Over at his Substack, Noah Smith has a pretty bullish take on India, Here…comes…INDIA!!!:
The United Nations estimates that India has now surpassed China as the world’s most populous country — or, as we colloquially say, the world’s “largest” country.
Obviously, crossing this threshold doesn’t mean much in practical terms. Being a tiny bit bigger than China doesn’t really change anything, and India has just about as many people as it did a year ago. But the flurry of news stories accompanying the event is a wake-up call for the world: India has arrived on the world stage, in a big way.
What does that mean? Well, a whole lot of stuff. More stuff than I can summarize or even mention in a single blog post. There was a quote attributed to Napoleon two centuries ago: “Let China sleep, for when she wakes, she will shake the world.” Well, China did wake up, and the world has been shaken. The whole economic landscape of the planet, the geopolitical balance of power, and even the Earth’s environment have been irrevocably changed in the last three decades by the addition of 1.4 billion human beings to the ranks of the (more or less) developed world. Now India brings another 1.4 billion, eager to join those ranks. Get used to seeing a lot more graphs with this basic format…
It’s a long post, but I think the major takeaway from the viewpoint of an economist is agglomeration. The co-location of producers and consumers and resources at such massive scale nations like China, India and the USA, result in a level of synergistic economic growth and power that smaller nations cannot match structurally. This is probably one reason that Britain punches below its weight vis-a-vis the US, it cannot scale.
But Smith is aware of human capital concerns, and this is probably the a signifier of the number one issue: Worthless Degrees Are Creating an Unemployable Generation in India. Fake credentialing just means firms will have to re-train or do their own intake (the obsession with credentialing shows up in funny ways on even on this blog; I don’t care what your credential is if you are a moron, something is common-sense to Americans working in tech).
Another issue that is focused on in the post is that India needs to focus on productivity growth through manufacturing. I actually thought a bit about India when I read this long and excellent piece in Palladium on the century-long failure of the British ruling-class on updating their nation for the 20th century.
33 thoughts on “Indian futures”
His comment on agglomeration reminded me of the stylized fact that most of the Indian population is north near Himalayan & Hindu-Kush mountains that receive lots of rain, most of the biggest cities are south along the coasts:
this is not really right, the northern plains are drier than mumbai and chennai. i think you might be focusing on bangalore and hyderbad, which are important for tech and outsourcing to usa, and are on the drier side
South may receive more rainfall than North but latter has snow-fed perennial rivers. The South has to rely on Dams to regulate year round supply.
The blurb about worthless college degrees is not so relevant for India. When measured purely as a function, the effect of these college degrees might be trivial. Only when seen through the prism of social value, these degrees make sense.
Funnel strategies used in sales illustrate what is going on. A top funnel strategy means you reach out to everyone who is interested in a college degree. A bottom funnel strategy means you only reach out to the talented who are deserving of a college degree.
Top funnel is attuned to social justice ideologies while bottom funnel is….what Arvind Kejriwal (an IIT grad) has been dissing Modi for (a shady college degree).
A college degree in India produces, at the very least, an Internet user and marketplace consciousness. Even with all this top-funnelling, only 11% of Indians are graduates.
The 11% of Indian graduates are very valuable to the Indian State. Graduates enter into a salaried job sooner or later, thereby providing the State with a firm source of income (the infamous TDS, tax-deducted-at-source). Direct taxes totalled 200 billion USD in 2022.
Dropouts who start their own businesses or work in agriculture have the profound inclination and THE opportunity to evade taxes.
So the Indian state has a very large incentive to prioritise graduate programs. Which it does promptly and exceedingly well!!
You are assuming service sector and difficult to tax unorganized agriculture + small businesses are the only options.
Part of the reason graduates in India are not employable is that most people see graduation as the only way to a stable paying government job. Since everyone can’t be absorbed in government, they then try to enter the private service sector employment. The underlying reason is that a high proportion of these graduates would/could have chosen a more trade oriented education if we had created a decent manufacturing focused economy. Ffs our ITI aka trade schools teach in English.
The British gutted native “manufacturing “ so that IN becomes a captive market for British factory manufactured products. At the same time they introduced the lure of few clerical civil service jobs. This upset the relative standing along the castes, triggering the quota wars. So this underlying dynamic of lack of respect for manual/physical work has to be addressed.
At the strategic level we are back to early 1800s situation. The west is trying to use India as a source of cheap labor/cannon fodder + large captive market by using divide and rule so that they take on China. We are as usual busy with our internal battles . Deja vu. 🤦♂️
The British gutted native “manufacturing “ so that IN becomes a captive market for British factory manufactured products. At the same time they introduced the lure of few clerical civil service jobs.
Among Jaffna Tamils a government worker even clerk commanded a higher dowry than a wealthy businessman. Later I found out that the reason was financial security. Even better if the husband died the wife and children got the pension.
This preference for Gormint jobs and the reasons behind it seem same throughout the sub continent 😄. Not sure if this is true of other “low trust” societies.
This preference for Gormint jobs and the reasons behind it seem same throughout the sub continent
There seems a reasonably easy solution. Wages above say a teachers job, plus a pension after 10-20 years.
Is that not that what was the heyday of US production economy* in the 50’s and 60’s.
*Production as in making real tangible goods as against the FIRE (Finance Insurance Real Estate) Economy. China does not want US FIRE economy products. US wants real tangible goods from China, hence the huge trade deficit with China.
JUST TO NOTE. US based commenters better not answer. The US is almost now like Soviet Russia. What you say is being tracked and can affect your future job prospects
Meanwhile in Bihar, Rjd leader claims Brahmins as foreign invaders from Russia.
Bihar getting the worst of TN periyar politics without the consolation of economic and manufacturing growth 🤦♂️
The British actions took place long long ago. It’s much more the direct result of Indian socialist parties from 1970s and 1980s.
In general, any degree is preferred by the Indian population to get into Govt or private sector jobs.
I agree that degree is preferred. The reason being preference for doing a desk based white collar job rather than a skill based trade.
Everybody happens to be bullish on India, till they aren’t.
It would be great if India could become like China. But India is not China, and it never will be. We need more decentralization, not less, regardless of what room temperature-IQ “Hindu nationalists” think.
Personally I think the EU analogy makes more sense for India than the China analogy. Political balkanization with some mutual defense apparatus and venues for economic cooperation.
the 1947 balkanization was a real success in terms of mutual defense and economic cooperation.
EU is just the correct model for American vassalisation. Freezing point IQ indeed.
The original eu before 90s could have gone to more tighter economic, political and defense Union like IN but the Americans got to work and brought in the eastern euros to enable the vassalization that has been in overdrive since Chirac left.
Similar plans seem to be underway for IN. Hence you see all usual suspects from khalistanis, DMK types , Kashmiris heck even Pakis pinning for Nehruvian socialism and constitutionalism.
Forcing disparate peoples together will create tensions regardless. India is not China, centralized nation-states only work when you already have a relatively homogeneous population.
I don’t understand the consternation over 1947 either. National identity in India is weak as is, a united India would never have worked without even more significant concessions to Muslims than have been made. You could certainly kiss goodbye to your wet dreams of Hindu Rashtra then.
the question is more about whether further balkanization of India produce better outcomes ?
i think if we think it would be a situation where there would be economic cooperation and mutual defense then maybe yes.
but i fear whatever conflicts exist now would metastasize into never ending mutually self-destructive rivalries similar to india and pakistan.
so for eg. going by geography alone india and pakistan should be major trading partners and it would be mutually beneficial if they were.
we can contrast this with china’s heavy handed mandarin imposition and homogenization which I think has been a massive success from a certain perspective. even taiwanese don’t speak taiwanese much anymore, as mandarin is more beneficial.
this is from a purely pragmatic perspective, however as a hopeless romantic i would like to see the full variety of indian languages preserved and used.
/the question is more about whether further balkanization of India produce better outcomes ?/
If India had to be balkanized, then it would have in first 30 years. Now there is enough pro-India grouping in all less-Indian areas (North East, Kashmir, Punjab, Bengal, Southern India), that makes balkanization or even secession almost impossible.
/so for eg. going by geography alone india and pakistan should be major trading partners and it would be mutually beneficial if they were./
India and Pakistan mostly don’t trade because they produce the same stuff, essentially with some margins here and there. India doesn’t need Pakistan exports, since Pakistan does not have the cost advantage to take advantage of Indian market (like say Bangladesh can in merchandise etc.) nor does Pakistan needs Indian exports (like software etc.)
Trading still benefits all trading parties (comparative advantage), no matter if trading partner produces the same stuff, or even if one trading partner produces everything at a lower cost (absolute advantage). Not freely trading is always an economic loss. The only reason India and Pakistan don’t trade with each other is because it’s used as a political tool on both sides. Even China and Taiwan trade with each other worth almost $300billion, despite not even officially recognizing each other and laying claim on each other’s territory.
“The only reason India and Pakistan don’t trade with each other is because it’s used as a political tool on both sides.”
Let’s not both sides this. It is PK which is not willing to trade. A few months back when inflation started in PK, there were voices asking to import vegetables from India. But went nowhere. With GST and ongoing infra upgrades, IN is one big integrated market. PK needs trade with IN more than other way around.
India increased customs duty on all Pakistan products by 200% in 2019 and recanted the MFN status, tariffs were part of the ‘hardline’ stance taken by BJP to ‘punish Pakistan for Pulwama’ and the BJP milked it fully for its reelection campaign in 2019. This is synonymous to banning if not outright banning it. So no, it’s not just the Pakistani side that plays politics over trade. Pakistan has usually allowed most Indian imports since 2011 (despite not fully reciprocating India’s MFN status). It’s only after the annexation of J&K in Aug 2019 that a complete ban happened on the Pakistani side. So both sides use this issue politically, nonetheless both countries still trade via UAE which is quite suboptimal.
Also, there is some misconception that Pakistan needs to trade with India more than the other way round. Economically, trade benefits both countries in equal economic terms – this is literally the cornerstone of a free market.
When you say Pakistan needs India more than Pakistan, you are referring to percentages (A greater percent of Pakistan’s economy will benefit from free trade with India, than India’s – that’s simply because India’s economy and population is bigger). On a per capita or $$ basis, the benefit is the same on average. However not trading is sub-optimal, and from a $$ perspective, the economic cost is equally shared.
The issue here is political, it’s always has been. Let me give you an alternative view, if you set economics aside for min:
India’s trade with Pakistan even under a free trade agreement would constitute a small portion of it’s overall volume while Pakistan’s trade with India would constitute a bigger portion of it’s total therefore making Pakistan more reliant on India than vice versa. This is favorable to India to use as a political bargaining chip with Pakistan, and to the (geo)political detriment of Pakistan. Which is why India granted MFN status to Pakistan in 1996 while Pakistan did in 2011 (and that too not fully). One of the reasons why India hardly took Pakistan to WTO. It was just using trade as leverage.
The BJP government decided that on a policy of isolating Pakistan, and it was willing to give up the political benefit of having trading access to Pakistan, as it decided it was not worth it or it was not meeting their objectives. Otherwise economically, when accounted for $$$ amounts, the economic loss from lack of free trade is the same.
Wouldn’t you say Waiting from 1996 to 2019 got PK to respond to reciprocal trade offer was more than reasonable time?
On trade front, I don’t think there are any commodities/products where importing from PK works out cheaper/better for IN. I believe the reverse is not true.
What do you mean reciprocal trade offer? India granted MFN because it benefited India politically. Pakistan also granted it in 2011 because it benefited Pakistan politically, although Pakistan never really fully implemented it, there was still free trade on most items except a few banned ones.
Most bigger economies don’t put reciprocal restrictions on trade with smaller economies, unless its politically expedient. US does not put equivalent tariffs on every country that puts a tariff on its products, or any country it has a trade imbalance with. Because lack of trade has an equal $$ effect on both parties.. But trade is also used as part of international relations and geopolitics, so reasons for banning or restricting it is almost always political.
Indian future is fkd for nxt 25 to 50 yrs. Only reason we are growing is thanks to technology that west is creating and giving opportunities to our people to learn and send back. Without that, we have no avenue of growth. And we are happy taking it away from our neighbors and run politics of envy.
So, there is that. Get out of here while you can, its too late for some of us.
bjp is a party that wishes to benefit from endless anxiety, by amit shah and modi, they do not wish to solve problems, it can easily get some ex muslims to be part of it, solve a lot of problems by ensuring religious autonomy in hindu temples across country while getting enough people to be part of board of governors from all background.
Apologies for sharing in non Open Thread.
Razib, If you’ve come across this, is anything new/interesting?
The Indo-European Puzzle Revisited – https://www.cambridge.org/core/books/indoeuropean-puzzle-revisited/25D6C8E56082964A6133D70925ADFE29
We need more decentralization
Personally I think the EU analogy makes more sense for India than the China analogy.
Gonna bet that “BaSeDeXhInDu” was either raised abroad or in his/her native state.
India is a made-up nation, keep crying about it. The wet dreams of Rajputs and Baniyas for “muh gloooorious Hindu Rashtra” are not what the entire country wants.
India is not analogous to China, that’s a fact. One country has 30-40 major languages and 6,000 separate castes each with their own unique histories, the other is 92% the same ethnolinguistic group and has thousands of years of unified history and ethnic kinship. It’s simply laughable to be offended by this simple statement of reality.
Make an actual argument or gtfo.
Weird way of saying “you are right”
It’s quite funny to me how you think me being raised abroad and not being duped by the nationalist propaganda of the Indian Republic is somehow a gotcha.
I’m sorry that I was actually raised in a civilized country where people can see right through your braindead Stone-Age fascist bullshit.
Please do tell me exactly, how exactly is Hindu fascism beneficial to us low-IQ coolie Shudras and Dalits? Obviously I am not smart enough like you godly Brahvermins and Rajchuts to understand the nuances of how slaving for UCs is somehow beneficial to my people.
Even white nationalists have more honor than you filth. Make an intellectual argument or fuck off, beast.
Weird way of saying “I am an upper-caste Hindu fascist who has no actual argument for why cultural genocide and North Indian UC hegemony is good for all 1.3 billion people in India who have nothing in common with each other apart from being brown and descended from people we now call Hindus.”
I didn’t answer your question because your whole line of questioning is an irrelevant tangent to distract from the intellectual bankruptness of your braindead ideological dogmas.
You are just another trained cultist attack dog and you don’t even see it. But sure, keep being offended by the reality of ethnic identity in the subcontinent and dreaming wet dreams about “muh Hindu Rashtra suuuperpooower 2040!”