Amy Wildman has a very positive story on Indian economy in today?s NYT. I have always enjoyed her coverage of South Asia. In this article, she captured the dichotomy of economic development in India very well:
?..India is now the world’s fastest growing telecom market … Banks are now making $15 billion a year in home loans … The Bombay Stock Exchange’s benchmark Sensitive Index has risen by more than 50 percent since April, hitting a three-year high. Foreign exchange reserves are at a record $90 billion? India is slowly making a name not just for software exports and service outsourcing, but also as an exporter of autos, auto parts and motorcycles. …The seasonal monsoon that ended recently was the best this agriculture-dependent economy has seen in at least five years ..That, in turn, is putting income and credit in rural pockets, spurring a run on consumer goods that will only strengthen when the harvest comes in later this year.
Then she also measures the cons:
In spite of all the negatives, a story like this, on the NYT homepage, is a big deal. And frankly, this worries me a little. I too think believe that India has an opportunity here that a country rarely gets. But I also think that Vivek Uberoi (who recently joined us in IndiaEconomyWatch) hit the bull’s eye when he said on an e-mail to the group:
I worry that if we are not careful, the growth may accelerate the endemic corruption of Indian institutions and the increasing fragmentation of our politics that is eating away our society. I wonder about the effects that the essentially regional nature of the current IT and BPO boom may have on Indian politics and society.
Obviously, I was reading Kenichi Ohmae. Ohmae is the prophet of the rise of Regional economies. In his last book published quite some time back, He talked about, how in Japan, some regions have been bearing a disproportionate part of national developmental burden in and how this has created huge social dischord.
.. This arrangement is both reflected in and sustained by the country?s voting patterns. The heart of the LDP?s traditional support came from the rural areas, to which is returned a disproportionate share of the centrally provided subsidies, in the form either of direct grants of money or services or for indirect protection like trade barriers against the import of foreign rice or beef.
? If I live in one of Japan?s three major cities, this arrangement quickly begins to lose its appeal. I may be as reasonable as the next man, but it is hard to see why I should keep footing this kind of bill.?
Yesterday, in his rejoinder in Slate (which is worth reading in its entirety) to David Brook’s new column in NYT, Daniel Gross nailed one of the core economic issue underlying the current tumult in USA:
On a percentage basis, those with the largest disconnect between the amount they ship to Washington and they amount they receive back are in the Northeast. New Jersey receives only 62 cents back on every dollar shipped to Washington, while Connecticut and New Hampshire receive 65 cents and 66 cents, respectively.
The data flies in the face of received notions about wealth, partisan affiliation, and dependence on the federal government. The five largest recipients of federal largesse in 2002 were all non-Northeast states: New Mexico, North Dakota, Alaska, Mississippi, and West Virginia (four of which went Republican in 2000). The states shortchanged the most were New Jersey, Connecticut, New Hampshire, Nevada, and Massachusetts?four of five of which are in the Northeast, and four of which voted Democratic in 2000. In fact, when you look at the voting behavior of states?based on 2000 per capita income?11 of the 13 wealthiest states voted for Gore while 15 of the poorest 17 states voted for Bush.
So, two of the biggest economies of the world are still wrestling with the social impact of skewed development. However, the relative homogeneity of people in countries like Japan or USA have so far held the ensuing social dischord in check. India has a lot of things. But one thing we don’t have is homogeneity.
I don’t think anyone would dispute that right now we are looking at the development of three powerful regional economies in India. In the South, there is what I would call the golden triangle of Bangalore, Madras and Hyderabad. New Delhi and the satellite towns of Gurgaon, Noida and Faridabad in the North and the Bombay-Pune corridor in the West are the two other key hubs that together with the Southern cities form the center of gravity of the IT / BPO / biotech boom in India.
But unlike Japan, India also has the problem of an increasingly fragmented and violent political system. All the Southern states are run by regional parties. The center of gravity of political power resides in the Gangetic valley of Northern India which is largely being bypassed by the technology led economic rejuvination in India. If you consider the fact that the large food and fertilizer subsidies are mostly going to big farmers in Northern India, that the bedrock of caste and religion based politics is in UP, Bihar and Madhya Pradesh, that the basic distrust between the Hindi speaking North and the Dravidian states never really went away, you would probably agree that we are looking at a potentially much bigger social upheaval in India unless we can figure out how to bootstrap the rest of the country.