothing could be further from the truth.  A cursory glance of the India Premier League is symbolic of India.  It reveals that the game of gentlemen has been engulfed by series of corruption scandals where allegations of cricket betting, money laundering and spot fixing were witnessed. 

And one could wonder why India companies are so active on the world stage when there should be so many opportunities to develop their own country.  May be it is in fact easier to do business overseas than at home?  

While India has achieved strong economic growth the past two decades, this will not been sufficient to enable India to achieve most of the Millenium Development Goals by 2015.  Indeed, an alarming 80% of Indians live on less than $2 a day, giving it a similar level of poverty to Bangladesh and Pakistan.  Alarming disparities exist across the population in terms of health and nutritional status, education and skills, as well as access to clean water and sanitation.  By contrast, only 30% of the Chinese population live on less than $2 a day.

The revival of India's economic growth has been driven by reforms launched two decades ago in response to economic crisis.  India has also been able to take advantage of the global boom in business process outsourcing, thanks to its English-literate population, and the many Indians who have studied information technology in the US and elsewhere.

But India's growth prospects now look much weaker.  It is faced with the Indian reality of corrupt and incompetent politics, bureaucracy and red tape, lousy infrastructure, and the limits imposed by poverty and discrimination against women.

Notwithstanding India's much vaunted democratic credentials, it scores well behind China on most economic governance indicators.  On Transparency International's corruption perceptions index, India comes in at 95th, compared with China's 75th.  The World Bank's ease of doing business index ranks India at 132nd in the world versus China's 91st.  The World Economic Forum's Global Competitiveness Index again gives India a very much worse ranking than China.

India today has some similarities to China in the pre-reform Mao era.  At that time, China had the nuclear bomb and satellite technology, but had over 90% of its population living on less than $1 a day.  Deng Xiaoping had the good sense to see the necessity of economic reform.

India's reforms, launched two decades ago, were a response to a crisis.  Its fractious democratic politics seem to be a major block on reform.  It seems regrettable that we may have to wait for another crisis before we see a new wave of reform in India.

References:

Pota, Viks.  India Inc.  How India's Top Ten Entrepreneurs are Winning Globally.
http://www.indiaincthebook.com/

Transparency International.  Corruption Perceptions' Index.
http://cpi.transparency.org/cpi2011/

World Bank.  Doing Business.
http://doingbusiness.org/

World Economic Forum.  Global Competitiveness Index.
http://www.weforum.org/issues/global-competitiveness
    

 

 


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