Providing Unique Commentary and Insight into Politics, History and Society since 2005

Friday, February 10, 2006

The Tiger

India is redefining what an Asian Tiger can be

Growing up when we'd make our family trips to India it was like living a nightmare. Why did I have to get in a plane, fly for 30 hours to go into a time warp to a country whose economy and thinking were very 19th century. I hated visiting India and resented that India with countless natural resources and unlimited potential had allowed the Asian Tigers of South Korea, Taiwan, Hong Kong, Singapore and Malaysia to modernize their economies while India remained backwards even by the low standards of the third world. In 1990, India's relatively small neighbors, Sri Lanka and Pakistan had more foreign export $ than did India.

India was behind the time largely because of the cumulative effect of official British policy which prior to 1947 was designed to keep India's home grown economy down and Nehruism which from 1948 to 1991 mixed the worst forms of socialism, nativism, personal psychopathy, sympathy for the Soviet Union, and paranoia into one. Nehru's family developed an unhealthy resentment of the west, an economy that was almost entirely centrally controlled, a bureaucratic mess that encouraged India's best and brightest to leave for the west, and a system of free enterprise which discouraged any sort of foreign innovation and investment. India was at the time of Rajiv Gandhi's assassination and the collapse of the Soviet Union in 1991, a nation without a rudder and without a direction to compete in the new world economy. India was a nation that had abused Democracy by allowing a corrupt family without a realistic vision for India's global role and obligation to dominate the national politics for over 40 years.

Enter Mahmohan Singh, the current Prime Minister who became Finance Minister in 1991. Singh is unique among Indian leadership. For starters he's not a Hindu or Muslim, but a Sikh and secondly and most importantly he is a believer in free markets and India's ability to compete globally. While the Nerhuists believed that India could develop anything that the west produced (for example a nuclear bomb, or innovative compact cars such as the Maruti which was a pet project of Nehru's grandson Sanjay Gandhi) they didn't trust India's ability to market these products outside of the protected and restrictive market at home. Moreover, Indian products were much like those of the Soviet Union......defined and altered more by the whims of bureacrats and politicians than the engineers or experts who had initially developed them. Even if India had wanted to compete abroad with such products, chances are they would have fallen flat on their face.

Beginning in 1991, Singh took some important steps to open up the Indian market, while positioning India to be a global leader. Within three years, consumer products and goods flowed into India from the west, the Indian economy recorded 6% growth and the perennially icy relations with the west improved. India's aviation sector was liberalized to allow private carriers (one of which, Jet Airways is now considered one of the world's finest airlines), to compete with the two state run airlines that had poor safety records and a worldwide reputation for inefficiency. The auto industry was liberalized to allow Ford, GM, Toyota, Honda, and Mitsubishi to set up plants in India, and export cars to neighboring countries. Indian companies such as Tata and Reliance were allowed to diversify as well as expand overseas. Also, innovation was encouraged by official government policy and spending on R&D, innovation that brought us the likes of Infosys and Wipro.

India not only became a replica of South Korea and Taiwan's economic miracles after 1991, it redefined the sort of economic relationship an Asian country (other than Japan) can have with the west. India's advantages of climate, English language proficiency, and a large educated population allowed Western companies to make India the world's back office. India's engineers became the fuel for the IT sector worldwide and kept companies like Google, Microsoft, Yahoo and Intel on top of the global earnings pyramid. While demagogic politicians in the United States throw red meat to their constituents about outsourcing and call centers in Bangalore, the bottom line is that Indians have proven they can do the sort of work call centers and software companies need more efficiently, competently, and cheaper than their counterparts in the U.S.

While India's infrastructure continues to need improvement, some shining examples of modernization stand out. The IT corridor in Bangalore is dominated by Hosur Road, a highway with limited access that is top of the line even by European standards. A superhighway on par with the U.K.'s motorway system (which is superior to the U.S. interstate system) is now open between Mumbai and Pune as well as between Delhi and Jaipur. In Kolkota, the government of West Bengal built an expressway bypass reminiscent of the London Orbital. In Chennai, the state government is planning an innovative monorail system to link the IT corridor with downtown. Now the Government has partially privatized the two busiest airports in the nation, Mumbai and Delhi to foster modernization, with the third busiest airport Chennai, and seventh busiest Kolkota next in line for privatization. The nation's fifth busiest airport, Cochin is already run by a private company, and the fourth busiest airport Bangalore is going to be rebuilt and expanded by 2008.

India is leading the global economy into the 21st Century after spending very little time in the 20th. From my childhood, when India was an awful place to visit, to today when it is among the most desirable places on the planet, one thing has remained consistent. India has its way or doing things and even though it may change with the times, business and culture remains distinctly and uniquely Indian. That's more than can be said for Europe or East Asia.


The Patriot said...

India was one of the few nations where the citizens were rightly pleased with the re-election of George W. Bush. They know that cooperation with the US is moving the world's two great democratic nations forward.

India is leading the global economy. The problem is that the unions and others are trying to stiffle our cooperation with them. If the left wingers that run the labor movement and democratic party win, China and India will eclipse us as economic powers. Just more reason to vote Republican this fall!!!!!!

The Patriot said...

Also, the private sector in India is now operating with very little regulation and interference from the once infamous Indian Bureacracy and see how far it has gotten them. I like the Indian market model and feel some of the burdensome regulations that have been scaled back in India show that similar changes here would help business and grow the economy.

Anonymous said...

Good commentary. Some nice points.

Ronald said...

"India's advantages of climate, English language proficiency, and a large educated population allowed Western companies to make India the world's back office."

Interestingly, the "growth industry" now for BPO outsourcing and back-office operations is for *non-English language* outsourcing, especially from Germany. As anyone who's worked in Europe knows, German companies will go out of their way to hire outside of Germany-- basically, to avoid hiring Germans at all costs-- because of that country's ridiculously irritating labor laws that make it impossible to transfer or lay off workers when a company realistically needs to do so, while saddling companies with pensions that no firm in its right mind would pay. So, predictably, German firms started hiring German-speaking workers in Poland, the Czech Republic, Russia, Slovakia, and Hungary (which is one reason why unemployment in Germany is so high), since German labor is unaffordable. Angela Merkel is trying to change this, but she's still not politically strong enough, and most experts expect that the rigid German labor laws will be on the books for another 15-20 years at least, continuing the shift of German companies to offshore labor pools.

Now, many German companies are enjoying record profits and expanding their operations to Asia, where labor is even cheaper than in Eastern Europe, and naturally the German firms are looking at tapping well-educated Indians for call-center jobs, medical dictation and transcription, tax preparation, auditing of the books, and text copyrighting and proofing. Conservative estimates suggest that 400,000 such offshoring jobs from Germany will open up within about the next 5-10 years. (Many French and French-speaking Belgian companies are also looking offshore, though not quite to the same extent as German firms.) Naturally, these jobs require German fluency, and that's the one factor keeping India from expanding its dominance of the offshoring biz-- not enough Indian students, despite the vast population, have become fluent in German.

Thankfully for India, Tamil Nadu, Orissa and Karnataka states have started to wise up, and they're emphasizing German-language fluency and even apparently starting up some German-language medium schools for instruction of students. (German is a major scientific and technical language like English, so students can study the same vast array of advanced subjects in German.) Also, many Indians are working for periods in Germany, and those that return are also fluent in German.

So India should indeed be ready with a bumper crop of fluent German-speakers as the German offshoring industry takes off and peaks about 5-6 years or so from now. (Tamil Nadu will also be ready with a large group of French- and even Portuguese- and Spanish-speakers as those outsourcing industries rise up, in part due to France's colonial history in Tamil Nadu.) Thus I'm very bullish about India's economy in about 10 years, so long as it continues to develop a home-grown pool of speakers in these various languages. China's also getting a share of the outsourcing market, since so many Chinese are fluent in Japanese and Korean as well as German, English and French, but India is still where most of the outsourcing action is.

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I am the host of the Major League Soccer Talk and EPL Talk Podcasts and am frequent guest on other (world) football shows. I am also the publisher of various other websites including this one. I work in public/government relations in addition to my soccer work and have a keen interest in history, politics, aviation, travel,and the world around us.