A twist indeed. I don't think that every (somewhat) optimistic article is necessarily "India Shining" - I think this is really pretty balanced, especially since the focus of this issue (I just bought it) is more about business than governance or infrastructure or other areas where performance is pretty pathetic..
Badri On 3/6/06 6:11 pm, "Udhay Shankar N" <[EMAIL PROTECTED]> wrote: > More India Shining, with a twist. Some more stuff > available for free at www.economist.com > > Udhay > >> First leader from the cover story Business in India, >> a special editorial survey, The Economist, June 03, 2006 >> >> Can India fly? >> The Economist print edition >> >> It has taken off at last. Only with further >> reform can it spread its wings and soar. >> >> WORKERS of India, you have the world's >> attention. Long neglected in Western boardrooms >> in favour of China, its yet more gigantic >> neighbour, India now appears on every corporate >> to-do list. Even in the furnace of pre-monsoonal >> heat, linen-suited Westerners (and Easterners) >> are appearing in Mumbai, Bangalore and Chennai, anxious not to miss out. >> >> But will India fly? After all, it has been in >> fashion before, only to disappoint foreign and >> local companies alike. Despite its huge >> potential market of 1.1 billion people, despite >> its wealth of English-speakers and democratic >> institutions, despite its vaunted 15-year-old >> reforms, India has been a daunting place to do >> business, its entrepreneurs chained down by the >> world's most bureaucratic bureaucracy, lousy >> infrastructure and lousier Fabian economic >> ideas. The recent stockmarket gyrationsthe >> Bombay index is down 9% in the past month, >> having tripled in the previous two yearshint >> that Indian business will once more land on the ground with a thump. >> >> >> It won't. As our survey this week argues, Indian >> business has secured a niche in the world >> economy that can only grow in importance. The >> question is no longer whether India can fly, but >> how highand whether the success of its business >> class can be spread throughout the country. >> >> Some of the reasons why Indian business is in >> fashion again are indeed ephemeral: a >> well-orchestrated publicity campaign by India's >> government and nervousness on the part of some >> foreign companies about their exposure to China. >> But two things are much more permanent. First, >> India now boasts robust economic growth. Figures >> published this week showed annual GDP growth >> over the past three years has averaged 8.1%. >> Even the gloomiest pundits believe India's >> ³trend² growth rate is at least 6%the rate it >> has achieved since 1991, when Manmohan Singh, >> then finance minister and now prime minister, >> removed some of the most crippling constraints >> of the licence raj. And growth should be faster >> still if India is able to cash in its >> ³demographic dividend². Its young population >> will add 71m people to its workforce in the next >> five years, or nearly a quarter of the world's extra workers. >> >> >> More than just Bangalore >> Second, India is producing far more world-class >> companies than China. The best known are the >> wizards of software and ³business process >> outsourcing²Indian firms have two-thirds of the >> global market in offshore IT services and nearly >> half that in BPO. But now they are being joined >> by manufacturers. Again, unlike China, this >> manufacturing boom cannot be explained by cheap >> labour, but by the efficient use of technology. >> India's merchandise exports grew by a quarter last year. >> >> Flush with cash and rich stockmarket valuations, >> Indian firms are now expanding abroad, snapping >> up Belgian gear-box-makers and German >> generic-drug firms. Indeed, parts of Europe are >> in a funk about an ³Indian invasion². France's >> Arcelor, the world's second-biggest steelmaker, >> would rather jump into a hasty marriage with >> Severstal, a Russian producer, than submit to >> the harsh rigours of a union with the world's >> biggest steel firm, Mittal Steel ( see article). >> Lakshmi Mittal, that firm's boss, is an Indian >> entrepreneur so global his firm makes no steel >> at all in his homeland. A bid for Taittinger, a >> posh champagne brand, by United Breweries, a >> Bangalore-based booze giant, has also caused outrage (see article). >> >> So expect to see a lot more of Indian business. >> But can its success make India as a whole >> richer? In economic terms, India is still poor >> and small. It holds a sixth of the world's >> population but accounts for just 1.3% of world >> exports of goods and services, and 0.8% of >> foreign direct investment flows (compared with >> 6.6% and 8.2% respectively for China). At $728, >> its GDP-per-head is less than half China's. Put >> as starkly as possible, Indian business will >> make a packet if the economy grows at 6% a year; >> but if the country is to catch up with China in >> the lifetimes of its young population (and >> provide them with jobs), India needs to grow >> much faster. Otherwise, poverty will persist for >> decades and social tensions will m ount. >> >> Sadly, political India suffers from >> complacencya belief that, desirable though >> further economic reform may be, faster growth >> will happen anyway. Demography, it is argued, >> will help raise the level of private savings >> from about 29% of GDP now to 34% over the next >> five to seven years. Investment will follow, so >> GDP will continue to grow at 8%, even if reforms >> stall. Nothing can sap the momentum unleashed 15 years ago. >> >> >> The 32-hour factor >> In fact, government action is desperately needed >> to unplug bottlenecks that will tighten as the >> economy grows (it takes eight days, including 32 >> hours waiting at checkpoints and toll booths, >> for a lorry to crawl from Kolkata to Mumbai). >> Nor is it just a question of roads, airports and >> electricity. Most village children lack the >> basic literacy needed to find work off the land. >> India's admired technical institutes will soon >> be unable to keep pace with the demand for >> well-qualified English-speaking engineers, chemists and so on. >> >> Education has actually been the subject of >> fierce political debate recently. The issue, >> however, has not been raising standards, but >> wrangling about quotas that would give nearly >> half the places in India's colleges to members >> of backward castes. Caste-based inequality is an >> evil that should be uprooted, but this is a >> cynical piece of vote-grabbing: the latest twist >> involves promising that all eligible upper-caste >> candidates will get places too. Meanwhile, other reforms go un debated. >> >> Trade liberalisation is halting and partial; the >> banking system allocates credit to the wrong >> places (see article); labour laws deter >> employment; privatisation is stuck; a fiscal >> deficit, bloated by ill-directed price >> subsidies, still sucks resources from productive >> investment in infrastructure, education and >> health; and foreign investment in many >> industries is hampered. Mr Singh has impeccable >> reformist credentials, but his government, which >> relies on the votes of Communist parties, has >> been timid in pursuing reform, and prone to populism. >> >> India has taken off. Just think how high its >> people could fly without all those chains . >> >> Copyright © 2006 The Economist Newspaper and The Economist Group. >
