Fang Shi Han / Bangalore, India
Despite many bureaucratic inefficiencies and a lacking infrastructure, India is fast emerging as an economic powerhouse that poses a serious challenge to rising China and the West.
Much has been said about a ‘rising Asia’ as a counterpoint to the Western economic powerhouses. Yet does ‘Asia’ only refer to East Asia?
More specifically, China has been the talking point in this economic crisis so much that we often forget that another country holding 17% of the world’s population is slowly making its way to the top as well.
India, Imperfect, Impressive
India has often been perceived as the ever-lagging tortoise behind the ambitious hare that is China. As the story goes, the hare starts off rapidly but crashes in the end, leaving the tortoise to win with its slow and steady pace.
Thus, even as China holds the position as the ‘next big thing’ today, India’s slower growth rate may provide for a more stable development trajectory.
India has had the notorious reputation of being economically slow. Delays are rampant, work deadlines are often promised but not met, and there is a general perception that Indians lack a sense of urgency with regards to business.
Infrastructure is also undeveloped. Potholes are numerous, blackouts frequent, and the ubiquitous Indian traffic where people drive with little regard for road rules and direction, are still present even in the relatively developed IT hub of Bangalore.
Bangalore’s Competitive Advantage
In spite of the poorly nurtured environment, Bangalore is dotted with numerous ‘Islands of Excellence’. Techology Parks such as the Information Technology Business Park (ITBP) run by Singapore-based Ascendas, or the General Electric (GE) compound, create little oases in the otherwise dusty, chaotic city of Bangalore.
Today, the services sector accounts for 68.6% of the GDP in India, of which, outsourcing plays a major role.
The story of contemporary Bangalore had its roots in the British defence industry. Because of the geo-strategic location of Bangalore, which is located away from the threats of Pakistan and China, a large number of educated locals were trained by the British.
This proved to be a crucial reason for the rise of the knowledge industry there when India gained its independence in 1950 and throughout the economic liberalization period in the 1990s.
This surplus of intellectual capital in India, especially Bangalore, came into the spotlight when the West was facing escalating labour costs.
The two worlds found each other in the outsourcing industry as high-tech businesses found their cheaper production centre without compromising on quality, and India by a stroke of luck, found a way to keep its massive gentry employed.
Working Around Red Tape
As with all large developing economies, India faces a problem of policy implementation at the ground level. Even with the comprehensive legal system, loopholes exist in places with regulatory ambiguity.
There are no hard and fast rules to doing businesses. Information is often inconsistent and departments may not be in sync with respect to a particular business practice.
Despite that, businesses are flourishing. Tata Group has recently bought Jaguar and rumors are rife that an airline may be acquired in the future.
Cognizant reports continued growth as 80% of their businesses based in North America and India in general seems almost immune to the economic crisis that is plaguing the rest of the world, even the rising dragon that is China.
Part of this phenomenon may be due to India’s continued emphasis on ecosystems both literally and structurally. Organisations such as The Indus Entrepreneurs (TiE) and National Entrepreneurship Network (NEN) strive to bring businesses of all walks together in a collective bid to maximize social capital.
A small publishing firm for instance, could meet a large logistics company at one networking session and get a deal on transporting books.
Even the familiar rural-urban problem seems to have its solution not in a high-handed approach, but a subtler, organic one. A company’s commitment to Corporate Social Responsibility (CSR) for example, seems to be an asset in circumventing vast bureaucratic obstacles.
After all, when the private sector offers to provide what should be a public good (such as schools and hospitals), that relaxes the squeeze on government budgets, which, in developing countries, are not particularly high to begin with.
Tata Consultancy Services commits 66% of their equities in public trusts in addition to building tertiary institutions to extend the pool of educated labour.
The Key to Sustainable Growth
Compared to China, India is much less export driven and thus not subject to the vagaries of the financial market. As Professor Iyer from the Indian Institute of Science puts it, ‘it is the system that generates its own growth’.
In Bangalore alone, in spite of the poorly maintained roads and haphazard traffic, the downtown area, away from the tech parks, is flourishing with the usual branded suspects, such as Reebok, Levis and Hard Rock Cafe.
Even if the brand itself is foreign, the law requires the local distributor to be an Indian company, providing the opportunity for the middle class to grow.
Unlike China or other Asian economies where the labourer-producer cannot afford to consume the end product, the spending power of the growing educated middle class drives India’s growth.
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Sorry I don’t buy this.
Poverty is still far too rife to pay attention to things like “Islands of Excellence”.
As long as the minority (rich and educated) pay no attention towards the majority
(poor and illiterate), India will always be a developing, behind-the-curve country.
Infrastructure is poor because the moneyed and influential can’t be arsed to fix things that’ll also be beneficial to the poor — like better roads, railway stations, bus stops and public transport.
In the midst of China’s ascendancy, we often forget about the other pivotal player in Asia’s rise- India. As the author has correctly pointed out, it’s growth path is quite different from other Asian players and may have its merits. Many of its middle class are highly skilled unlike many developing countries.
Unfortunately, he inadequately fails to point out what India is not. Yes it is less export driven and the “spending power of the middle class drives its growth” unlike China.
But almost half of India’s children below 3 are malnourished (highest in the world) and 1/4 of its population lives below its own government’s definition of poverty. 80% of the population lives on less than 2 US Dollars a day. There is a caste system that continues to oppress many groups in society and discriminates them from birth. By my estimation, the “middle class” makes up less than 10% of the population.
If that is the kind of growth the author desires, I rather have less consumers and pick China’s growth any day.
so many inaccuracies, eg Because of the geo-strategic location of Bangalore, which is located away from the threats of Pakistan and China, a large number of educated locals were trained by the British. British India already incorporated Pakistan and it was split after India gain independence. India gained independence in 1947 NOT 1950. Bangalore was developed as a brain child of the former CM of Kanataka, Chandrababu Naidu and the author credits the British? Please lah…
singapore tak boleh tahan! malaysia boleh! india balaey!
Blackfeline,
Talk to one Indian friend= 1st hand experience? One of my friend’s wife who is a teacher, once asked me when I returned from a one year stint in a Jakarta University whether it is safe to travel there because of the Bali blasts in 2002. So can I take it that all Singapore teachers are ignorant, sterotypical and have no sense of geography and direction? Obviously not……
Hi RighteousSinga,
As a country transitions from 3rd world to 1st world, there will always be discrimination and people living below the poverty line. I think your points are moot because the author celebrates the path of development India is taking. How do you measure the success of a country’s economic strategy – a growing middle class or a falling number of people who live below the poverty line?
Poor response indeed. Maybe its just the nature of this particular website that most people aren’t interested in much beyond short term (political?) interests…
India really isn’t as bad as it seems.
It’s true that Indians will be Indians – they have such a strong sense of pride that I admire. I asked 1 manager working in a tech park, whether he wanted to migrate to a more developed country in future and he, without hesitation, told me that he preferred India, even with all its flaws.
As much as SIngaporeans criticise their country for poor infrastructure and income inequality, we often forget that people there, even those living in slums, are much happier than us back home. They have this sense of optimism and hope that is sorely lacking in us. We seem to be a pretty bitter bunch of people.
Let’s take the slum example for instance. The first 2 comments were pretty worked up about poverty, and I’m not denying that poverty does not exist. Yet we choose to often, to focus on these aspects instead of the atmosphere of optimism that lies even in the gardener working in a tech park who goes home to his slum at night.
I celebrate this mode of development because we’ve (especially the PAP) have chosen to focus on China, and how the crisis has impacted its export industry. We often forget India as the number 2 upcoming country, and the fact that it seems to have a more stable mode of growth not subjected to the vagaries of the international financial system. Added to that is their focus on organicism – driving the economy through startups – and taking a more cautious approach to development even though it slows down the process of major infrastructural development in the rural areas.
Honestly, I didn’t expect the first views to be so negative.
Hey Shihan,
I really enjoyed reading this perspective on India. I must say you’ve brought out some important features of our economy. I always enjoy reading pieces on India written by a visitor, because you sometimes have to stand outside to look inside.
‘India has had the notorious reputation of being economically slow. Delays are rampant, work deadlines are often promised but not met, and there is a general perception that Indians lack a sense of urgency with regards to business.
Infrastructure is also undeveloped. Potholes are numerous, blackouts frequent, and the ubiquitous Indian traffic where people drive with little regard for road rules and direction, are still present even in the relatively developed IT hub of Bangalore.’ These lines are right on mark. Indians run on an Indian Standard Time as I joke sometimes. Infrastructure is so badly strained because of the congestion and population. Roads have pot holes because they see so much traffic everyday. Blackouts occur, because grids don’t mature as quickly as demand does. And Indian traffic sense scares me daily, I don’t have any explanation for this other than that perhaps people are so tired of waiting everywhere else, on roads they make as mush haste as possible.
Also about local bureaucracy, it is frustrating sometimes. But I’ve seen it become better over a period of 3-4 years. For citizens it is getting much smoother, but there’s lot to be done before perfection.
A very good point about startups. Being a student entrepreneur, I can say more and more of my friends find it rewarding to run a business, because entry for barriers are low. Businesses are built to solve problems and we have a million problems waiting to solved :)
I have a few additions. First is that I don’t think any of us in India think about China as competition, unlike the outside world talking about some sort of competition quoting GDP growth rates. I always find this funny, as my Chinese friends do as well.
Secondly I think you’ve seen only the IT hub of India, and not too many other industries. Perhaps being in Delhi or Mumbai would have shown you a different side of India. Bangalore is a city of mostly highly educated migrants, because it is so highly focused on IT. And the city grew so suddenly in the past decade that it is still suffering under the strain. And it has nothing to do with British Defence :). Just a very active CM and state government.
Mumbai is a city always in hurry, but has an impeccable traffic sense as does Delhi.
Finally to all the people who’ve commented here. I agree there are a lot of problems that some of us urban folk aren’t even aware of, but things are getting better and quickly. Every generation is doing better than the previous, but if you use sheer numbers that you quote while using statistics things will look gloomy.
You live in a country that has systems designed for and to be used by few people, it is the opposite problem to solve in India. High population is a problem but we are still figuring out how to make it a strength.
Oh and Indians will always remain Indians :) I agree. We are a proud country and I think you will hardly find many pictures of even the poorest of people not smiling at the camera.
Cheers!
shihan,
it’s not negative…just reality check! Yes…indians will alway be indians..at the expense of others! I don’t need to elaborate…Until and unless…they understand what’s is global and international playing field…it’s still another 100 years for me…dont get me wrong…majority of my friends are indians. However, as far as biz is concerned…it’s extra effort for me!
Hi Donaldson @ 8
I dont’ agree that my point is moot. While many other countries have had to face discrimination and poverty, none has had the unique challenge that India faces. Not only is the middle class a very small % of the population, the middle class unlike traditional economies is services based. A service based economy requires a very literate and educated work force.
Consider this: Traditional middle classes have advanced through manufacturing. The leap from agrarian societies to industry does require skill set changes but it does not require one to have a very high level of education. In India’s case, most of the middle class comes from services. The leap from an agriculture based society to services based is much larger and, to my knowledge, has not been implemented before.
Compound this with the fact that 80% of the population is currently not in middle class and has little means to advance and you realize the big leap that India has to make is stupefying.
The author encourages us to consider the alternative path that India is taking (vs an export driven east Asian country). He talks about the growing middle class that drives the growth, and how India may have a stable development trajectory, but he neglects to inform us about the real challenges and problems India faces. He does allude to the usual infrastructure/ bureaucratic problems etc but doesn’t tell us about the scale of poverty that India endures in return for this consumptive middle class. If readers had been informed of these issues, they would be less inclined to desire such an economic model.
One final point: I don’t think India is stably developing in its current form. If 10% of the population does very well, and the other 80+% has little means of participating in such gains, it is a tinderbox waiting to explode.
Abhishek@ 10. I liked your response a lot. Thanks for enlightening us. At the end of the day, a prosperous and peaceful India and China is good for all of us!
Dear Shihan,
I appreciate you providing your viewpoints and applaud you for taking the time to write for us.
Writing for an online newspaper like TOC means that you are going to get loads of feedback. Some of which you may not like or agree with. You shouldn’t view my points as being negative; I’m simply pointing out why I disagree.
One piece of advice: You owe it to the readers to provide factually correct articles. As Dr Frankenstein @ 3 has pointed out, your article is riddled with factual errors.
Please realize that I am not being “bitter” here, I am providing you with constructive advice. I would point you to articles written by your colleagues Andrew Loh and Gerald Giam. I often don’t agree with them either but their articles are factually correct and well thought out.
I hope that this does not discourage you from writing more articles for TOC because having a diverse range of views is what makes this site interesting.
Hi RighteousSinga,
I like a discourse! It is nice to read why readers disagree with the author. It not only enlightens the author on points that he/she could have missed, but also highlight perspectives and alternative interpretation of the same fact that would have made a better thesis It is learning curve for all readers and writers, isn’t it? We learn, we improve, and we write better articles in future.
You arguments suggest that you are of the opinion that only the service sector is capable of elevating one’s status to the middle class. I was wondering if you could further elaborate why it is not possible or substantially more difficult for an Indian to elevate to the Middle Class through the manufacturing sector.
Looking forward to your reply.
Sad to see posters like blackfeline resorting to insults if they disagree. Can we have a more civilised debate?
last poster..what is acivilised debate? Get real n welcome to e real world! You want to b politically correct go join the PTA! Im just stating my view..so what is your issue?I believe we should allow diverse voices and don’t xpect me to bend over 4 your like..
As expected more immature remarks from a rabble rouser who has nothing more to contribute than a pack of stereotypical retoric……observation should be based on fact and not your biased opinion….FYI, there are more Indians in the fortune 500 list than other Asians and that is a fact
and BTW insulting who disagree with you is hardly expressing an opinion…it is downright against the rules of posting comments this website
I don’t think there is anything wrong with the article if seen as a fragment of information about a facet of the Indian economy.
What bothers me is the implication that some strategies (for eg, consumption-driven economy, deliberate concessions for local producers etc) are suitable for Singapore just because they work for India. For one, there is no way for domestic consumption to bear the bulk of the GDP based on Singapore’s current population size and demography.
Again, I have no problems with facts. But projecting the facts into recommendations requires more prudence.
I don’t think this article talks about Singapore or an economic model that may be potentially applied to Singapore. However, it serves a nice reminder for us Singaporeans to not overlook India at all. Nowadays, when we talk about business opportunities, we are harping about emerging opportunities in either China or Southeast Asia while condemning the West for dragging us down.
India is probably at the stage Singapore was in the 70s and 80s whereby a growing middle class further stimulates domestic economic growth. Unfortunately, Singapore is so small that we have reached the limit for the middle class to continue to sustain the economic growth. In simple terms, the Singapore economy has outgrew the Middle Class.
I would say having a better understanding of India’s economic structure would help us Singaporeans to identify commercial opportunities in India. Cross-border trade is still the way forward for continued economic growth for Singapore.
india is a country of paradoxes. the debate in the comments is whether the glass is half empty or half full
what the writer speaks about is how impressive india’s growth has been despite not relying chiefly on exports. it is one growth story where its largely the result of people’s efforts and little on the government side. it is a success story that will unfold as time goes by and the full potential of india is unleashed.
the dismal side of india is equally depressive. its only given that as a country achieves economic growth, the number of poor will decline though the proportion may not and the severity of poverty can actually worsen with the larger divide
so overall how do one rate india. the growth story of india isnt like any other asian country which chiefly has been export oriented and cheap labour. indian masses has not just within the middle class but also the working class high competency despite the inefficiencies. they can manuerve their economy into any terrain they want as they have the skills. that puts india in a stable and sustainable growth path being in a position to grab opportunities as they come along
as to the poverty issue, its due to two factors. one – the politicians who are not interested in eradicating poverty. they actually want to preserve the poverty for their own votes and to protect their power to be corrupt and unquestioned. two – the middle class who actually dont want to accept there is poverty in their country. they rather live in their illusion maybe because it makes them less guilty of their consumption patterns.
in summary, in economic terms, the growth of india is phenomenal. poverty remains a major economic problem but its due to social and political realities which cannot be resolved with economic solutions.
Thanks for the intriguing article Shi Han and we certainly have an interesting discussion going on here. India is a country of paradoxes and of great diversity, and it is these very qualities that makes it such a fascinating and yet, perplexing, country.
Dr Frankenstein, just to correct a little fact. Chandrababu Naidu was the former CM of Andhra Pradesh. He rightly deserves recognition for developing Hyderabad into an economic power, but the former Karnataka CM responsible for Bangalore’s rapid growth as an IT powerhouse is S.M. Krishna (the current External Affairs Minister).
Re : RoJak Rabbit, RighteousSinga
I love people like you. Do keep up the good work & keep your narrow behinds out of India.
The less of the likes like you have dealings with India, the better for the rest of us. Thomas Hardy sums people like you nicely, “There is a condition worse than blindness, and that is, seeing something that isn’t there.”
Hello All,
The thing that surprised me the most both about the article and the comments is that no one seems to have used the India vs China GDP stats to compare the merits/demerits for a democratic system against an authoritarian system.
There are many Chinese academics, and Singaporeans, who contend that the reason for India’s slow growth is its democratic system which is slow, bureaucratic and breeds corruption and the Chinese model where decisions can be made and implemented quickly is more conductive to economic growth. Some go as far as to say that our country, Singapore’s, contribution to political science is establishing a precedent for a authoritarian state to establish a free economy, effective courts and corruption-free civil service – something that the Western world associated exclusively with liberal democracies.
Personally, I find the debate is slightly misconceived. I am of the opinion that the problem with India is not its democracy but its bureacracy. And that the two are very different.
What do you people think? Can a developing country with a large illiterate population, severe infrastructural deficiencies and an overstretched civil service achieve economic growth comparable to a stronger authoritarian government?
And who said that in 1st world countries, minority (rich and educated) pay attention towards the majority
(poor and illiterate). Have you seen rich people eating at Kopitiam? or does a normal cabbie eat at Raffles Hotel ?
Every country whether it is 1st or 3rd world, has the income gap.
It is the mindset of the citizens that determine whether the country is developed or not. So I think by Singapore is still 3rd world country bcos the citizens here are infamously known for complaining even they are much better than the poor citizens of India.