India Needs to Think Different – Part II

As the festive season in India is getting over many people are happy to know that Chinese product sales  may be down by 30%. It may be a moment of celebration for patriotic Indians in short term although Indian traders will have to bear the brunt since they already had imported these items. Let us ask – why Indians would have to buy Chinese product to begin with? The answer is very simple –  Indian industries don’t make those items  or don’t pay attention to consumers’ concerns for price, choice and quality.  Suddenly one cannot stop trading according to international trade rules. And don’t forget Chinese do invest in the Indian market – close to one billion dollars! Taking advantage of ‘Make in India’ China plans to invest $20 billion in next 5 years. How is that going to further affect Indian market?

In part I of this article I’ve noted that the solution to all these challenges lies in rethinking  strategies in three key areas – education, agriculture and manufacturing.

Education

My economist friend reminds me: Material prosperity for individuals and nations come from creation of wealth. People who are free can create wealth. And freedom stems from education and minimal interference of government, whose job is only to create the environment for a free market and fuel the entrepreneurial spirit. So, the key is education. India has largest number of illiterates, and there exists a huge gap between haves and have-nots, created by elite planners for past many decades. Yet, Indian education system, though mostly British founded, are great for those Indians who have access to the system to make a living. But it’s not enough. The number of institutes for higher education has to increase rapidly and quality is equally important as quantity, else un-employable ‘educated’ youth will only become bigger burden.

One may debate on criteria and methodologies used to determining rankings of educational institutes, but this site gives a reasonable picture of top 200.

http://www.4icu.org/top-universities-world/

This data shows that India does not have a single university in the top 100 ranking. Delhi University gets 130 in ranking while China has one in top 50, 4 in top 100 and 18 in top 200. Japan has 3, Brazil has 4 and Russia and South Africa has 1 each. This can be a fair determinant of the progress of a nation. India may take pride in the IITs and IIMs, yet majority of Indians don’t get the world-class institutes they deserve, despite their rich history of innovation. Even in the recent past Calcutta University alone nurtured Satyendranath Bose, CV Raman and Meghnad Saha – three pioneers of modern physics. India needs an education revolution which can educate, train and skill millions to be free to choose professions of tomorrow and become entrepreneurs themselves.

India currently has 769 universities, close to 38000 colleges and around 12000 stand-alone institutions. India graduates 1.5 million engineers every year, yet many of them are not employable. We all know that science and engineering graduates help propel innovation and entrepreneurship. Can you imagine the power of so many engineers, if they are properly educated and trained? China went through a similar situation and they are working hard at it. America has merely 250,000 engineers, who run best of the organizations in the world, along with foreign engineers from countries like India and China.

According to US National Science Foundation, Indian-origin scientists and engineers in the U.S. grew 85% between 2003 and 2013. In 2013 there were close to 1 million scientists and engineers of Indian origin and it is growing much higher than China, in 2003, Indian-origin researchers were 2.5% of the U.S. research workforce and as of 2013, made up 3.3%. Indians are extremely successful in many Western nations including USA. So why they are not as innovative or entrepreneurial in India? The answer is simple – they don’t have the right environment, culture and opportunities back home.

China has a plan to raise its GDP expenditure for innovation from 0.5 percent in 1995 to 2.5 percent by 2020, which would also require 3.7 million scientists working for R&D. It is clear that they have a mission and plan; but, how about India?

In case of original research, Chinese science and engineering researchers have become 3^rd largest group to produce peer-reviewed research articles only after the EU and USA. Certainly, India has a lot of catch up to do.

Agriculture

India has 2^nd largest amount of arable land after America and slightly bigger than China. Per capita arable land is .08, .12 and .48 hectors in China, India and USA respectively. In India, around 70% of the population live in rural areas and around 50% of the workforce are directly engaged in agriculture. But, farming-dependent income for majority of rural India is so low that people are forced to find alternatives and move to the cities. If the farm income was somehow raised just enough, so that all basic needs of life are met, then staying in the villages and depending on agriculture would make sense. But, that is practically not possible because of too much dependency of too many people in limited and fragmented land and associated inefficiency in agro production, storage and distribution.

India is the 2^nd largest grower of rice and wheat after China – however their production is 40% more than India for both crops. Similarly, in fruit production India is 2^nd to China yet China produces 3 times more than India except in mangoes, bananas and also spices where India stands first. But India’s agro-based food processing industry is still not fully realized, which can create jobs and wealth for millions in rural India. However India is still an agriculture-based economy, which America was until 1920s. Today, only 2% of its population feed not only America, but many other countries while rest of the population is involved in manufacturing, service and innovation. In sharp contrast to that is India – 60% people are engaged in agriculture based activities, mostly in production of crops. The labor force that is at the receiving end of the rest of the economy, barely can send their children to school, cannot afford to provide right food and health care. They are forced to go to cities where they become part of the labor force mostly in service or very low paying manual jobs, and often become slum-dwellers.India’s agriculture counts for 17.2% of its GDP vs, China 9.2% and USA 1.3% (World Bank). India must rethink how to make proper use of this village population to make them skilled, productive and contribute to the economy in the right way and in right sectors.

Manufacturing

‘Make in India’ is the right path which requires acceleration. First condition for the success is massive reform in education sector to focus on right skills for the professions of today and tomorrow. 2^nd pre-condition is reorientation of agriculture dependency and freeing up millions of either jobless or extremely low income jobs in the sector.They will then need to be given skills training, matching with the demands in non-agro sectors.It is good to be emotional to ban Chinese products. But, it is a different story to be able to limit dumping of Chinese products in Indian market place by creating atmosphere and opportunities for Indian entrepreneurs to make those very products, which are imported from China. If the mindset of people in decision-making places changes and if the focus is there, it will happen in time.According to (In Touch 2015) average manufacturing labor cost in India was 92 cents/hour as opposed to $3.52 in China. It is not only sad that the wages for India’s laborers is extremely low, but the fact that it is low, is also due to the low productivity of the people. If the labor force has to be productive, they need training aided by capital investment to make them efficient in new jobs. Obviously a mechanic, with same physical and intellectual ability makes a lot more than a poor farm labor! India has not been able to take this opportunity to create a ‘manufacturing hub’ for the world.PM Modi has realized this and he has introduced ‘Make in India’, but implementing it to achieve the intended goal is not that straight-forward. It goes without saying, that the prerequisites are infrastructure, investment and entrepreneurship. India must not go back to Nehruvian socialistic economy, push for more government control in industries and dole out billions of Rupees of cash, without checks and balances in the name of helping the poor!

It is futile spending billions in so called ‘skill’ training and not having enough jobs to absorb them. Same is true with ‘Start Up’ India if the money goes wasted in people who has no basic skills to start and run a business!

India must get out of fire-fighting mode, impractical Nehruvian idealisms and cold-war era inhibitions, and think differently – for a long term strategy and plan, to emerge from potency to reality of a super power.

Let’s admit this and set our expectation from India – India has the world’s largest share of poor and illiterate. As Rabindranath said: ‘Jaretumi niche phalo se tomare bandhibe je niche, poschate rekhecho jare se tomare poschate taniche.’ Meaning – who you put down will tie you down, those you leave behind will pull you back.

India’s greatest wealth is its age-old wisdom and a long track record of being a knowledge society in the past. Let India be a super-power in its own right when it has provided the basic needs of every citizen.

And, let us be realistic. The Modi Government is doing its best, with so many limitations the country has due to decades of neglect and lack of strategy. Emphasis now must be to think different, think tomorrow – while minimizing the damage today. India’s only choice is to focus on capacity-building yet, do not let any opportunity go to challenge and win over others’ strategy, plan and action to undermine India, including China.

Click here to read Part I of this article.