India Votes for Stability

Re: # 404

Anil,
Comparing India to US today makes no sense because US went through a major industrial revolution before going into financial services, and other service sectors. So did all the other rich countries of the world. India continues to lag even in competitively manufacturing simple stuff like toys which should create a large number of jobs for people who don't have the skills for high-tech jobs.

Here's a recent Time magazine story that should wake you up to the reality of manufacturing's impact on jobs, trade, economy etc.

Fears over Chinese imports are rife in India even though, or perhaps because, bilateral trade between the two countries is burgeoning at nearly 50% a year and the balance of trade is widening in China's favor. In 2004, when bilateral trade was $13.4 billion, the trade balance was in India's favor to the tune of $1.7 billion. But by 2006, India's trade balance had swung to a deficit of $4.12 billion, which grew to $16 billion last year. China is India's largest trading partner.

India's toy industry, which employs some 2 million people, has been complaining of unfair competition since China joined the WTO in 2001. "Plenty of people lost their livelihoods when the Chinese swamped the market," says Subhash Gorwaney of Khazana, which manufactures wooden educational toys, "They offered similar products, more variety, unbelievably low prices, but also lower quality." He added that the competition has not been without benefit. Indian manufacturers "have changed their methods, introduced innovations, and overall the bar has been raised."
Riaz Haq, PakAlumni Worldwide

Re: # 401

Riaz Mian:

Please give up being obstinate, you are making my point.

"... The road that led to the plant was a dirt road, as WSJ described it. ...... The road that took the WSJ reporter there was a six lane highway straight from a modern airport."

These roads, incase you need to be reminded are called infrastructure, and their construction is not called manufacturing.

It was comparable to plant in China, accoring to IBM who qualified this plant and the one in China. There difference was Chinese used nimble fingers to manually do surface mounting of components and had employed over 1,500 workers.

I am talking about early 90s. Chinese industry was non existant. Taiwan, Hong Kong, Singapore and Korea were dominating. Manufacturing had started to move into China.

Service sector (IT included) job is higher value and brings more value (even when measured in terms of $) into the economy. Therefore, it puts more in the hands for spending. This spurs demand for goods and services. Jobs thus created are indirect jobs and definitely more than a manufacturing job. Unless you have more than "flipping hamburger" argument, you may think of taking my experience on it.

Therefore, real question is what is that spurs the economy. Service first or manufacturing, no matter where it is as along there is a market to cater.

Just look at the U.S. in today's economy it has more jobs in the service sector. Service sector jobs employ more in service intensive economy) produce more disposable income and hence more indirect jobs. So much more that it can sustain manufacturing done elsewhere. This cycle is sustainable as long as new opportunities are created, like Clean Technology etc. which create jobs that cannot fly away. In global economy they have a tendency to fly to the place where a product (even service) can be produced (or provided) at the lowest cost.

If the trade balance is favorable then import of manufactured goods can be tolerated provided there is something in the economy to generate foreign exchange (Saudi Arabia is a great example of this). And hence the U.S. must innovate else it will be in trouble. What you are missing is a different orientation in thinking from hamburger flipping is the only service job.

Otherwise an efficient, productive and competitive manfuacturing base, even if it is secondary is sufficient, like Tata Nano plant. It is not world class but sufficient to meet demands of Indian market. They have priced themselves so low, that no one can deliver a Honda or Hyundai at their price. Smart move.

Please do not forget what I have mentioned that India already has a large industrial base (8th largest). This is when its productivity and quality are poor.

Can you imagine what would be its output when it productivity and quality increase? Well experts have done it.

McKinsey and Co had done a study on Indian economy where they had rightly pointed to the priorities that I have outlined. This report estimated this manufacturing base with continuing investments in improving productivity and quality would be sufficient to meet demands for the service sector based economy of India. Hence the priority in manufacturing is to improve productivity or quality, rather put a new Semiconductor Fab, when infrastructure is poor.

Even investment to improve quality and productivity was proposed to be left to the competition and market to take care of it.

For your knowledge, infrastructure construction will create the highest number lower skill jobs in India, certainly much more than manufacturing.

Somehow I get a feeling that you think that by throwing more people into manufacturing better cars will come out (for example). I gave you a real life experience of cold $10 million of my own funds into manufacturing.

Evolving world class manufacturing before world class infrastructure is foolish. It renders (as was in my case) a world class manufacturing unable to make money. A lot of firsts, lot of rewards, very high visibiility and a lot of production, but impossible to make profit.

Of course you can run charity, if that is what you have in your mind for "jobs". Unfortunately, markets and bankers are quite brutal in their demand for profits.

Re: # 398

700 jobs in India's largest electronics manufacturing plant? It must not be very large by Chinese standards.

It's probably like the largest shoe manufacturing plant in India that Wall Street Journal described and compared with China's largest shoe manufacturing plant a few years ago.

It was interesting to note the "largest in India" stood for thousands of shoes manufactured in primitive conditions smelling of toxic glue being applied manually and the fans shut because of recurring power outages. The road that led to the plant was a dirt road, as WSJ described it.

The "largest" in China made over a million shoes with modern machines, no glue smells, with reliable electricity and good exhaust. The road that took the WSJ reporter there was a six lane highway straight from a modern airport.

That's what a real Industrial revolution has meant for China. The contrast is very sharp and clearly visible to a casual observer. That's how China has lifted a historically large number of poor out of poverty and India has more poor today than it did in the early 1990s when reform began.

British Minister Alexander last year contrasted the rapid growth in China with India's economic success - highlighting government figures that showed the number of poor people had dropped in the one-party communist state by 70% since 1990 but had risen in the world's biggest democracy by 5%.
Riaz Haq, PakAlumni Worldwide

Re: # 398

Are you suggesting that all of India's low skilled and unskilled labor can be absorbed by IT? If not, what would they do instead? Go into banking and real estate? Flip hamburgers? Work for Walmart type retail outlets? Wait on tables? Who would buy from them if people have little or no disposable income?

Please give me an example of a nation even a quarter or less of India's size that has been able to create jobs en masse without a very large manufacturing sector.

Do you remember what Ford said and did and how he paid his employees when he set up his Model T assembly line? And Ford is still doing much better than the rest of the auto industry.
Riaz Haq, PakAlumni Worldwide

Full time employment is a myth. Even communist never provided.

Riaz:

In early 90s I had set up India's largest electornis manufacturing plant. To compete globally, I had to bring in automation to bring productvity and quality. It did become the largest exporter of computer electronic parts, and in 1994 it exported 50% of computer hardware exports from India.

Your notion that world class manufacturing creates more jobs than world class is services is wrong. I created about 700 jobs in this world class plant (if you know Zia Malik, he has seen this plant as him). I benchmarked with IT. For every direct job I created it created 4 indirect job. IT industry created two times more jobs.

Anil: you say, "Industrialization in today's world is not the only way to generate jobs."

Yes, I agree, but it's still the best way to generate massive number of jobs that can pay a living wage that India's huge population needs badly. Service sector is not going to do it. There are no examples of large countries who have succeeded in providing near full employment to their population without industrialization in recent history.
Riaz Haq, PakAlumni Worldwide

Raiz:

This only tells me what you absorb. There is something that needs to be done.

As they say beauty is in the eyes of beholder.

Re: # 392

Here's an excerpt from Economist's India story you pointed me to:

Then again, Indian voters are not to be second-guessed. And Congress must now earn their support. In a country with 60m malnourished children, 40% of the world’s total, and an abysmal record in providing its citizens with the basic education and medical care that is supposed to be theirs by right, there is much to be done. And freed of its most troublesome allies, Congress will have no excuse for failure.

Mr Singh, who says the party’s victory “comes with a challenge of rising expectations�, appears to welcome this. On May 19th he challenged his new government to provide “a social and political environment in which new investment can be made.� If that promises some liberal reforms, of the country’s statist financial sector, for example, or its ruinously politicised higher education, Congress’s victory would be welcome indeed.

Few in Congress claim to want such changes, however, and Mr Singh, beholden to Mrs Gandhi, does not command his party. Sadly, not much reform may follow. But for many Indians, and all who wish the country well, this is still a pleasing moment. The divisive BJP and belligerent Communists have been forced to think again. The venal SP, whose manifesto included a pledge to curb the worrying spread of computers and English, is not in the government. And Miss Mayawati, who had hoped to be India’s next prime minister, is stuck in UP, inspecting the many statues of herself that she is building there.

Along with the usual accolades in Western India about Indian democracy, it basically reinforces my points about the lack of delivery of basic services.



Riaz Haq, PakAlumni Worldwide

Riaz:

It seems you are a hog for trivia. Let me share something with you.

India's industrial structure was seventh or eight largest in the world in 1990s. Believe me that there are more than eight industrialized developed countries in the world.

Please talk to some economists and they will tell you that job, capital and markets are more important than anything. Industrialization in today's world is not the only way to generate jobs.

If India and China followed the conventional model that you tout, yhe air you breathe, you will be able to see before you breath.

Classic development trajectory agriculture to industrial to services, is not necessarily the panacea.

Indian model is interesting and different. Its service sector is seizable and quite productive and growing quite rapidly. IT sector is just an illustration.

India's industrial complex despite being eighth largest, is among the least productive and among the lowest quality. This happened due to license raj and captive market that India had created.

Now that competition is getting introduced, there is no reason to believe that market will not play itself out.

India needs to stay on its trajectory of becoming a giant in services, which by virtue of its population is as possible as oil in Saudi Arabia. As far as industrial complex, productive and quality improvements makes this seventh largest industrial complex competitive in global economy.

Where India is gettin killed in its infrastructure which has not kept pace with its growth in other areas. If you have to send goods through goods train, you should add 25% extra to it, and wait as long as 21 days to reach destination.

Its roads suck, you just need to travel to feel it.

Airports are clogged, births at its ports are never empty and ships at times wait for days to off load or to load cargo.

You will see these only when you understand micro indicators are more important, just as the micro indicator of Mumbai rail road track gives you morning delight. Above all get your head out of the sand, and also rid yourself of hatred. There is nothing to gain locking your horns with hindu right wingers who come to Chowk to rattle persons like you.

It seems you have heard someone talking about the classical model of economic development and you harp about it as gospel, as a shloka from gita, or aayat from quran. You may need to go beyond it.

Re: # 391

In the early days of US democracy (about 200 years ago), the voting rights were limited to while men who owned property. It was an agrarian society, much like India's, for which Alexander Hamilton said "Masses are asses".

The term Robber Barron was coined by Theodore Roosevelt, about 100 years later, to describe the industrialists and bankers when industrial revolution came to America. These people were not gangsters and common criminals who dominate politics in the heartland of India.

The US did not become a real democracy until after it became industrialized and voting rights were extended to most of its citizens. India has not really had an industrial revolution that leads to a better educated, more discerning voters.

If you look at the evolution of democracy in US and compare it to US, India has a very long way to go.

The real question is: Can India really have an industrial revolution with the people in charge of India's "democracy" today? For that, you have to look at the rapid industrialization of China for inspiration.
Riaz Haq, PakAlumni Worldwide

Re: # 391

Riaz:

"And when you are done with your screams of holy cow and where is the beef, may I suggest for your envious reading please take a look at the cover of the latest Economist and read the related article."

You might just get a clue to answers to your agony.

Re: # 390

Riaz:

"...Holy Cow!! Where's the beef here!..."

Is this the only thing left at the bottom of your barrel?

Yes, gangster's elections are blot on Indian democracy. If you have a solution please forward it to India's Election Commission, or Supreme Court. Till then just watch and get your early morning delights thinking of Mumbai's rail road tracks.

For a bit of information for you to chew. Do you know who used to get elected in the early U.S. I will give you a hint, they were called as Robber Barons. Machinery is still left in some places, for you to see, but first you might need to get your head out of sand, or while inside there please think of inveting glasses that can help you see through the sand.

And when you are done with your screams of holy cow and where is the beef, may I suggest for your envious reading please take a look at the cover of the latest Economist and read the related article.

Re: # 389
Holy Cow!! Where's the beef here!
What a fantastical response to gloss over the reality of India's failed democratic experience! There is no more powerful turn-off for those wishing for democracy than the criminal-infested Indian legislatures, gangster politicians lining their pockets, lack of basic infrastructure, and the poor, illiterate and hungry residents of India's vast slums.
Riaz Haq, PakAlumni Worldwide