What are the broader takeaways from the apparent success of India trained CEOs in the US ? The usual Darwinian (best and brightest) or ‘sheer population’ arguments are attractive but dont withstand scrutiny. A broader explanation is that India has been disproportionately successful in producing corporate leaders (much like certain populations in the past were successful at producing generals or merchants), and due to trade and immigration links, some of its success has overflowed to the US as well.
Since 1984, India’s stock exchange has provided returns of an astounding 10,000%. Even the Dow Jones (3700%) has returned a fraction of the BSE’s returns.
This is a nearly forty year period, enough to average over most bear arguments. It spans the fall of the Berlin Wall, Kuwait War, 9/11 attacks, the Great Recession, the arrival of the internet, AI and smartphones. Given India’s strictly mediocre economic fundamentals in the 1980s, the success of listed Indian companies over an extended duration points to successful resource and work management.
Corporate India has played a much bigger role in India’s economic expansion than corporate China in China’s meteoric rise. The US tech sector has reaped an unanticipated reward of this fact. Globally though, the much more important economic implication is that India’s GDP rise is likely to be felt via private corporations, in contrast to China’s SOE heavy BRI.
Cricket and hockey, two traditional games of the English elite are now eclipsed completely by working class football in the UK. In an ironic twist of fate, these sports are now patronized primarily by the middle class in its former plantation colony India. Even more twisted, many urban elites in India have now embraced European football as a marker of a more globalized identity, in opposition to the more ‘desi’ cricket. The popularity and patronization of a sport in a group of people still has more to do with identity and politics than any inherent characteristic of the sport.
Unlike cricket, hockey has not become a global behemoth in terms of revenue and following. Can hockey enter the upper echelons of global team sports ? I think if the Indian government, interested business and sports bodies play their cards well, hockey can do this. The key could be an IPL style hockey league. The adjective IPL style should not be understood in a facile manner. The cricket IPL is no ordinary sports league. It operates in a sporting universe where the international game is the highest echelon, rather than commercial city based clubs. This compresses its playing time to just 8 weeks, but the league generates more than a billion dollars in revenues in that period. Revenue per game is $ 10 million, compared to the NFL’s $ 50 million. The IPL achieves these numbers with a league only 14 years old, from a country with 1/30th America’s per capita GDP.
The spectacular success of the IPL is a miracle, and a similar mini-miracle will be needed to sustain a hockey league. A dedicated playing window, so all the best players can play on a single platform. Teams in big markets like Mumbai, Delhi and Bengaluru to maximize revenues and publicity. Careful game timings and advertising to capitalize on a small but dedicated (and wealthy) fan following in the low countries and Germany. Since hockey as a sport has official status in India (in contrast to cricket), it can and should receive backing from the government. The Indian government can own a stake in the hockey IPL which it can relieve when the league is well established and profitable.
There are advantages hockey has vis-a-vis cricket in terms of playing time (1 hr vs 3 hrs) and its similarity to football in play and scoring. Of course, it is an established Olympic sport with strong men’s and women’s competitions. Hockey, along with soccer and cricket emphasizes skill and agility more than bulk and power, making it relatable in more geographies and demographics. The successful Olympics campaign will give birth to hockey stars who will rapidly gain a following in the sports star loving Indian public. Once well ensconced commercially in India, the game of hockey will garner the resources to promote itself further, just like cricket has.
In its period of rapid economic growth, Indian democracy was successful in redistributing gains from urban centered, globalization led growth to the rural agrarian economy. The redistribution of available economic and administrative resources among competing groups is a primary concern of democratic politics. The situation is very different in non-democratic polities. In the figure below, we see that during globalization led growth, the ratio of per worker agrarian income to overall per capita GDP drops to less than a half in China and Vietnam, while it remained above or close to one in India and Indonesia. In other words, agrarian workers in one-party China and Vietnam became relatively poorer while their country became richer, agrarian workers in India and Indonesia did not incur a relative disadvantage.
In India the vast rural population with more than a century long experience in political mobilization, has pushed governments to spend money in rural areas. Redistribution has occurred via irrigation projects, rural roads, NREGA, subsidies, loan waivers and recently, direct income transfers. Any negative externality arising from agrarian activity has been borne by urban residents (eg: Delhi smog) but farmers were not penalized. Aside from rural-urban dynamics, democratic redistribution has led to a spatial equalization of agricultural productivity across the country.
Though the condition of Indian cities is depressing, the upshot of a democracy dominated by the rural majority is comfortable food security. In fact, even though India’s use of pesticide is quite low by global standards, and its agricultural yields, cold-chain infrastructure sub-par, it has become a major net agricultural exporter. This is in huge contrast to China which has become a massive net importer of food. This is an important strategic advantage for India.
There are signs, though, that India’s redistribution toolkit might be reaching the limits of its efficiency. Concurrently, a more reformist Indian government, awash with surplus grain, wants to re-orient farmers towards higher return crops or even an exit from farming. An urbanising electorate may also not be as willing to redistribute their hard earned tax monies towards their rural co-citizens.
The reorientation of the Punjab-Haryana farmer away from rice and wheat will require tact and persuasion, not ordinance fiat. The set patterns are very comfortable from the economic (MSP + diaspora remittances + armed forces recruitment) and psychological (we feed and secure the nation) perspective. The simple promise of higher incomes might not convince historically agrarian communities who havent fully embraced the money economy.
The Prime Minister has proven to be a masterful communicator. We have not yet seen the same skill in his dealings with the farmers. The approach there has oscillated between genuflection and disregard. The potential is there for the 200000 sq. km tract of well irrigated, fertile land in India’s north west to become the new California Central Valley (47,000 sq km). India can then become the land that greatly increases global access to premium agro-products like fresh, dry fruits and vegetarian protein. The latter (beef-mukt world) will also resonate with many urban supporters of the government and even the farmers themselves.
Historians have put forth the the idea that complex political states originated as ‘hydraulic empires’, a need for ancient societies to manage vast water systems. Governments have evolved from their ancient origins to do a lot more beyond managing water. However, we shall see in this post that attitudes towards water can lead to important differences in the evolution of spatially and temporally adjacent political entities.
In terms of hydrology and geology, there are striking contrasts between the Indo-Gangetic plain and peninsular India. The Indo-Gangetic plain is drained by perennial rivers, fed by both Himalayan glaciers and monsoonal precipitation. Peninsular India, on the other hand, is drained only by monsoon-fed seasonal rivers. Geologically, the Indo-Gangetic plain is blessed with alluvial soil which is both fertile and holds groundwater. Peninsular India is composed of harder rocks, which leads to more runoff and less groundwater retention. Water has always been a much harder challenge in peninsular India than the Gangetic plain.
The British Raj and its successor state of India, had vastly different attitudes towards the hydro problems of peninsular India. However, the Raj’s successor state of Pakistan never had to deal with the water challenges of peninsular India. Pakistan remained agriculturally more productive per worker than India till 2017. India had to construct 5264 medium and large dams (compared to Pakistan’s 150) to overtake Pakistan on that count. A side effect was an advanced industrial and technical base.
We first discuss the dam policy of the British Raj, which is known for its investments in railways and canals. A striking rarity in the Raj’s impressive portfolio of grand infrastructure projects are mega dams. It is not that the British did not build significant water-works in India, but these were overwhelmingly barrages and canal irrigation projects. And the absence of large dams was not due to a lack of technical expertise, indeed, elsewhere in the empire, (notably Canada and Australia), British engineers pioneered the techniques that underlie the construction of modern, large scale dams.
So what explains the Raj’s dam reluctance in their richest canvas ? It is likely that the politics of British India underlies the inhibition towards dams. The centre of gravity of the British Indian empire was the Indo-Gangetic plain. It was the most populated region, the region which produced the most recruits for the British Indian army and the region they really needed to manage. And this region did not need dams. The large dams the British built were mainly in deep South India, the largest dam there was a project conceived by the king of Mysore, Krishnaraja Wodeyar.
The modern day Republic of India found itself in a very different political situation. The elites of peninsular India were organized and had the numbers to match their Gangetic counterparts. Prime minister Nehru, although Gangetic, was deeply influenced by the economic philosophy of the Soviet Union. At the time, the Soviet Union was a master of building mega dams. A massive dam building project ensued, all across India. In the Gangetic plain, this meant increased agricultural yields, but in peninsular India, the dams were a game-changer. Vast tracts of land in Madhya Pradesh were brought under productive cultivation. Interior Maharastra developed a sugarcane belt. Gujarat has become a leader in cotton, tobacco and groundnuts.
Equally important, dams made large cities viable outside the Gangetic plain. Dams and their reservoirs are the only reason the nascent urban centres of peninsular India (Mumbai, Pune, Ahmedabad, Bengaluru and Hyderabad) could become the dynamic mega-cities they are today. In contrast, Gangetic plain cities continue to get their water from the perennial rivers that they are set on (Delhi-Yamuna, Lucknow-Gomti, Patna-Ganges, Kolkata-Hooghly and so on).
It is conceivable that the extreme importance of large dams and water management structures pushed India’s post-independent elites to invest heavily into engineering education. The public and private enterprises in charge of dam construction, irrigation boards, and hydroelectric machinery provided employment for the labour produced by these elite institutes. These projects thus serviced the needs and aspirations of both urban elites and the vast rural voting masses.
On the other hand, Pakistan’s situation was quite different. With the exception of Islamabad, Pakistan’s cities get their water in the same way Gangetic Indian cities do, surface water and ground water. Developing state-of-the-art water management technology was never an imperative for the Pakistani elite.
Economic growth in India has made the question of immigrating to the US vexing for a lot of young Indians. The old attraction of more material prosperity no longer holds, you can buy everything in India. The difference between siblings in the two countries is no longer the car, the modern electronics and superior amenities. In many ways, immigrating to the US has become a more ‘experiential’ move, with terms like ‘job satisfaction’, ‘latest technologies’ being used in addition to the touting of cleaner, safer and more hip environs.
So should you, as a young Indian teen or adult seek American shores? I was in the same situation nearly two decades ago, and took the plane to the US very unthinkingly, almost like an instinct. I always wished someone would have told me what the possible implications of such a big decision would be, the doors it would open as well as close. I seek to do so for any young person interested here. This post is not going to be about details of work and life in the US versus India, but rather the big picture.
Today, the cost of moving out of India is more than the loss of family and ‘culture’. India offers opportunities of its own. It is with this context that we move forwards with our analysis.
Career: Technological Leadership in Prescribed Areas vs Flexibility in a Growing Economic Power
US leadership on the technological front is significant and enduring. America attracts smart people not only from India, but from across the world, including other developed markets. Deliberately or unwittingly, America has been marketed to the world as the place a smart person needs to be in to maximize their potential. This is somewhat like the IPL being the cricket league where a cricketer can compete with the best in the world. There is a reason why America is the only country in the world that has a Google and an Apple.
However, the last two decades have seen a sea change in India’s economic growth, technological prowess and integration with the world. Consider the number of US patents filed from India. From being four orders of magnitude lower than the US, India is now less than two orders of magnitude lower, with continuing growth. Similar trends are seen in the number of scientific papers published in elite journals, where India has moved from 1/20th of US output in 2000 to 1/3rd of US output in 2018. India today offers more opportunities than ever before.
Add to this the fact that the American work visa is exactly that, a visa. The visa is designed to bring in workers in areas where there is a shortage of Americans, so the bulk of opportunities lie in the computer software/data management sector. The flexibility and freedom to explore different career and life paths is severely constrained. You cannot easily leave your software engineering job in a global mega corporation and join a business development role in a start up. You cannot take two months off and wander away to see the world. Your US work visa needs full time employment, every second of your life.
So the trade off here is the opportunity to get a narrow but a truly world class exposure versus exposing yourself to a spectrum of career and life possibilities in India.
Life: Systems vs Services
If there was a one line summary for the difference between life in the US and India, it would be in America you can rely on systems, in India you can get a lot of services.
In America, systems work. The courts, police, municipal authorities all do their job professionally. You will not see mounds of rubble by the roadside and trash everywhere. The air will be clean, government authorities will be professional and accessible. The contrast with India is stark.
When it comes to services, lets just say this, the middle class homes of my relatives in India are a procession of cooks, drivers, maids, gardeners, electricians etc. We have a huge population whom we can now feed very well and transport cheaply around the country to markets which need them. As an example, in India, the service and variety of food on offer in a 3-star hotel buffet for 5 dollars was impressive. On the other hand, there were no Mexican options and stepping out of the hotel, you could literally smell the chemicals in the air.
Spirit: Continuity vs Renewal
Humans are not merely the work they do and the goods and services they consume, transcending our finite selves is a big part of the human experience. This is where notions of family, ethnicity, religion and nationality come into the picture. The US and India offer you contrasting pathways in this regard as well.
Being in India offers continuity and context. You can remain soaked in the arts, sports and traditions you have been familiar with since you were a child, and there is no need to separately make an effort to ‘access India’. You are the market whom the creative and talented people in the economy seek to serve.
America offers the chance for renewal and rebirth. Indeed, for the majority of its existence as a nation, America has offered the tired and beaten people of this planet a chance at reinventing themselves and starting a ‘new life’. The children of those pushed out by their home countries have achieved miracles in the American meritocracy.
So there it is, you can think about these three trade offs while making your decision. Do you want to achieve the summit of computer technology ? Or do you want to explore the world of work before diving into a committed career path ? Do you get annoyed and distressed by the dysfunction of the Indian governments ? Or do you appreciate all the services available to make your life easier ? Finally, do you feel India imprisons you and you need fresh air ? Or can you not bear to sever yourself from your gods and greats ?
Do state capacity and policy really matter when it comes to wealth among regions in South Asia ? Or is prosperity today determined largely by a mixture of geographical and historical factors ? South Asia as a unit is a reasonable region to study because the introduction to modernity in this entire region was mediated by the British Empire.
Seen in the two figures below are GDP per capita ($ PPP) figures for smaller (< 20 million population) and larger (> 20 million population) regions. The entities include the nations of Bhutan, Nepal, Bangladesh and Sri Lanka, states and union territories of India, and provinces of Pakistan. Some notes about the two figures:
Green bars denote plains regions, red mountain regions and blue coastal regions.
Bold x-axis labels indicate entities with major metro areas.
Bold borders around bars indicate non-Indian entities.
There are roughly five bands of wealth we can identify:
Rich smaller entities of India: Goa, Delhi, Sikkim and Chandigarh. These have GDPs of around $20-25000.
Richer large entities consisting of Indian states and Sri Lanka. GDPs are around $10-12000, and these are predominantly coastal regions.
Succesful agrarian states of India (Punjab and Andhra), mountainous states of India (HP, UT, MZ), Pakistan’s capital Islamabad, and country of Bhutan. GDPs between $8-10000.
Interior Indian states and Odisha, along with all Pakistani provinces. This is the South Asian mean performance of around 4-6000$.
Poor regions: Indian states of UP, Bihar, countries of Bangladesh, Nepal, Pakistan’s remote area of FATA and India’s remote state of Manipur.
Clearly being on the coast and having a major city help in a major way. In this context, there are three regions which are major disappointments, India’s West Bengal, Bangladesh and Pakistan’s Sindh. All three are on the coast, have major metropolitan areas and even have rich agricultural lands. But their economic performance is significantly below potential.
On the other hand, the economic star of the subcontinent is the Indian state of Haryana. It defies every convention, its not on the coast, lacks a huge metro region and lacks abundant rainfall. But it excels in every aspect of economic activity, its agricultural productivity is second only to Indian Punjab, its industries are varied and well developed and its service sector is a leader in India along with Karnataka. Gurugram hosts genuinely innovative startups, home to at least 7 of India’s 30 unicorns.
An interesting comparison is that between the state of Punjab and the Pakistani province of the same name. Indian Punjab is richer despite lacking a metro area. But there is a convergence in certain aspects. These are rich agricultural areas, with strong remittance networks but they both might lack industrial entrepreneurs.
Bihar, Nepal and Eastern UP together continue to be home to the largest concentration of poor people on planet Earth. This is an isolated region, with no major cities, neglected by every Indian political entity for many centuries now. The Modi government’s national waterway one has already connected the region upto Varanasi to the ocean, upstream will be a technological challenge. Nepal, can look to Indian states like Uttarakand and Himachal for an effective growth strategy.
Although geography and history play a major role, the example of Haryana shows that those factors can be overcome. Market access, aggregation effects and the presence of mercantile communities are the key variables that determine economic performance.
The question: why does China produce and export so much more than India does ? At the coarsest granularity, the answer comes down to demographics, distance and war.
Demographics: India and China may have similar populations today, but the size of China’s labor force is still around twice that of India’s. This is because of the different ways in which the two countries transitioned to low fertility. China had a huge surge in population growth after WW2, but its fertility fell dramatically in the 1970s. This has given it a huge pool of workers, nearly a billion, but their number will fall off equally rapidly in the coming years.
In contrast, India will never as many workers as China does today, but will have the largest workforce of any country for a long time. India’s transition to low fertility has been steady and smooth. Basically India’s labour force time series will be flatter with a lower peak, as compared to China’s sharp curve with a higher peak.
Distance: Distance matters. A lot. Within India itself, villages within 5km distance from an urban area became 20% richer between 1993 and 2005, whereas those more than 10 km away became 2% poorer in the same period. Wealth clusters, rich countries tend to clump together in Western Europe and East Asia. The same is true for the rich states of the American North East.
China benefited enormously from being proximate to Japan, Korea and Taiwan (total population 220 million). They were already plugged into the American led rich world, and China entered this network via its contacts with them. For India, the rich countries nearby were the oil rich Gulf states, and we did benefit from them via remittances. But these desperately underpopulated countries cannot be compared to places like Japan that experienced massive industrialization in the early 20th century.
War: Among the top industrial powers in the world, China ranks first, but this is mainly due to low tech goods and high tech reexports. But after China, the countries are the US, Japan and Germany. In fact, they were the leading industrial powers since WW2. (India, by the way is sixth after Korea).
The American economy expanded by a factor of 3 in the decade of the WW2. Even though Germany and Japan were devastated, the hysteresis effects from the large scale industrialization that fighting modern, mechanized wars remained. They had the will and memory to industrialize again.
India has also seen military conflict, but this has remained confined to its margins. We have just never experienced ‘war time’ economy and discipline for long periods of time.
If Indians wanted large scale industrialization, they would demand it. But they dont. They demand everything from reservations to train routes to temples. Perhaps, the payoff from industrialization for workers is not as great as our chattering classes like to think. Foxconn factory workers in Sri City make half the salary of a maid in nearby Chennai. For many families, a second child is a better investment over the long term than the temporary boost in income from the woman working a factory job.
Trying to become the ‘next China’ is not desirable at all, we have to find ways of increasing our service exports, and improving our agro productivity.
I spent a month in India recently and wanted to share some impressions.
Prima facie, India is a distressing and depressing place. The overwhelming feeling is one of criminal neglect and carelessness. This feeling needs to be tempered with the real difference in wealth between India and rich countries, but the differences are present even when in comparison to similar income countries like Vietnam.
The classic example is of driving. There are a 130 fatalities per 100,000 vehicles in India, the same number for is 55 for Vietnam and 37 for Indonesia. Drivers are reckless, contemptuous of rules, near maniacs on the road. Traffic police is nowhere to be seen.
The other apparent feature of India is trash. India actually generates very little trash per capita. But virtually none of this seems to be disposed properly. The constant sight of trash on the roads, every nook and corner eventually starts to appall one. More importantly, the health and safety implications are grave.
A newer menace is pollution. In the winter, it is a permanent fixture in the sky, casting a depressing spell. Health implications will become clearer in the coming years. Street lighting is also very poor.
Cumulatively, this series of neglects produces an urban environment that leaves one paranoid, morbid and irritated.
Our Constitution makers committed a grave oversight by allowing states to decide the structure of urban governance. Legally, cities in India exist at the whim of state legislatures. Mumbai city has no independent legal existence. Tomorrow, the state of Maharashtra can merge it into Pune if it wants. Imagine the state of Texas abolishing Austin. The central government doesnt seem to care that it hasnt appointed 37% of high court chief justices. The list of governance befuddlements goes on and on.
We actually have good urban schools (PPP or government aided), which are funded by the state and managed by independent religious, cultural or educational societies. These schools have produced a generation of excellent human capital. But it is the West and Gulf states that benefit from this excellent system, due to our own short-sightedness. Those who care about India’s future need to think seriously about why the best of India’s talent leaves at the first available opportunity.
My own hope lies with Delhi. Through sheer providence, we managed to have an urban area with a sensible model of governance. The city actually has a real mayor, who by most accounts has done a great job in the last five years. If policing responsibility was also shared with the Delhi government, rather than being in the hands of a Union minister, we will see what Indian democracy can truly achieve in an urban area.
Election 2019 reflects a victory of the Gujarat model. But not the model you are thinking of. Not even that other, more sinister model. It is something very fundamental, rooted deeply in economic ecologies.
Human beings are shaped fundamentally by the networks they find themselves embedded in. In India, these networks overwhelmingly take the shape of caste groups marked by an occupational role, social status and marital rules.
For the North Indian peasant, with an economy driven by land and service to an imperial power, caste identity emphasizes kinship and honor. Biradari literally means brotherhood, and membership is conditioned on izzat.
2019 might well be the year that the North Indian peasant realizes the futility of imbibing a kinship and honor based caste identity. On the one hand, these networks simply do not provide the resources to grow and thrive in a post-agrarian world. And even if optimally politicized, the sheer number of caste groups makes the gains from achieving political power limited and concentrated.
After all, previous engagements with foreigners in the recent past have given Indians globally important automobile and IT industries.
India today is more open to the world than ever before. Everybody from Peru to Russia to Ghana to Indonesia can come in after submitting a simple electronic form. Less than 7 million people visited India in 2013, by 2016 that number more than doubled to 15 million. Modi’s Gujarati mind grasps the decisive role of networks in the growth of individual, and he might have well coaxed the North Indian to look beyond his caste tunnel.
The arguments around the broader regional framework Pakistan lies in have often centered on cultural/aesthetic similarities or pure geography. Here, I will argue that Pakistan lies in the Middle East using scientific metrics that describe human behavior.
Regional comparisons of this kind have to account for other explanatory variables. For example, comparing Pakistan, where the urban population is less than 40%, to countries like Turkey or Iran, where it is nearly 80% can be confounding. Also, these countries are much richer than Pakistan, in part due to their more urbanized and industrialized economies. Finally, these countries are not based on the plains around large rivers.
Luckily, there is a comparator which is similar to Pakistan in these control variables: Egypt. It is a predominantly rural country, with a per capita income not much higher than that of Pakistan.
We consider Hofstede’s six cultural dimensions. Hofstede gives countries scores along the following metrics: power distance, individualism, masculinity, individualism, uncertainty avoidance, long term orientation and indulgence. Higher numbers indicate a society and culture more oriented towards these values, and lower ones vice versa.
The figure below shows the scores of Egypt (blue), India (violet) and Pakistan (green) on various metrics. We see that along the metrics of individualism, uncertainty avoidance and indulgence, Egypt and Pakistan align very well with each other, but are very different from India. On power distance, Pakistan differs from India and Egypt, on long term orientation, Egypt differs from India and Pakistan, while they score similarly on the masculinity metric.
We see that Indian society is more individualistic and has higher tolerance for uncertainty and risk taking than Egypt and Pakistan. It is also much more indulgent.
Hofstede attributes India’s scores on individualism and uncertainty to Hindu philosophy. The caste system is certainly an important factor on India’s power distance score. On the other hand, the shared religion of Pakistan and Egypt decisively shapes values regarding individual autonomy, risk aversion and indulgence.
There are other similarities as well. The preeminent minority group in both Pakistan and Egypt are Christians. However, Egyptian Copts are a stronger group with links to the West, but the Pakistani Christians are former Hindu Dalits, who converted during the British rule to unshackle caste chains. In terms of marriage customs, both Pakistan and Egypt see predominantly cousin marriages.
They key difference between Pakistan and Egypt is that Pakistan’s elite speaks English and has a vocal diaspora in Anglo countries. The longer and deeper historical imprint left by Britain has decisively shaped Pakistan, indeed much of the country was settled as canal colonies during British rule. Such a deep British imprint is not seen in Egypt, where the elite was originally Francophone, but an increasing switch to English is underway.