The Indian Economy Blog

February 10, 2007

The Indian Elephant

Filed under: Business — Atanu Dey @ 5:24 pm

The Indian economy must be an elephant. At least that’s what it feels like when you read the stuff that observers are saying about it. Blind people describing what they perceive the elephant to be through their sense of touch comes closest to characterizing the quite varied descriptions of the Indian economy. Here’s Cait Murphy of Fortune advising us “India the Superpower? Think Again” (Feb 9th, 2007) and there’s Stephen Roach of Morgan Stanley telling us that “India [is] on the Move” (Feb 9th, 2007), while Niranjan Rajadhyaksha of Mint holds forth in his new book on “The Rise of India.

To get a better understanding of an elephant we have to walk around the elephant, of course, and integrate the various localized partial descriptions in our mind’s eye. Murphy is right of course that the myopic hubris which declares India to be an economic superpower is a load of nonsense. Surely, an economy that cannot even feed half its below-five children or one where around 20 percent of the people are chronically hungry is a pretty dismal one, never mind all the hot air about 8 percent GDP growth rates. He points to the 2006 Human Development Report’s ranking of countries according to health and human welfare measures, where India ranks 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).” India failed according to that report card at least.

But that is not in fundamental conflict with Roach’s position that India is making progress. One can be quite sick and still be on the road to recovery. It’s the positive trend that should give some hope. Roach’s vantage point is the Indian corporate sector, which of late has been hitting the headlines. He says of his recent visit to India: “What blew me away were the corporate and entrepreneurial stories. For all the buzz over China, one of the great paradoxes of the world’s greatest development story is that it only has a handful of truly world-class companies. By contrast, India has a much deeper and broader stable of very powerful businesses. Moreover, it’s not just IT services – it’s also telecom, pharmaceuticals, energy, steel, and auto components.” You can not expect the chief economist of an investment bank and a global financial services company to not be a cheerleader in the game of international takeovers.

India is sick but on the road to recovery, seems to be a reasonable position. In the excerpt (linked above) of Rajadhyaksha’s book, I read that, “India will have to deal with myriad challenges in the years ahead if it is to ensure that it remains on its current growth trajectory and also if it is to help more and more of its citizens become active participants in the global economy. Five issues stand out: poverty trends, income inequality, energy, employment, and infrastructure.”

Poverty trends are positive, he notes, but he is worried about rising income inequality. It is somewhat puzzling that within a discussion of growing income inequality he cites irrelevant[1] figures on how many Indians are US dollar millionaires (~70,000) and billionaires (23). Be that as it may, he does note that more than income inequality, changes in consumption patterns matter.

I intend to read Rajadhyaksha’s book at the earliest opportunity and until then I will reserve my comments on his position. But I am disappointed that he did not include education in the list of the main challenges that India faces. Sure, both Murphy and Rajadhyaksha note the lack of adequate physical infrastructure. But Murphy mentions education also.

Like everyone else, I too have my biases. Whenever I read an analysis of India’s economy, I keep a keen eye out for the word “employment.” It is red flag to me and I feel like screaming “It’s not employment, stupid, it’s production that matters.” I can argue (and will do so at length one of these days, be warned) that it’s precisely that obsession with employment at the detriment of production that has been the primary cause of India’s dismal economy. Production is king, and the rest of the bunch of concerns including employment are at best minor functionaries.

On that note as we continue to walk around the elephant, I will conclude with the immortal words of Inspector Clouseau, “Until we meet again, and the case is sol-ved.”

Notes: [1] It would appear that the wealth of these 70,000 US dollar millionaires and 23 billionaires (lower bound around US$ 100 billion) is being implicitly compared with India’s annual GDP (around US$700 billion.) That is like comparing apples to horses. The wealth of these super-rich 70,000-odd people has to be compared (if at all) not with the income of 1 billion Indians, but rather with the wealth of 1 billion which I guess will be around US$ 20 trillion.


  1. Dear Folks

    The national family health report is out. This is the third in a series of surveys that capture of health levels of families across the nation. With a sample size of 100000 across the nation it is quite representative at a national level. Here are some key headlines, good first-

    - Fertility levels have reduced marginally from 2.9 to 2.7 (benchmark: 2.1 is replacement level) in 7 years

    - Urban fertility rates (32% of population) are below replacement level at 2.07 whereas rural fertility rates are at 2.98

    - Compared to 40% of the families with 2 children wanting more than 2 children in 1993, the figure has dropped to 17% in 2005. During the last 7 years the figure has dropped from 28% to 17%.

    - AIDS awareness, increased from 40 to 57%

    - Infant mortality has reduced from 68 to 57

    - Contraceptive usage increased from 48 to 56%

    - Penetration of polio vaccine increased from 63 to 78%

    - Literacy increased from approximately 63% to 68% in a span of 7 years

    Overall mostly good news on the population management front, still a long way to go.

    Now, the bad news

    - % of child population who received vaccinations has changed marginally from 42 to 44%. The main areas of concern are the penetration of DPT and Measles vaccine

    - Underweight children below 3 has not changed at all during the last 8 years. 46% of children below 3 are classified as underweight

    - DPT Vaccine penetration, no change from 55.1% to 5.3%

    - Children in the age group 6 to 35 months who are anemic stands at about 79%, up from 74%, 7 years ago

    - Married Women in the age group 15 to 49 years who are anemic stands at about 56%, up from 52%, 7 years ago

    Overall, a mix of good and bad news. While the international media have gone tomming about the data about underweight children, the data for underweight children is a little unreliable at the state level because of the sample sizes. However at the national level, the sample sizes are fine and therefore should be taken as reported. There are two major trends that have emerged

    a. The India-Bharat Urban-Rural divide

    b. The BIMARU-Non-BIMARU divide

    The rural urban divide is phenomenal

    Vaccination: 58% vs 39%

    Mortality 42 vs 62 deaths per 1000

    Contraceptive usage: 64% vs 53%

    Media: 93 vs 73 for men and 87 vs 54 for women

    Literacy: 81% vs 61%

    Electricity: 93% vs 56%

    Piped Water: 71% 28%

    Toilets: 83% vs 26%

    TV: 73% vs 30%

    All of these imply that most rural folk are typically engaged in low productivity tasks aka agriculture leading to lower consumption and therefore lack of utilities and services, particulraly from the Govt sector. The data indicates that while Govt deliveries have been equally faulty in both urban and rural areas, the private sector has largely substituted the Govt in providing some services in urban areas because of higher disposable incomes in Urban areas

    The BIMARU (Bihar MP Rajasthan UP) vs Southern states (AP, TN, Kar and Ker) gap is another interesting facet. here are some comparsions. All data have been weighted to taken into account individual states within these groups

    Underweight Children: 51% vs 36%

    Vaccination: 29% vs 62%

    Infant Mortality: 69 vs 39 per 1000 births

    Media: 73% vs 91% for men, 49% vs 83% for women

    Women Contraception: 44% vs 65%

    Literacy: 59% vs 72%

    Electricity: 48% vs 89%

    Piped water: 17% vs 64%

    TV: 31% vs 54%

    Rural Population: 76% vs 62%

    Fertility: 3.6 vs 1.9

    Within this data there appear to be multiple trends

    a. More people live in rural areas in BIMARU vs South and henceforth related issues

    b. Relatively lesser women empowerment culturally

    c. Less efficient delivery/ lack of focus of Govt services in BIMARU vs Non-BIMARU states- Water, electricity and other services

    The huge gap in fertility rates are a huge concern and can cause problems in the future.

    One state I have deliberately dropped out of this group is Orissa. Here is a comparison between BIMARU and Orissa

    Underweight: 51% vs 44% of underweight children

    Vaccination: 29% vs 52%

    Mortality: 69 vs 65

    Media, 73% vs 74% for men, 49% vs 61% for women

    Female Contraception: 44% vs 51%

    Fertility: 3.6 vs 2.4

    Literacy: 59% vs 69%

    Electricity: 48% vs 45%

    Piped water: 17% vs 10%

    Toilets: 30% vs 19%

    TV: 31 vs 29%

    Rural Population: 76% vs 83%

    Orissa is clearly a geat story from this survey. On most parameters Orissa are above national average for the first time and are way ahead of the rest of the BIMARU states, this inspite of the fact that a larger proportion of people in Orissa live in rural areas than in BIMARU states. The growth rates on most parameters that orissa has is significantly higher than most states across the country.

    Clearly the governments in each and every state have tasks to do and deliver more efficiently. The big concern as I see it the galloping population in the north with such high fertility rates. The fact that one of the poorest states like Orissa has significantly lower fertility rates when compared to Bihar and UP imply major issues in service delivery in these states. The Central Government will need to think through on a more efficienct system that can bring about significant cultural change in the Northern states from being a male dominated society to one where the husband and wife are equal partners. Population issues must be talked about more often across the country, if AIDS awareness can be so high why can’t we increase awareness for having lesser children?


    Comment by Chandra — February 10, 2007 @ 5:27 pm

  2. [...] {This crossposted to the Indian Economy Blog. Please comment there, if you please.} [...]

    Pingback by Atanu Dey on India’s Development » The Indian Elephant — February 10, 2007 @ 5:41 pm

  3. My Two Cent Comment…

    1. The BIMARU India Vs Non BIMARU India is getting phenomenally Big – But did u all notice one thing ? BIMARU States are different from all other states in that they are a)having very large size in terms of physical area or population b)They are having very low levels of urbanisation compared to rest.

    Which comes to the point that BIMARU’s backwardness is lot to do with the very large size (population and area) and it can be addressed by having smaller states. Watch out for Jharkand, Chattisgarh and Uttaranchal march ahead in coming years …..

    2. The drop in fertility is good news, and perhaps outside BIMARU , Population growth is not going to be much after 2011 census !!! Interesting !!!

    Comment by Ramki — February 10, 2007 @ 10:15 pm

  4. Employment is important because India doesn’t want millions of idle youngsters working in devil’s workshops.

    Placing importance on production would mean placing importance on productivity, which in India would mean less labour used.

    Employment is important simply from a political and social perspective.

    Comment by yum yum — February 11, 2007 @ 1:52 am

  5. “For all the buzz over China, one of the great paradoxes of the world’s greatest development story is that it only has a handful of truly world-class companies. By contrast, India has a much deeper and broader stable of very powerful businesses. Moreover, it’s not just IT services – it’s also telecom, pharmaceuticals, energy, steel, and auto components”

    This is not a paradox in China’s current development but a historical institutional difference. China had a completely central-planned economy until the early 1980s. Most existing Chinese companies (and ALL private Chinese companies) were established after the late 80s and are still in the midst of expansion. Second, key sectors such as telecom, energy and steel remain nationalized in China.

    Meanwhile, many of India’s non-IT world renowned companies were established during the British Raj years, such as the Tata Group (est in 1800s); or shortly after independence such as Ranbaxy.

    China remains the world’s greatest development story because it has achieved so much in so little time (essentially since 1984 and then since 1992) from the cobwebs of one of the most centrally planned economies in the world. Before 1984, private companies with more than 8 employees were banned in China.

    Comment by J. Yin — February 11, 2007 @ 3:12 am

  6. Hi J. Yin,

    Most of us accept that China is a great success story. There is not envy towards China (most people are too poor to even care.)

    A superior attitude towards China was always a Western elitist thinking (like so many others.) Unfortunately, this way of thinking has been imported by a bunch of reformers/libertarians who are basically market-fundamentalists and present much more strongly in the media. I am noticing that this attitude has started affected some people in power too (hopefully they will stick to China-bashing and do no harm to India. Even if they do, they will get a good reminder in the next elections.) Partly, this has been because the West has been spending a lot of money to “educate” the elite in India.

    I believe that every country should be allowed to evolve its own political and economic systems. It has worked for Britain, France, Germany, the US and Japan. It would definitely work for China too.

    So pulling hundreds of millions of people out of poverty is indeed a commendable feat.

    Comment by yum yum — February 11, 2007 @ 7:17 am

  7. Elephants and tigers are passe. Here’s a Business World article that says India is an ugly duckling:

    Comment by akhondofswat — February 11, 2007 @ 9:29 am

  8. That Business World article brings up a good point on East Asian land reforms and the lack of in India.

    Comment by J. Yin — February 11, 2007 @ 10:16 am

  9. “A study by UBS Investment Research, ‘Asian Economic Perspectives’, points out that Indian gross domestic savings rates are already virtually identical to the historical average for Asian high-growth economies. It also says, “In fact, when we compare Chinese and Indian export growth rates and export/GDP ratios, India looks almost exactly like China did in the late 1980s.” In other words, India is different because it is at a different stage of growth.”

    Exactly what I have been saying all this time.

    Comment by J. Yin — February 11, 2007 @ 10:37 am

  10. Lack of any land reform whatsoever (except in one state) might take India along the way of Latin America (Brazil) rather than East Asian economies.

    The services boom might even turn out be something like the once-booming sugarcane industry in Trinidad. There is a major difference that Indians are learning some excellent skills. The story might be different this time but when 50% of the women are illiterate, things can be so rosy.

    Comment by yum yum — February 11, 2007 @ 8:44 pm

  11. Human resources and attitiude matter more than natural resources.
    BIMARU has perenial rivers (Ganges, Yamuna, etc )while TN and
    Kar are at loggerheads over the sparse waters of Kaveri. And
    BIMARU has most of the mineral wealth (Iron ore, Coal, etc) when
    compared to South states. Yet the paradox of South doing better.
    Even within TN, the Eastern belt (coimbatore and Erode dts) are
    doing extremely better (i am from that area) than other belts,
    in spite of the fact that it is a relatively dry and water starved
    area. The entreupreunal spirit of the people of this region has
    resulted in tremendous growth of local GDP (textiles, spinning,
    trucks, poultry and rigs, etc) and there is an acute shortage
    for skilled and semi-skilled labour here. One local home textile
    company in my hometown Karur is supplying most of the hometextiles
    for Walmart Inc. In 1992, when Manmohan Singh was FM, he expressed
    his wish to visit Karur and Tirupur which combinedly contributed
    nearly one billion USD in foreign exchange earnings. Until
    1970 this area was backward and now the boom is too good…

    Comment by K.R.Athiyaman — February 11, 2007 @ 10:29 pm

  12. And Ramki,

    breaking up large states into smaller ones may be counter productive
    ; the cost/benefit analysis shows it ; creating a new state (or even
    a new district) costs several billion rupees in fixed and annual
    costs / establishments, while the net revenue from the undivided
    area remains the same and is independent of this fragmentation. It
    creates more babus and regional power brokers. And ultimately
    a lot of good money is squandered and fiscal deficit and inflaltion

    Comment by K.R.Athiyaman — February 11, 2007 @ 10:36 pm

  13. Bit Disagreeing on Yum Yum’s View…

    1. Is Land reform as important as it is made to be? If that is the case, why is that Communist WBengal’s Villagers have lower income levels than a Capitalist Gujarat/Punjab’s Villagers? What is the ranking of Rural West Bengal (which is endowed with best water resources among most Indian StateS)in terms of overall economic Well being?

    The problem in India is that far too many people are tied to land and any redistribution of land will only make agriculture more inefficient and fragmented. Some 700 million people are tied to farmland for livelihood and any improvement in their incomes can come only if prices of farm products rise – which would also mean higher inflation. Is that good?

    It is time that India devised a clear strategy towards gradual urbanisation – TN and Maharashtra are moving in that direction and it is the way to go. BIMARU states are suffering precisely because they have too much dependence on farming.

    2. Is Indian IT Services like the once booming SugarCane Industry of Trinidad ? Is China’s Electronics Manufacturing boom similar to the once thriving (and now dead) Textile Industry of UK ?

    Comment by Ramki — February 11, 2007 @ 10:36 pm

  14. Athiyaman,

    Breaking Big States into smaller states has some fixed costs, but the benefits outweigh costs.

    Consider South India itself. Till 1957, most of South India was in a single staate called Madras. Then came the division into 4 states. Yes, there was this administrative expense in terms of breakup but have not these individual states much better off now? Consider the breakup of Post partition Punjab into Punjab and Haryana, and breakup of Bombay into Gujarat and Maharashtra. The point is that smaller states are more responsive towards their electorate. 8 years after breakup, there is sufficient evidence to show that Uttaranchal and Chattisgarh are doing relatively better and gathering more investment.

    UP is definitely in need of breakup. With a Population of 170 Million, Uttar Pradesh is having more population than Russia and Canada Put together. The administration at Lucknow is simply unable to govern such a large population and that is why law and order is so bad in UP. And a bit of history- the Present Day UP was created by British Rulers in 1860 and that time the population was only 40 million.

    Yes, it is always bad economics to spend more on bureaucracy. But having 33 states instead of 28 will not add much to bureaucratic expense. It is not small states that cause fiscal damage – it is things like 6th pay commission that cause greater fiscal damage.

    Comment by Ramki — February 11, 2007 @ 10:43 pm

  15. And Athiyaman,

    Regarding TamilNadu, did u not notice that TamilNadu is having one of the highest urbanisation rates among bigger states in India? Close to 40% of population is living in urban areas and maybe in a decade, TN will be a primarily urban State. And W.Tamilnadu (Tiruppur belt) is having one of the highest levels of urbanisation…..

    This contrasts with BIMARU, which can be characterised by very low levels of urbanisation (of less than 15%). Greater dependence on farming is not a boon, it is a bane in a overpopulated country like India.

    Of course, you may point out to Kerala (with 85+% urbanisation), but Kerala is a different category, a state run on remittances from overseas and other states. Almost 30% of Kerala’s Adult working population is employed in service sectors in other states/nations.

    Comment by Ramki — February 11, 2007 @ 10:49 pm

  16. Ramki’s analysis of urbanization rates above fails to acknowledge that the southern states in India are closer to the coast, and not landlocked like the northern states with lower urbanization rates. Closer to the coast means cheaper transportation via the coast, rather than rely on poor inland transportation infrastructure. It’s an obvious geographic advantage. Similarly, it’s not an accident that the rich and urbanized provinces in China are all along the coast or major river deltas.

    Comment by J. Yin — February 11, 2007 @ 11:03 pm

  17. Ok lots of posts and nice to see the debate moving to a deeper analysis of India which I might call a bottoms-up approach.

    I am a bit confused with the new posts and will simply address the points made rather than the people who made the points.

    BIMARU states have a problem exactly because they have been discriminated against. It might have been for the good of India as a country but not for the states that were discriminated against. Also these very states had some politically advantageous factors that later turned into disadvantages for them.

    I will take the erstwhile undivided Bihar as an example. Bihar was extremely rich in resources and politically powerful. Instead of adding value to these resources at a lower cost in the local area (inside Bihar) the central goverment mandated that prices for coal, steel etc should be the same whether in Bihar or far away Maharashtra. The end result was that industry chose to situate their manufacturing in Maharashtra, which was closer to the biggest port and a fairly well-developed financial centre than in backwards Bihar. Thus Maharastra continued to enjoy the fruits of further industrialization. This is not an attack on Maharashtra but just an example of discriminatory policies.

    The advantage that Bihar had was political power. It had a large population and hindi-speaking leaders which mattered in earlier phase of Indian politics. The result was that Bihar enjoyed a lot of pork from the central govt. Those who live on freebies forget to learn skills, generally skew the economy and become corrupt. We have a situation where quite a lot of Biharis are interested in landing govt jobs even in this time. Again, this is not an attack on Bihar. In fact, I refuse to use the term BIMARU because it is so offensive and unfair at so many levels.

    Comment by yum yum — February 11, 2007 @ 11:18 pm

  18. The Debate is getting interesting and some good insight.


    I think you may have a valid point. It is interesting to know that Orissa, (which is lumped with BIMARU States) is doing better than rest of the group. Orissa is a coastal state. How? Gujarat is doing so well while Rajastan has lagged behind. I think that Logistics and availablity of quality Transportation infrastructure (passenger and freight transport) matters a lot in development and the Hindi Belt States severely are deficient in the same. And the two Hindi Speaking states with good Transportation infrastructure (Punjab and Haryana) are the richest….

    Equally pertinent to note that the mobile phone penetration is lowest among BIMARU states.

    2. yum yum,

    Can we say that the Hindi Belt States (or BIMARU) has failed because they lacked the assertive Regional parties that Rest of India had? Or Atleast Assertive regionalism that helped other states to bargain for more investment…. Even a Nationalised party like CPM in Bengal or BJP in Gujarat promotes regionalism and regionalist Competitiveness. There is an element of regionalism present in all states outside Hindi Belt states, that have made them bargain their share of investment and attention. Even among Hindi Belt states, Punjab and Haryana have had regionalist parties/sentiments that have helped them get right attention and right kind of investment. The 4 states of UP, Bihar, Rajastan and MP have been devoid of this regionalism and it has worked to that detriment… Despite sending 80 MPs, UP is simply unable to get the best investment and best Government projects – Why?

    Comment by Ramki — February 11, 2007 @ 11:28 pm

  19. I don’t know why people misunderstand land reforms as an end rather than a means to an end. The end or rather ends are:
    1)Destroying the existing social hierarchy with its vested interests that will want to preserve the status quo (pre-industrial or semi-industrial state.)

    2)Providing a large number of people with a base capital to build new livelihoods.

    Hernando De Soto is an advocate for capitalism and speaks only about the second. Unfortunately, he misses the first which is just as important.

    The above two outcomes can be obtained through means other than land reforms. They may also be partially realized and needn’t go the whole hog to stimulate new growth.

    West Bengal never had real land reforms. It had very limited land reforms and the feudal mentality continues only this time it is the feudal rule of the politburos and village committees. Kerala had almost full-scale land reforms. The outcome was a grand leveling of the society spurring people to move away from the land and old social structures that people fall back to support themselves.

    Punjab had the advantage from the leveling effect of Sikhism. Feudalism cannot be maintained continuously when your own underlings consider themselves equal to you because their religion says so.

    In Gujarat, the Patels broke through a big part of the state thus leveling off some old social differences.

    My point is that India has simply not tackled its social problems. Instead people have been taken by the boom in the cities and believe that economic development will pull up the rest.

    This is the “take off theory” and one of its major exponent is Jeffrey Sachs. This take off theory has never happened anywhere unless it was preceded by huge social reforms. Guatemala did not take off. Nor did Brazil. Eastern European countries have gone through some bitter times. Russia underwent a genocide caused by economic policies in the reform days of the early 90s.

    You cannot expect growth to be sustainable with bad infrastructure and a lopsided society. 50% of women are illiterate. The statistics with regard to children are more akin to sub-Saharan Africa.

    What bothers me is that the powers-that-be are using the same glib talk that I used to see in the English-language newspapers.

    Yes, I do believe that the Chinese electronics industry is a modern day version of Trinidad where capital comes from abroad, goods are made and then the vast majority of profits pockets by outside interests. This will be the case unless China actually takes over the technology and then builds on it. In case of Japan, Korea and Taiwan the control and technology was always with the local companies.

    In outsourcing, I remember figures from about 2 years back which should that a majority of gains are obtained by the outside interest. Though in case of outsourcing I am seeing knowledge being gained that is not easily transferable. Knowledge and experience might keep some of the business forever.

    Only time will tell if both of these countries end up being larger versions of Trinidad (though even that is better than poverty and chaos.)

    We are definitely not talking about upcoming superpowers here.

    Comment by yum yum — February 12, 2007 @ 5:32 am

  20. PS: Punjab and Haryana do not belong to the Hindi belt.

    Comment by yum yum — February 12, 2007 @ 5:32 am

  21. yum yum wrote: Yes, I do believe that the Chinese electronics industry is a modern day version of Trinidad where capital comes from abroad, goods are made and then the vast majority of profits pockets by outside interests. This will be the case unless China actually takes over the technology and then builds on it. In case of Japan, Korea and Taiwan the control and technology was always with the local companies.

    This is a gross overgeneralization. Chinese domestic electronics are made using mostly local technology or 50-50 joint venture technology. The majority of Chinese buy domestic electronics and appliances except for a few “must-haves” such as the Apple iPod or Motorola Razr phone. This is why TCL and Haier have been so successful in China. No, China is not Trinidad. Trinidad never made their own brand refrigerators and washing machines that are now sold in every single Best Buy in the United States like Haier is doing. Nor does Trinidad have a sizeable domestic market which can allow local companies to grow and develop. Nor could Trinidad’s domestic electronics companies expand their markets by selling and marketing toward Africa and Latin America like China is doing, and thereby obtaining enough capital to buy out smaller western electronics companies such as Thomson. Try again.

    Comment by J. Yin — February 12, 2007 @ 6:39 am

  22. Are most quality Indian economic commentaries and blogs written in English?

    If not in English, could someone link me 1.) A popular Hindi-language online economic newspaper and 2.) A popular Hindi-language economic blog?

    If most quality economic sites are indeed in English, does that make English the de facto national language in India? Doesn’t this also pose as an information barrier to the hundreds of millions of Indians who can’t read English?

    Thanks. What do you think of the potential for selective bias in English-language reporting in India? I’m having trouble finding non-English-language sources of Indian economic commentary. Any pointers appreciated. How about (Dainik Bhaskar)?

    Comment by J. Yin — February 12, 2007 @ 7:13 am

  23. J Yin,

    China is changing tack and hopefully it succeeds. Perhaps that is reason why China effectively subsidizes US consumption by sending back dollars. I wonder if the West realizes this. I think it does but cannot wrench itself off from the carousel of capitalism.

    Yes, there is a big disconnect between English-language media and the rest at least in terms of the print media. But Hindi TV news channels are very popular.

    Remember the vast majority of the people are simply not in the debate in any manner whatsoever. They are illiterate or too poor to have access to any information they can argue on.

    There is a famous instance that I repeatedly go back to. There was a Chief Minister of a state called Andhra Pradesh. He basically built up its capital Hyderabad into a destination for Software and services industry. He was celebrated in the English-language media in India as well as in the international media. But when election time came, he lost by a huge margin. It came as a surprise to everyone except the Andhraites who lived outside Hyderabad.

    I find Indian blogs to be totally out of touch with the realities of life in India. Many are extremely ideological (libertarianism is the new fashion among self-styled intellectuals of India.) Others are just plainly out of touch. They have a class bias.

    Hindi not the only vernacular language in India. There are several others. In India, people make their voice clear through elections. It is one thing that works very effectively.

    Comment by yum yum — February 12, 2007 @ 9:41 am

  24. So does that mean the literacy rate in India is based on the local vernacular, and not the national vernacular (Hindi or English)? This would imply that the national literacy in either Hindi or English would be much lower than the reported national literacy. Does this pose a logistic difficulty for national information exchange in India? Seems kind of like EU’s growing problem with juggling dozens of official languages.

    By the way, the Chinese literacy rate is measured in Standard Mandarin (“Common Language”), not in any of the regional languages/dialects (Mandarin dialects, Wu, Cantonese, Minnan, Hakka, Gan, Xiang etc). Exceptions are for the 8% of the population who speak minority languages (Turkic, Mongolian, Hmong, Dai, Korean etc), because the criteria for literacy in China’s minority languages are not set nationally.

    How is literacy in India defined? The Chinese definition is not very robust, but only the bare minimum to function, so maybe that’s why Chinese literacy is higher than India’s. For the 92% Han population, literacy is defined as recognition and use of 1500 Chinese characters for rural residents and 2000 Chinese characters for urban residents. The latter definition is on par with Japanese literacy definitions. Learning 2000 characters takes A LOT OF WORK! For comparison, the college-educated Chinese knows about 4000 Chinese characters. Typically I don’t use characters beyond 2000 frequency except for proper names (like rare surnames or geographic names). Chinese language is a lot like German, it combines very common and basic words to form new and more abstract words, so knowing 2000 characters can form hundreds of thousands of words. For example the word “desk” in German is Schreibtisch (schreiben = to write, tisch = table), in Chinese the word “desk” is made up of 3 characters to form Xiezitai (xie = to write, zi = writing, tai = table). English doesn’t do that very much, except for medical or scientific terminology using Latin/Greek roots. So once you know 2000 basic Chinese characters in Chinese, it’s easier than in English to expand your vocabulary.

    Comment by J. Yin — February 12, 2007 @ 1:27 pm

  25. Yin

    Yes, literacy is calculated with respect to being able to read and write your mother tongue and not English. Having said that most schools offer to teach you 3 or 2 languages- Mother Tongue/ English and Hindi. The medium for education is either the local language or English. My estimation is that 30% of our schools have Hindi (National language) as a medium for education, another 50% have local languages and about 20% have English as medium for education.

    I dont think the 3 or 2 language forumla are causes for concern.
    The problem in our schools are fairly simple

    a. Inadequate resources (The central Govt spent just 4 billion dollars for primary education for a population of about 70-80 million children as opposed to spending 30 Billion on defence)

    Of course Individual state Governments too spend some money and that could add up to another 2-3 billion dollars

    b. Ineffective delivery

    Teachers are not trained or donot turn up to teach

    c. Improper structures

    Parental and community involvement is not very high across most schools. Implies community resources and monitoring are unavailable in most schools. Hvaing said that some initiatives of involving community have proven to be successful and these schools have done really well.

    Comment by Chandra — February 12, 2007 @ 5:16 pm

  26. now that in some premature bout of hurrays, we see the top indian businesses rolling over each other to make foreign acquisitions, the question remains if it is an act like “fools rush where angels fear to tread”..

    w/ greenspan led global liquidity causing such worldwide act of chutzpah (a la chavez)…commodity bubble is deemed a fundamental change in the world economy what with millions of Chittalurus guzzling away in their Enfields if not in sub-lac cars(disregarding the fact that lumber prices in US have collapsed..cement has come has copper from its perch)

    Will it be an act of bravado and downfall for Mittal/Tata/Birla (who else now, Goenka/Kirloskar?)–as they buy commodities based companies at super inflated prices (w/their shares risen considerably, courtesy fascination for emerging markets in US/Europe, since 2003)– only time will tell..

    we have seen this script before….
    Fasten your belts folks as the next act will be far more interesting and challenging/wrenching than what we have just seen..

    (I am not an economist but an investor..hence in a happy position to be not confused by webs of theories)

    Comment by andiron — February 12, 2007 @ 6:58 pm

  27. That’s an interesting aside, andiron. “(I am not an economist but an investor..hence in a happy position to be not confused by webs of theories)” Implying that economists are a confused lot about matters that they study.

    There is much satisfaction in the belief that the experts with all their years of studying are somehow less equipped to comprehend what matters. Creationists, for example, take much delight in pointing out the fact that evolutionary biologists argue amongst themselves, and use that professional disagreement as proof positive that creationism must be right. What they miss that the “webs of theories” that the biologists spin are not meant to hold up the core ideas of Darwinian evolution; the core ideas are not in dispute; the arguments are about details which do not alter the basic logic.

    Yes, as an investor you really don’t need to pay attention to the nitpicky details that professional economists concern themselves with. But to imply that they are confused about the essentials is not very reasonable.

    Comment by Atanu Dey — February 13, 2007 @ 3:53 pm

  28. Atanu:

    all i point to is polling top economists about an issue and their voting patterns leads me to nothing (such as 45% yes, 47% no,8% don’t know )

    if economists (to a large percentage) cannot agree on variety of economic issues (hey man,given the inputs plug it in CAPM model??) what conclusions a layman like me is supposed to draw?

    now some may jump on glabalization issue as a parallel..but that would be a true disservice to the economists’ profession..

    Comment by andiron — February 13, 2007 @ 6:17 pm

  29. andiron, I submit that it is not the economists that are confused, you are confused by the choice that you have to make as to which set of economists you should believe given that they have different theories to which they subscribe collectively but as individuals, the economists are fairly clear about where they stand.

    Allow me an imperfect analogy. In a poll, when asked about the type of cuisine they prefer, the members of a well-known gourmet club responded: 20% Chinese, 18% French, 28% Indian, 34% English (incredible, I know.) Now I am confused about what cuisine I should go for seeing that these guys are not unanimous on their preference. But I am sure that the 34% who prefer English food are not confused about what sort of food they dig.

    (I can’t believe I am having this discussion.)

    Comment by Atanu Dey — February 13, 2007 @ 7:00 pm

  30. Yes agree, media is calling rising of india, india coming and so on. Few things defnitely are moving on track but there are n no of basic issues which most of western and indian media is overlooking to make good bucks on there ivestments.

    electricity is still a big problem
    drinking water, a big problem
    population, momentarily looks good long run is disaster
    % of childs opting out of school, big future problem
    inflation, common man is grinded in it and is a big issue
    health systems and qaulity of life, does it even exist for 50% or so ppl

    just because few ppl make billions or millions will nver quality we as india in developed nations league.

    imagine western economies slowing down or crashing, we will be flat on our stomach so
    we are yet not there, we still have many miles before we can say we have rised on horizon.

    Comment by vijay kurhade — February 13, 2007 @ 10:42 pm

  31. Vijay

    I will advise you to watch the following links:

    They are clips from a talk by Hans Rosling, a famous economist with a very different style of presenting economic figures. The talk focuses on economies of the developing world, watch the India related data.

    As an aside, its pretty gripping content for an economy lecture, perhaps the bloggers will consider making these links sticky ? :-)

    Comment by Sudeep — February 13, 2007 @ 11:49 pm

  32. “To get a better understanding of an elephant we have to walk around the elephant,of course,and integrate the various localized partial descriptions in our mind’s eye”
    This is from american diplomacy.

    Comment by con man — February 14, 2007 @ 1:17 am

  33. I found this article very interesting:

    I would like to hear Mr. Atanu Dey’s comments regarding developments such as this one that emphasize on low cost solutions to grand scale problems in context to the Indian economy and social sector.

    Comment by Sriram — February 21, 2007 @ 1:25 am

  34. Atenu, I like your distinction between production and employment. I believe both counts. Production is what matters for wealth but employment matters too for structuring people mind. One man ability to create wealth depends of his skills, specialisation. He will not produce in the future if he has no been working before.

    Another point, i believe that the buzz about the next superpower makes no sense. While the following link is too pessimistic (written during cold war), he has an excellent insight. In today world, power is not in political organisation but in technology. Nuclear fusion is the today superpower, not the US. It is mobile phone that are enabling many indians to get access to information. They would be less outsourcing in China without progress in communication made over the last 20 years. While political organisation are still important, they are loosing grips everywhere around the world.

    Comment by christophe — February 22, 2007 @ 9:42 pm

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