The Indian Economy Blog

July 8, 2006

Puncture Mishra

Filed under: Business,Economic History,Growth,Labour market,Politics — Nitin @ 2:40 pm

The 21st century will be India’s. But some people simply won’t get it

In a recent op-ed first published in the New York Times, Pankaj Mishra misunderstands or misrepresents the motivations behind the Bush administration’s policy of reaching out to India: far more than a sop to the Indian-American lobby, it is a result of a keen recognition of America’s long-term geopolitical interests. He misunderstands or misrepresents capitalism: for it is the presence of functioning, well-regulated stockmarkets rather than the movements of their indices that characterises capitalism. He misunderstands or misrepresents electoral politics in India: for every losing Chandrababu Naidu, there is a winning Buddhadeb Bhattacharya. For despite dissing the “India shining” story, the coalition government that came to power in 2004 had to put India’s best known reformist in charge.

He misunderstands or misrepresents the nature and demands of jihadi and Naxalite terrorists: for few in India believe that only regular elections will satisfy them. He misunderstands and misrepresents facts about economic growth and reduction of poverty: and these have been pointed out by several commentators. And most surprisingly of all, in spite of being a journalist in Britain and the United States, he misunderstands or misrepresents the foreign media’s coverage of India: by insinuating (not directly alleging, mind you) that publications like Foreign Affairs, The Economist and TIME take their cue from the Bush administration, and also by ignoring what they actually say in some of those articles. But if Mishra is right, what of the New York Times’ unsympathetic treatment of India, the nuclear deal and, for that matter, even its publication of Mishra’s own article? Who did it take its cues from?

Little wonder that he ends up totally misunderstanding and misrepresenting what the new India story is all about: that regardless of its problems (and no one denies it has many), the world—and India—believes that there is a good chance that India will be a 21st century superstar.

But like the metaphorical stopped clock, Mishra did get something right:

Many serious problems confront India. They are unlikely to be solved as long as the wealthy, both inside and outside the country, choose to believe their own complacent myths [IHT/NYT]

Unlike what Mishra suggests this does not constitute a major risk to India’s rise as a global power, which is achievable even at the current, sub-optimal pace. What it means is that Indians—wealthy or otherwise—cannot be complacent and continue debating whether the 1991 reforms worked. Economic freedom and good governance are necessary to accelerate the rate at which Indians improve their lives and livelihoods. However, both the New York Times and the Guardian stand out as curious platforms to remind Indians—even the wealthy ones, for the foreign wealthy have less care and lesser influence over the state of India’s poor—of the need to shake off ‘complacent myths’.

Indeed it is Mishra’s three-fold misunderstanding of the Mittal example that sums up why he doesn’t get it. First, unlike Google’s Sergey Brin, steel magnate Laxmi Mittal was not only born and educated in India, but he also cut his teeth doing business at home before stepping abroad. Second, the fact that he decided to take on European protectionism before turning his attention to Indian red-tapism suggests that he considered setting up a plant in India a bigger challenge. Absent the red-tape, thousands of Indians would probably have found jobs in the steel industry. Third, that in spite of knowing all this, he still could not ignore India. Credible evidence of India’s emergence as a global economic power comes from the likes of Mittal and IBM who are backing up their opinion with billions of dollars. Mishra’s attempt to pass off the shrinking underbelly as the whole elephant is just cheap talk.

50 Comments »

  1. Its amazing that we still find “India Shining” propnents, long after the people has bitten them to dust. Nitin should ask about india shining with vidarbha, karnatak and andhra farmers. Where these India shining politician and “you know what?” class is leading India to. We have policy for all except Agriculture. We give tax breaks and all incentive and let Farmers die of their produce coz we import duty free commodities.
    Yes India is shining for the “class” of people who got freedom and democracy from british. The rest are still in slavery …….

    Comment by Zulfiquar — July 8, 2006 @ 5:48 pm

  2. Its amazing that we still find “India Shining” propnents,

    Isn’t it? There must be something in it then.

    Comment by Nitin — July 8, 2006 @ 6:11 pm

  3. Those who think that the NDA’s election loss means that India is not shining are

    1. Betraying ignorance of India & her politics: incumbents almost always lose
    2. Wishful thinking: If I close my eyes, it will go away
    3. Motivated denialfest – New York Times & Mishra

    Comment by Sanjay — July 8, 2006 @ 6:48 pm

  4. I feel India has got great potential and the problems mentioned by Pankaj Mishra can be tackled if political will is there. A determined judiciary and a responsible public opinion and a free press will make the politicians behave and some of the young politicians of today show promise though we have a long way to go. Let us not be cynical and be positive. After all hope is what drives people and nations. If we were not hopeful we would not have won our freedom from the British in 1947.

    Comment by Ramakrishnan — July 8, 2006 @ 7:07 pm

  5. As a side note, I’ve always wondered why the Democratic party in the U.S. & its cheerleaders like the New York Times are anti-India and anti Indian American.

    Ranking Democrat in the US Senate Foreign Relations Committee Joseph Biden during his recent trip to New Hampshire told an Indian American activist that “You cannot go to a 7/11 (a chain store) or a Dunkin Donuts unless you have a slight Indian accent. I’m not joking.”

    In 2004, Senator John Kerry referred to Sikhs as terrorists and Senator Hillary Clinton jokingly referred to Mahatma Gandhi as a gas station owner. Mrs. Clinton has long kept a deafening silence on the Indo-US nuclear deal. she is co-chairwoman of the Senate’s 39-member India Caucus.

    Comment by Sanjay — July 8, 2006 @ 7:16 pm

  6. [...] ll be India’s. But some people simply won’t get it July 8th, 2006 The Indian Economy Blog » Blog Archive » Puncture Mishra The 21st century will be India? [...]

    Pingback by Seekersdigest.org » Blog Archive » The 21st century will be India’s. But some people simply won’t get it — July 9, 2006 @ 2:34 am

  7. [...] pass off the shrinking underbelly as the whole elephant is just cheap talk. This post also appears on The Indian Economy Blog

    [...]

    Pingback by The Acorn » Puncture Mishra — July 9, 2006 @ 7:03 am

  8. You say Pankaj Mishra has misrepresented facts but your rebuttal lacks substance. Your response is largely rhetorical and contains the usual nationalistic claptrap that TOI/ET dishes us every morning. Its the same media that blows the trumpet when Bobby Jindal stands for Louisiana Governor – as if he was our own. And the same in context of Mittal Steel.

    I have just come back from travelling the interiors of Bihar, Jharkhand and West Bengal and let me tell you my friend – any talk of India being close to an economic power anytime in the next 50-60 years is mere eyewash.

    Comment by Raj — July 9, 2006 @ 8:59 am

  9. Raj,

    Pankaj Mishra’s factual and analytical errors have been pointed out by so many people (many of the best ones are linked in the post) that repeating them adds little value. Debunking incorrect facts and inaccurate representations cannot be “claptrap”. The reference to Mittal steel is not celebratory—rather explanatory. Unless you think that example is irrelevant to the issue. Bobby Jindal certainly is (irrelevant, that is), but who brought it up?

    I have just come back from travelling the interiors of Bihar, Jharkhand and West Bengal and let me tell you my friend – any talk of India being close to an economic power anytime in the next 50-60 years is mere eyewash.

    But aren’t you like one of those blind men of Hindustan? I could tell you this my friend, with equal conviction, that I just came back from travelling through several towns and villages in Karnataka, Tamil Nadu, Maharashtra and Gujarat — and prosperity is spreading. But unlike you, I’m not claiming this is the whole elephant.

    Comment by Nitin — July 9, 2006 @ 9:51 am

  10. Nitin,

    Your argument that so many people have written critical of pankaj mishra, then it must be true has logical fallacies. You should know only those people have written that have benefitted by subsidised education in India and serving USA. The vast majority the 80% Backward and Dalits are suffering. For them this India shining thing is making them poorer than they were as the the rich getting rich.

    Don’t be swayed by the TOI and such like paper, they cater to only feel good rich segments through their paid content. Next time take a trip to real India. Did you mention you travel to karnataka, nitin I could have arranged you to see the real karnataka where the farmers are in dire straits, as I am from that part.

    Lastly am not criticising your feel good article, but it is not the India I know of. Maybe I have not seen that India you have written about.

    Comment by Zulfiquar — July 9, 2006 @ 10:56 am

  11. Nitin,

    This is my first time on this blog so forgive me if I have no knowledge of the kind of reputation you guys bring to the table.

    But I will say this – most of us who write about India’s impending economic greatness – need to get off their laptops, take off their neck-ties, stop reading/watching any form of media and spend a month or two in India’s vast under-developed country side.

    I do not want to get argumentative and I will only say that I did not read your response to the very significant points made by Pankaj Mishra :
    (1) More than half of India remains illiterate.
    (2) Half of Indian children suffer from malnutrition.
    (3) Nearly 40% of the Indian population lives on less than a dollar a day.
    (4) India ranks 127 in Human Dev Index far below countries such as Mexico and Cuba (even below Myanmar !!).

    You seem to be fond of giving the “blind men and the elephant” analogy…but that seems irrelevant here considering that (from how I see it)…80-90% of this elephant(India) is jaundiced and malfunctioning. Optimists such as yourself appear to derive their hope only from the 10%.

    And Mishra did not even get to the following :
    (1) India topping all country rankings in terms of Corruption.
    (2) India’s inefficient legal system and outdated labor laws.
    (3) Business and entrepreneurship being severely impeded by (1)& (2) above.
    (4) Indian political class being filled with nincompoops – and no change to this political scene appearing likely in the foreseeable future.
    (5) Finally, India’s non-stop population growth – that will always ensure that infrastructure and resources will never meet demand. Radical changes to curb population growth cannot be expected in the free-for-all democracy i.e. India.

    …and finally I wish that tomorrow morning…when the tens of thousands of shanty people in Mumbai get out to defecate in the open on the streets, they should read this on the newspapers and be happy :
    http://in.rediff.com/money/2006/jul/08india.htm

    Raj

    Comment by Raj — July 9, 2006 @ 11:00 am

  12. Zulfiquar comments

    Your argument that so many people have written critical of pankaj mishra, then it must be true has logical fallacies.

    Ironic that Zulfiquar should write about “logical fallacies”.

    You should know only those people have written that have benefitted by subsidised education in India and serving USA.

    1) On what basis do you state that all the writers are those that have benefitted from subsidised education? And that they’re serving the US?

    2) Even so, what is the relevance? This is a classic non-sequitur, Arundhati Roy style. Check this out – http://en.wikipedia.org/wiki/Non_sequitur_%28logic%29

    The vast majority the 80% Backward and Dalits are suffering.
    3) Are you saying that 80% of India’s population is comprised of “Backward and Dalits”? What evidence do you have for saying this.

    For them this India shining thing is making them poorer than they were as the the rich getting rich.

    4) Another logical fallacy. I don’t think anyone on IEB denies that not all sections of India are advancing. Or that India has many problems. http://indianeconomy.org/2005/10/29/the-long-and-winding-road/

    However, Zulfiquar’s assertion the notion that growth is a zero-sum game ie, the rich are getting richer at the expense of the poor is not true.

    See this, for example… http://www.oxusresearch.com/economic.asp?ID=13&SubType=I

    http://indianeconomy.org/2006/02/03/rule-of-law-in-india-and-its-economic-implications/

    Comment by Prashant Kothari — July 9, 2006 @ 6:07 pm

  13. Raj,

    I don’t think anyone disputes that there are several serious problems in India that need to be solved. These problems, and the speed at which they are resolved, will limit how fast India can grow. That they need to be addressed with determination and seriousness cannot be disputed. And it is not as if the Indian media is all going gaga over the new India story. In fact, the Indian media in general covers many of these issues, although as superficially as is usual. And then there are publications like Frontline which dedicate themselves to pointing out the problems you mention.

    So one Pankaj Mishra writing in the New York Times is not breaking any new ground highlighting these problems.

    Neither does this mean that the growth in those parts/sectors in India can be overlooked because of these problems. The point I make in the post, and which merits re-statement, is that regardless of these problems and their braking effects, the pace of growth will make India an important economic player in the 21st century. Contrast, for example, India’s clout in the Uruguay Round of multilateral negotiation and the current Doha round. Taking your figures, even 10-20% of India, an economy of 100-200m people is not an insignificant global player.

    But despite all the talk about inequality, India’s income inequality is still less than that of China, United States and others.

    As an aside: I don’t agree with the view that only those who have seen the problems first hand somehow are the only ones who can appreciate or solve them. I would go by the strength of arguments rather than simple “believe me, because I’ve been there” type of assertions.

    Related Link: Joydeep’s paper is among the best I’ve seen on this subject.

    Comment by Nitin — July 9, 2006 @ 7:09 pm

  14. Bunch of macauley’s inspired,indian-english accented, neau-veau baboos strutting around w/ their newly found, but shortly lived, wealth.

    1. 79.9% of the indians earn less than $2 a day.
    2. ~40% of the indians earn less than $1 a day.
    3. per capita ~$700 just above sub saharan..
    4. take ENGLISH out from these baboos, and they will back defecating on the street (oops, they still do/lining up the railway tracks of wealthieast indian city (submerged,already?)..The nice representatives from dravidian india were seen defecating in the indian capital just after independence..
    5.Engineers are produced in india like erstwhile coolies (ever wonder why medicos took strongly to reservation more than anyone else)
    5. when credit bubble bursts and unusually low interest regimes give way to stricter, but healthier, regimen of high interest to purge excesses – like gurugaon’s hyperinflated indian prostitutes or bengaluru’s gallivanting devadasis-Gurudas charans bubbly assertion like 6-8% growth of india would look like ancient history. With no safeguards in place, thousands of IT minions and call(center) girls/boys will be scraping the barrel.
    - AGNI III failed. Sorry no chirpings yet.

    i can go on and on, but my exhaustion is not worth it.

    Comment by andiron — July 9, 2006 @ 9:11 pm

  15. Nitin,

    Guess…we can have an endless discussion on this and still stick to our guns.

    But I am amazed that you wish away India’s gigantic problems as “not breaking any new ground”….and consider India’s muscle flexing at the WTO as momentous.

    Yes, India will be (and in many ways currently is) an important global economic player. But then, any country of India’s size and population (20% of all humanity at last count) will be important to the world. I don’t see how this translates into India’s economic greatness.

    Yes, an economy of even 100-200 million is sizeable, but the economic plight of the remaining 900 million will remain much more noteworthy.

    That said, I still admire the optimism of cheer-leaders of India’s economy such as yourself. I hope you guys are proved right….but from what I know of (and seen of) India, I can’t help but consider the optimism far-fetched.

    No doubt you will find more people who applaud your version than who do not. I feel the reason is that [b]optimism is entertaining[/b] and [b]pessimism is boring[/b]. No wonder then that [i]Frontline[/i] does not sell as much. And serious cinema doesn’t make as much money as [i]Govinda-David Dhawan[/i] block-busters.

    That’s all from my side. You may have the last say. I promise not to drag this further.

    Raj

    Comment by Raj — July 9, 2006 @ 9:46 pm

  16. “Yes India is shining for the “class” of people who got freedom and democracy from british. The rest are still in slavery”

    In the good old days, those pining for these poor slaves would organize a rally at the street corner holding red flags and deliver a speech.

    Now they get on the internet (possibly over a broadban connection) and pine for the poor.

    Tell me India isn’t shining.

    Comment by RR — July 9, 2006 @ 9:52 pm

  17. btw, want to get this in. Just read Andiron’s comments above. Abrasive as he may sound, he has really got things spot on – in my honest opinion.

    Raj

    Comment by Raj — July 9, 2006 @ 9:55 pm

  18. Andiron’s “attack-dog” style makes for good circus but, not surprisingly, it lacks substance. Throwing around income numbers is without including corresponding prices is nonsensical. In official PPP terms, India’s per capita income is closer to $2500-$2800. In reality, even adjusting India’s GDP by the official PPP ratio is not a reliable indicator of the quality of life of those Indians that “earn less than 1-2 a day”. This is because a large portion (i.e. cars, high end electronics, luxury items etc) of the common basket of goods & services used to compare prices across economies is quite irrelevant to those that “earn less than 1-2 a day”.

    The rest of the post appears to be quite irrational.

    1. Why would anyone want to take english out of India so long as indians can use it to give themselves a competitive advantage in the global economy? Its like suggesting that saudi should not exploit its petroleum resources or that south africa give up its gold reserves. Sounds pretty lame.

    2. I’m not quite sure what is the point about “Engineers are produced in india like erstwhile coolies”. Unlike coolies, India engineers are being sought eagerly – with H1B programs & outsourcing – around the world. In short, the Indian economy has a comparative advantage in services and knowledge and in resource-intensive manufacturing.

    The comment about a putative “credit bubble” appears to be a figment of imagination. As PK Basu notes – never in human history has a democracy with even 200mn people sustained annual real GDP growth of 5.9% over a 24-year period as India as achieved.

    Comment by Sanjay — July 10, 2006 @ 2:44 am

  19. Raj,

    Re your comment (#15): Apart from clarifying that neither have I ‘wished away the gigantic problems’ nor do I suggest that India’s ‘muscle flexing at the WTO as momentous’, I am fine with the way you have summed up the discussion on this post.

    But I’m surprised you term andiron’s tirade as “abrasive”. I think disgusting is a better word. I can’t imagine how those who seek to hold up the end of India’s poor (which refers to you, not andiron) can even tolerate those who label engineers as coolies and call-centre workers as prostitutes. Not only does it demean the engineers and the call-centre workers, it demeans coolies and prostitutes as well.

    Comment by Nitin — July 10, 2006 @ 6:51 am

  20. Nitin,

    I just happened to read some of your previous posts on this blog and I must say that I feel a tad guilty now of misjudging you as one of those incorrigible cheer-leaders vis-a-vis Indian economy.

    I see now that you have done some very thought-provoking write-ups in the past such as : http://indianeconomy.org/2005/11/05/how-about-a-new-white-elephant-to-fund-infrastructure/

    It must ask for a great deal of effort and time from you.

    Keep up the great work !!

    Raj

    Comment by Raj — July 10, 2006 @ 10:44 am

  21. When People here are bothered only about the sizeble 100 million and what they are doing, they secretly wish somhow the 900 million problem to go away. Prashant kothari want to know about 80% backwards class. Kothari according to Govt figures 54% of indians are backward and 27% are dalits, hope you agree.

    Well i cannot argue when someone tell me that 1$ a day poor guy equals $2500 in real terms. People here may know more about economics than me as the title suggests.

    Just one last query, When everyone here says ‘ yeah i know India has problems” then why the fuss. Are you guys agaitated coz he is raising this problem internationally? Its as if no one outside the borders knew till pakaj mishra blew whistle. Grow up guys, you people don’t want to acknowlwdge the problems. Read TOI and watch Undie TV, you feel good, rather than criticizing someon who shown the mirror.

    Comment by Zulfiquar — July 10, 2006 @ 11:18 am

  22. On sale, daughters of a Rajasthan village I don’t need to elaborate, read and do something about it.

    Comment by Zulfiquar — July 10, 2006 @ 11:28 am

  23. Mittal’s success is largely due to his modus operandi of buying loss-making steel plants, and turning them around. For this he employed managers of whom a majority were Indian. In fact a lot of whom used to work in the stagnating Indian PSUs. His success does have a lot of contribution from the Indian business world. It is not at all like Brin and Google.

    Brin and Google analogy would be more apt for rebutting someone who says that Vikash Dharasu is an example of the success of Indian football.

    Comment by Gaurav Sabnis — July 10, 2006 @ 11:48 am

  24. Zulfiquar,

    You win! Conceding defeat is easier than attempting to argue with someone who cannot even read, less understand, that everyone here agrees that India has many problems that need to be solved. Yes, India has many problems that need to be solved. Really, India has many problems that need to be solved. Again, let me reiterate, firmly, unequivocally, that India has many problems that need to be solved.

    But this post was making a different point. (Before you start again, the different point does not ignore that India has many problems that need to be solved)

    NB: I suppose you read that Rajasthan article, as opposed to just getting carried away by the headline.

    Comment by Nitin — July 10, 2006 @ 1:50 pm

  25. Zulifquar says When People here are bothered only about the sizeble 100 million and what they are doing, they secretly wish somhow the 900 million problem to go away.

    Murder by imputation… pray tell, Zulfiquar, how come your know our motives so well? [grin]

    I agree with Nitin’s last comment — pointless to discuss with those who don’t want to read or understand….

    Comment by Prashant Kothari — July 10, 2006 @ 2:02 pm

  26. A lot of opinions, and some facts, on the current conditions of the 900 million or whatever the right number is. No mention of the changes. In other words, if India’s dirt poor have gone from hunger to malnutrition over the last few decades, isn’t that progress?

    Please…I am not being glib. The only scientific way to assess India’s progress is to measure the changes. The rest is chest beating rhetoric. Of course no human in this world should be even close to malnourished.

    Comment by Sarat — July 10, 2006 @ 4:14 pm

  27. Zulfiquar, the issue is not whether Mishra exposed us Indians to the west (since when did we care about what others think; if we did, our country would be in order long time ago), but the issue is that Mishra presents facts as a lie to support his conclusions.

    Even if you think, like Mishra does, that 3.5% growth is better than 8-9% growth to pull crores of poor out of poverty; even if you feel nostalgic about socialism, like Mishra does, and somehow wants to redistribute the tiny middle class wealth to the vast Indian poor (tax the wages and purchases to spend on corrupt and unworkable social spending programs); even if you some how like the unnatural scarcity of everything from food to scooters to telephones of the 60s, 70s, and 80s (the same guys who created and perpetuated those scarcities in the 70s and 80s, including the previous avatar of current PM, are in charge of India today with predictable results – I hope you are old enough to know what I am talking about while hoping that you were born post 1980 in order not have to live through it); and even if you are not the reveling kind to feed on current achievements to tackle existing problems, would you not want to use facts, as they are, to support the point that you’re trying to make? Pankaj Mishra doesn’t. He uses selective data, innuendoes, and pulls things out of thin air to make his point. Unfortunately, he is getting more and more space in western media to present his lie. I think that’s the issue Nitin is trying to puncture.

    Comment by Chandra — July 10, 2006 @ 10:09 pm

  28. Ok enough is enough! No need for idiotic personal attacks. This blog is the result of a lot of hard work and the authors are open-minded enough to permit all comments.

    Let us respect that. Enough, really! Stick to the issues.

    Comment by Abhay Ghiara — July 10, 2006 @ 10:17 pm

  29. According to Mishra, India is adding 100,000 people each day to its burgeoning middle class.

    Mishra’s point about Indians making less than a $1 a day is misleading if he does not also indicate to his readers that vegetables/ lentils etc cost 10 cents/ lb. Big Bazaar, a big deparment store in India, regularly sells potoatoes at 6 cents/ lb, eggs cost 2-5 cents apiece; a single application shampoo costs 3 cents.

    The point is that Mishra’s piece in the New York Times lacks balance, perhaps quite intentionally.

    Comment by Sanjay — July 10, 2006 @ 10:25 pm

  30. The problem with Indians in general is that they are scared of interospection.
    I thought the article by Mishra was fair.
    Anyone that thinks otherwise is actually doing a great deal of dis-service to the country.

    Why don’t any of you list the pros and cons of India, rate the cons and how long you think it will take to fix and get some clarity!

    Thanks

    Comment by Chris Prabhu — July 11, 2006 @ 4:01 am

  31. Why don’t any of you list the pros and cons of India, rate the cons and how long you think it will take to fix and get some clarity! — Chris Prabhu

    Read the other posts on IEB, going back as far as you want. You’ll discover we’ve done all that you’ve asked for… and more

    Comment by Prashant Kothari — July 11, 2006 @ 5:06 am

  32. Big Bazaar, a big deparment store in India, regularly sells potoatoes at 6 cents/ lb….

    perhaps it should not. If an IT penpusher from OSMANIA can get for his effort ~Rs 500/hr (you say market determined it..i say what market?), the tax structure should be such as to help the lowly (erstwhile brother of the penpusher?) potato-growers get a little more meat. Obviusly, tax/fiscal regime is such that farmers are getting leached dry. (well, subsidies distort it even more). The indian government is culpable in maintaining this uneven regime..But the market will soon catch up as multitudes of IT wannabes – unfortunately, the ara/chapra belt remains awefully enamored of their indigenous languages- are on their way, lost in the utopian assumption that white sahibs would surely provide a plum employment in future.. Or, may be a sinecure in one of the many govt institutions steeped in the tradition of corruption/ casteism/ regionalism..
    In India, the vast poor has subsidised/enriched the boxwallahs. Of course, the latter being fully satiated – for example, by the slave labor of housemaids working at a pittance w/ no working safeguards whatsoever- can mirthfully wax poetic about the India Inc.

    Comment by andiron — July 11, 2006 @ 6:06 am

  33. When I started working in the early 90′s I couldn’t see how India could EVER become a developed country. Now, I can see a path and good reasons to believe that it will happen in my life time. Why shouldn’t I be excited about that? I am excited not because I don’t see poverty or the myriad problems that exist. I am excited because now we finally seem to be on the way to solving these problems.

    Comment by SKY — July 11, 2006 @ 11:28 am

  34. Free markets need good governance just as much as planned economies. What constitutes good under free market conditions is very different, of course. India’s biggest challenge is a lack of responsible referees and arbiters and lawmakers to make the free economy self-sustaining and viable in the long run. But, hold on right there!

    Isn’t it possible that free markets themselves have an innate ability to generate good governance as opposed to good governments being formed with a “big bang” theory. For example, I have noticed that Indian politicians have gradually become very image conscious and extremely careful in terms of how their actions are perceived by the “junta.” That’s like our own politicians in the US whose public spiritedness and controlled corruptibility are nothing but results of a more vigilant press and public. A similar scenario is evolving in India, and that’s a step towards good governance. This improvement may have come about due to the proliferation of media as well as the quality of reporting, both offshoots of a liberalized economy. Remember reading Times of India in the bad old days? It was like reading a government press release.

    It’s the perennial chicken or the egg question. Do you have to, or can you even, install responsible governments before the economy is even allowed to run free? Or should you go for a free economy regardless, because it will eventually beget better and better governments. Look for your empirical evidence in the history books.

    Comment by Sarat — July 11, 2006 @ 9:32 pm

  35. A country as poor as India and with as much squalor can hardly be called shining by any stretch of imagination, unless you happen to inhabit one of those movies from the Karan Johar/Yash Chopra stables with Shahrukh Khan hamming away to glory. This is what the Pankaj Mishra-type naysayers are fixated on. I am not going into the motivations for these fixations. But this fixation on a snapshot view of India in comparison to other countries misses the dynamics. It fails to see why the populace in a poor country that is growing rapidly and providing tangible gains in living standards to vast numbers is likely to be filled with optimism whereas the populace in a rich or middle income country with falling or stagnant living standards and grim outlook is likely to be glum. This is where the comparison of India to CUba and to sub-saharan African countries is horrible wrong. A look at the Penn World Tables will reveal that India’s per capita real GDP has grown steadily (especially rapidly since the mid 1980s) since the 1950s whereas most of the sub-Saharan economies have either grown very slowly, staganated or declined. The same holds true for CUba (although the Penn Tables go only from 1958 through 1996). Take another example, Argentina. It was the 6th richest nation at the turn of the previous century. Today its languishing in the middle and falling fast. Argentinians have seen a steady decline in their economy for more than 50 years. They are unlikely to be cheery even though the average Argentine lives a far, far better life than an average Indian. But the average Indian is comparing himself/herself to an average Argentine. He or she is looking at the life their parents or grandparents led and considers himeslf lucky. And when I mean average I dont mean the college-educated, MNC working, Barista-sipping person. No average is meaningful in India. But Indians across the spectrum of class, caste, language or region have on the average seen meaningful improvment in their lives over the past two generations. Aside from the all the data on poverty and survey data on the consumptions basket of the poorest, the best testimonial can be had by readin Naipaul’s An Area of Darkess and then reading A million mutinies. Of course, all of us who are a little bit older can testify to the tangible improvements in our lifetimes (again even for the poorer sections of society).

    Yes, India is poor. Everybody knows that. You dont need data for that. All you need is to step outside and see squalor and poverty staring you in the face. If someone thinks that the people writing paeans to india are writing it from their confines in the West, they are sadly mistaken. Almost all of the writing is done by people who have visited or regularly visit India. Unlike in China, where Potemkin Villages can hide reality, poverty in India is in your face. And unlike everyday Indians who have become inured to misery around us, these people are visitors. Yet they are writing postively. This is not the result of a marketing job. It is an assesment by a dispassionate third-party observer.

    A country of 1 billion poeple can be poor and yet be a global power–example China. It can also be a major economic power. If India’s per capita GDP quadrupled, it would still be below the middle-income countries, but the economy would be the fourth or fifth biggest (depending on whether you use PPP or nominal dollar based figure). There would huge markets for almost everything even if a vast majority of Indians cannot afford most things.

    Comment by srinivas — July 11, 2006 @ 10:18 pm

  36. Srinivas, you couldn’t be more right. First of all, comparing India to sub-Sahara and Cuba is silly. Those countries do not have the prerequisite set of skills, demographics, and other conditions to propel them forward. India does…in abundance.

    A little of the topic, but I want to respond to your comment, “whereas the populace in a rich or middle income country with falling or stagnant living standards and grim outlook is likely to be glum.”

    Don’t count on America being one of those stagnant or declining countries ever. America, as many outsiders admit and I, as an insider for 33 years, have come to discover, is more than a country – it is a state of mind. This society, constantly nourished by people all over the world, is constantly reinventing itself and reaping the economic rewards from its boundless innovativeness. Perhaps the lesson to be learned here is that a rising economy of today will have to keep elevating itself to a higher and higher economic ground or decline. India’s low-cost IT industry, at least for now, is already finding that out.

    Comment by Sarat — July 12, 2006 @ 3:41 am

  37. >> perhaps it should not. If an IT penpusher from OSMANIA can get for his effort ~Rs 500/hr (you say market determined it..i say what market?), the tax structure should be such as to help the lowly (erstwhile brother of the penpusher?) potato-growers get a little more meat. Obviusly, tax/fiscal regime is such that farmers are getting leached dry.

    Your’e right…that way the poor getting the free stuff have no incentive to work…while the hardworking IT guy can slow down ’cause he is being burdened with a heavy tax load. A sure fire way to get to the top. It worked for the past 40 years didn’t it!

    BTW, Indian farmers get more subsidies that most farmers in other countries. Don;t freak out. Here is one example, electricity is almost free.

    Comment by Chris Prabhu — July 12, 2006 @ 10:05 am

  38. Sarat,

    I have been analyzing the US economy now for the better part of a decade and I have always been an optimist on the long-term prospects for the US. Most naysayers on America simply dont get it. Yes, America is an idea. An idea that ones possibilities are limitless and of ones own making. Perhaps the ground realities dont bear this out, but as long people believe in it, the economy will be dynamic and people will generally support free market policies. That is the big difference between the US and western Europe.

    Comment by srinivas — July 12, 2006 @ 7:44 pm

  39. Srinivas, no sooner had I exchanged ideas with you on America, I happened to pick up a magazine – either Times or Fortune – and found a one-page article on what the next propellant or value creator for any mature economy such as America’s will be. It will not be technology but ingenuity.

    Technology becomes ubiquitous so rapidly that no country can count on exclusivity and high margins from it for very long. The writer went on to elaborate upon the iPOD phenomenon as an example of ingenuity creating value. The iPOD was not in itself a technological feat, but a very original idea that put everything together – legal music downloading, digital player, per-song pricing vs. the older almbum model, an idiot-proof interface on the player, and imbued it all with coolness. Voila! Billions of dollars added to Apple’s market cap, a significant revenue stream created, and a 70% market share to this day despite numerous MP3 competitors.

    Sorry, Sony. You used to do all that in the olden days.

    Comment by Sarat — July 12, 2006 @ 10:56 pm

  40. Sarat,
    It also depends on how you define technology. And innovation is a much better word than ingenuity. As business strategy folks would say, innovative capabilities are one of the better sources of sustained competitive advantage.

    Comment by SKY — July 13, 2006 @ 1:41 am

  41. —————————————-
    India’s economic report card

    By Kaushik Basu
    Professor of economics, Cornell University

    India villagers
    India’s per capita income is a tad higher than sub-Saharan Africa’s
    For non-economists the World Development Indicators (WDI), published
    annually by the World Bank, must seem like a cure for insomnia. It is
    long, is written on large-format paper, crammed with numbers and
    consists of very few words.

    But, as an economist, I find the WDI to be a very valuable source book.

    The paucity of words means I need have no fear of being burdened with
    somebody’s expert opinion (and can merely inflict mine on you). While
    impressionistic writings and generalisations have their role, and pure
    statistics has its own risks, the latter often helps us cut through
    popular hype to see economic reality as it is.

    The recently released WDI 2006 is a wonderful document for evaluating
    cross-country performance. This column’s focus being what it is, let us
    begin with South Asia.

    Sobering

    Given the huge positive press that India has received in recent times,
    it is sobering to discover that India’s per capita income is just a
    shade higher than that of sub-Saharan Africa, and about one-sixth that
    of Latin America.

    Equally surprising is that 35% of India’s population lives on less than
    $1 a day, which is comparable to Bangladesh’s 36% and much worse than
    Pakistan’s 17% and Sri Lanka’s 6%.

    The problem with South Asia is that, being poor, even this smaller
    inequality means much greater hardship for the poor and this is what is
    feeding various kinds of rebellious movements in the region

    Your comments on the article

    What then is the basis of optimism for India?

    It has everything to do with change.

    To check this out statistically I pulled out WDI 1998 from my shelf.
    This gives data for mainly 1996 and so is unaffected by the East Asian
    crisis which started in 1997.

    In 1996, India had a per capita income of $380, Pakistan $480,
    Bangladesh $260 and Sri Lanka $740.

    Compare these with the figures in the latest WDI (which pertain to
    2004).

    India’s per capita income has risen to $620 and has overtaken
    Pakistan’s $600; and the relative gap with Sri Lanka, which now has a
    per capita income of $1010, has narrowed. Bangladesh which currently
    has a per capita income of $440 has grown reasonably well and so has
    lost out with India more marginally.

    Exaggeration

    How does India’s growth compare with the world beyond South Asia?

    A woman scrounging on a rubbish dump near Dhaka, Bangladesh
    A lot still needs to be done to combat poverty in Bangladesh
    The recent cover story on the Indian economy in Time magazine repeats
    what is common wisdom, to wit, that over the last three years India has
    achieved “the second fastest [growth] rate in the world”.

    The WDI allows us to check the veracity of this statistically. And this
    common wisdom turns out to be an exaggeration.

    If we take the national income growth rate over the period 2000-04,
    with an annual growth rate of 6.2% India was not second but the 17th
    fastest-growing nation in the world.

    If we take a longer period, 1990 to 2004, India moves up to being the
    fourth fastest-growing economy in the world, behind China, Vietnam and
    Mozambique.

    And if we take an even longer view – from 1980 to now, India does
    indeed come second, behind China and virtually tying with Vietnam.

    So what India has excelled in is sustained growth. It is this that has
    given rise to hope. And, combined with the vibrancy of democracy and
    the successes of higher education in India, this has led some
    commentators to argue that its future augurs even better than China’s.

    Inequality

    One worrying feature that could cause political instability and
    jeopardise this bullish forecast – and much of South Asia shares this
    anxiety – is the problem of poverty and inequality.

    Much has been written about this but again some statistical fact
    checking sheds new light.

    Inequality in South Asia is large but not as large as in much of the
    rest of the world.

    Homeless people in Karachi
    Even smaller inequality means much greater hardship for the poor in
    South Asia
    Let us consider the ratio of income earned by a country’s richest 10%
    and the poorest 10%. The ratio for India is 7.3. That is, the richest
    10% of the population is a little over seven times as rich as the
    poorest 10%.

    All South Asian nations have similar ratios.

    This is a lot of inequality but not as much as in China which has a
    ratio of 18.4 or the United States 15.7.

    The problem with South Asia is that, being poor, even this smaller
    inequality means much greater hardship for the poor and this is what is
    feeding various kinds of rebellious movements in the region.

    This will be one of the most formidable challenges confronting India
    over the next decade if it is to live up to its promise.

    The difficulty arises from the fact that the rising inequality is
    largely a concomitant of globalisation and, hence, for a single country
    to take action against this is to take the risk of a pathological
    backlash on the economy.

    To try to cap high-end income, as some have naively suggested, will
    cause the flight of skilled citizenry and capital to other nations and
    will exacerbate poverty.

    To wantonly subsidise the poor or to dole out largesse will cause
    fiscal bankruptcy, which will make the problem worse in the long run.

    The focus will have to be on creating private-sector jobs with the
    complementary use of a few well-directed subsidies.

    This is not a matter of sloganeering and populist pronouncements but
    will require a combination of scientifically designed policy
    interventions that reach out to the poor without damaging market
    incentives and the entrepreneurial spirit.

    Comment by andiron — July 16, 2006 @ 10:21 pm

  42. [...] Update: Here is the Libertarian whine about Pankaj Mishra story. These guys are really funny. This post reminds me of one Indian proverb “If a cat closes its eyes, it will think the whole world is dark”. Thanks to Abi for the pointer [...]

    Pingback by Krishworld Politics » Blog Archive » The great Indian Myth — July 25, 2006 @ 12:07 am

  43. Can’t we all just ignore Zulfiquar and his like, and move on? Nitin and Prashant, excellent work defending your positions. All, just read comment #41, and move on.

    Comment by Doodad — July 27, 2006 @ 2:40 am

  44. Link to Kaushik Basu’s article – it has more comments at the bottom.

    http://news.bbc.co.uk/2/hi/south_asia/5116596.stm

    Comment by Doodad — July 27, 2006 @ 2:43 am

  45. this is very good article.To wantonly subsidise the poor or to dole out largesse will cause
    fiscal bankruptcy, which will make the problem worse in the long run.

    Comment by vin — August 8, 2006 @ 7:35 pm

  46. Well I did not like the india shining political slogans
    Neither did i like mera bharat mahan for that matter.
    and the first line of “Saare Jaahan Se Achcha”
    I do like the often edited line of “Yunaan o Misr o Roma”

    Nitin,
    I am not engaging in Zulifiqar like arguements but at this stage its
    an exaggeration to say 21st century will be indian etc.
    It seems like a repeat of india shining.
    India is doing better economicaly than before, the future especialy
    long term is unkown….It is better not to make grandious statements
    regarding what will happen.

    Pankaj Mishra has been well characterized as a house nigger par excellence else where….
    There are serious problems, and likes of Pankaj Mishra Or his promotores from the NYtimes can never come up with any solution.
    Atanu Dey, was on with Mishra and Suketu mehta on Lyndons dispicably banal
    show…That makes for interesting observation, where Mishra went along
    with lyndons silly assertion that econmomic have nots had something to do
    with the bombay blasts.
    I had my doubts of Mishra from some of his early publicity that was given to him and appearance on that show confirmed it for me.
    Its better to ignore that SOB.

    Comment by Guru Gulab Khatri — August 9, 2006 @ 12:09 pm

  47. [...] Here’s an older fisking of Mishra [...]

    Pingback by The Indian Economy Blog » Puncture Mishra (Bongopondit edition) — August 14, 2007 @ 2:41 pm

  48. [...] As a mere drop in the Indian pool of engineers-turned-MBAs, I cannot come up with anything more than cuppax fundaes. However, I am always anxious to offer my readers more and better content. I am proud to announce that the intellectual level of this blog is taking a massive leap. As a special to Sleisha Cuppax Fundaes (w)Only, Pankaj Mishra is providing his review of Chak De India. I hope you will be dazzled by his intellect (and also enjoy the review). [...]

    Pingback by Sleisha Cuppax Fundaes (w)Only » Blog Archive » Batman Never Begins — August 25, 2007 @ 10:27 pm

  49. and the indian economy is improving in a unilateral way only 4 those who has the power to rule economy.

    Comment by satish jha — October 3, 2007 @ 12:11 am

  50. and improvement of our natonal economy ,nowadays matters in our family matters.

    Comment by satish jha — October 3, 2007 @ 12:13 am

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