FLIP SIDE OF THE COIN
There's a good, sobering op-ed piece in the New York Times today from Pankaj Mishra in London, titled "The Myth of the New India".
While I've continued to believe in the long-term bull case on India, it's always worthwhile to be mindful of the contrary case to any investment opportunity.
Mr. Mishra makes some good contra points to keep in mind. An example:
"But the increasingly common, business-centric view of India suppresses more facts than it reveals. Recent accounts of the alleged rise of India barely mention the fact that the country's $728 per capita gross domestic product is just slightly higher than that of sub-Saharan Africa and that, as the 2005 United Nations Human Development Report puts it, even if it sustains its current high growth rates, India will not catch up with high-income countries until 2106.
Nor is India rising very fast on the report's Human Development index, where it ranks 127, just two rungs above Myanmar and more than 70 below Cuba and Mexico. Despite a recent reduction in poverty levels, nearly 380 million Indians still live on less than a dollar a day."
The piece also highlights an issue experienced by politicians in India despite the IT-driven success of the country to date:
"Feeding on the resentment of those left behind by the urban-oriented economic growth, communist insurgencies (unrelated to India's parliamentary communist parties) have erupted in some of the most populous and poorest parts of north and central India. The Indian government no longer effectively controls many of the districts where communists battle landlords and police, imposing a harsh form of justice on a largely hapless rural population.
The potential for conflict — among castes as well as classes — also grows in urban areas, where India's cruel social and economic disparities are as evident as its new prosperity. The main reason for this is that India's economic growth has been largely jobless. Only 1.3 million out of a working population of 400 million are employed in the information technology and business processing industries that make up the so-called new economy.
No labor-intensive manufacturing boom of the kind that powered the economic growth of almost every developed and developing country in the world has yet occurred in India. Unlike China, India still imports more than it exports. This means that as 70 million more people enter the work force in the next five years, most of them without the skills required for the new economy, unemployment and inequality could provoke even more social instability than they have already."
China of course has a problem as well with the growing spread of the haves and the have-nots, as recent reports have indicated.
So while we should continue to focus on the long-term opportunities for both nations, it's also wise to keep an eye on the things that could go wrong, or just be unexpected speed-bumps.
Good piece overall...recommended weekend reading.
Mike,
Nice article and really good thoughts on where India is heading with current developments in only one (or two) sector. But I guess, over the time we might be able to see better India. Its not only politians who needs to change but change should be brought by each individual by analysing where they are heading in life and what will be future of their descendants. Hopefully things will change, there will be more literacy among rural population and awareness of how people (politicians) are using them. India has over 1 billion human resource and if used properly and thought process of each individual aligns to make better India, then definitely things will change.
Once again i would like to thank you for writing about this.
Posted by: Dipesh Khakhkhar | Sunday, July 09, 2006 at 03:44 AM
Last week on the Monsanto eps call they talked about having to negotiate with the Indian government about pricing cotton seeds and they talked about how it seemed like the India of 1976 instead of 2006. It will happen in a jagged line as always. Every bull has to read the bear case and vice versa. That is one of the beauties of the net that few avail themselves of.
Posted by: Ward | Sunday, July 09, 2006 at 07:43 AM
I'd suggest you read this rebuttal...
http://indianeconomy.org/2006/07/08/puncture-mishra/
No one denies theres a long way to go..but Mishra's Arundhati Roy light(well not so light)
Posted by: Amit Doshi | Monday, July 10, 2006 at 08:07 AM