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July 3 - July 12, 2024
Another problem was the dominance and profitability of rice farming and its hold over the political establishment. Agricultural subsidies kept the economic value of growing paddy and wheat artificially high, which prevented a natural transition of small and marginal farmers out of agriculture. The state government further distorted economic choices by offering farmers free power to draw out groundwater, which depleted the water table. Eventually, smaller farmers, who could not afford the big pumps that were needed to draw water from the depths it had sunk to, were hurt.
One measure of the political apathy towards industry was that between 1960 and 2010, barely 10 per cent of the state assembly debates focused on industry; the main obsession continued to be agriculture.12
The Economic Survey of India 2016–17 estimated that within manufacturing, the number of jobs generated for every investment of Rs 1 lakh (that is about $1200) in apparel is twenty-four, in leather and footwear it is around seven, in the auto industry it is 0.3, and in the steel industry it is 0.1.
value in a product is created at the initial stage, as R&D and design go into conceptualizing the product. Then the product is manufactured, with each part produced in the region where it is most cost-competitive to do so. Sub-assemblies go back and forth across borders. The final product is then sold in the target market, with a whole range of high-value services, like advertising, marketing, financing and content provision, accompanying it. The idea of the smile curve is that most of the value addition in a product is at the beginning and the end of the supply chain, where services are
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So one reason services have become more tradeable is that they are embedded in tradeable goods. A second reason, however, is that services can now be provided at a distance. Both combine to increase the tradability of high-value services.
Thus, there are scale economies even in services, allowing service providers to benefit from a larger global market by producing more cheaply.
Perhaps the most important recent example of productivity without scale is the advent of cloud computing.
Not many realize that the largest profit generator in Amazon today is its web services, not its retail business.
Being online allows them to internalize feedback quickly—not only do they learn what the customer wants, but they can try and influence consumer taste.
A study finds that the opening of an IT-enabled centre servicing global markets, such as a call centre, results in enrolment in nearby English-medium schools going up by 7 per cent.10
By signing the Trade Related Intellectual Property Rights Agreement (TRIPS), negotiated under the auspices of the WTO in 1994, India agreed to long periods of patent protection even in areas where intellectual property rights protection is controversial.
China’s possible dominance in sunrise industries, like 5G, artificial intelligence, battery technology and electric vehicles (EVs), drones
‘China+1’ strategy, that is, for every segment of the supply chain that is in China, they are looking for an alternative producer in a country that is likely to remain friendly to the Western bloc. Some global supply chains are looking to India as their China+1 producer, especially given the growing attractiveness of India’s domestic market.
if we are subsidizing manufacturers to finish in India then export. What matters for manufacturing prowess is how much value is being added in India. Apparently, very little! India has become a mass assembler of mobile phones, the least value-added part of the supply chain, accounting for only a few percentage points of the total value of the mobile phone. Most of the parts, including the most sophisticated elements, such as logic chips, are imported. Indeed, it is not even clear if the value added in India exceeds the subsidies that are offered.
We have to improve the capabilities of our workforce significantly so that global manufacturers come to India looking for them, and our workers can move up the jobs ladder. This requires improved population nutrition, education and health care at all levels.
almost 60 per cent of global websites are in English, which gives artificial intelligence algorithms based on English a much greater database to train on.12 Most of the world’s textbooks and scientific papers are published in English, and ad hoc translations are rarely as easy to read. More prosaically, while real-time translation by bots will come, perhaps soon, the ability to converse in a common language with the world will be an advantage in providing real-time services, and in business transactions, for years to come. We also need to increase the numbers of our best-educated and trained
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Instead of bringing mobile phone assembly to India, we need to design the phones and chips of the future, and the associated software and app platforms, thereby profiting from the truly value-added parts of the global supply chain. Phone assembly coming to India would also be nice, the added cherry on our value-added cake, but not if we have to pay enormous subsidies for it.
the share of the public sector in overall salaried employment fell from 26 per cent in 1999 to 11 per cent in 2020.18
India does not spend its revenues well and has a tendency to offer government employees generous pay and benefits. For example, in 2019, the average secondary school teacher’s salary ratio to GDP per capita was 0.76 in China, it was around 1.1 in countries in Asia, but higher than 1.7 in India.
For government schools, the number for India is approximately 3.19 So a government secondary school teacher in India was making more than three times the average income in the country. Similarly, the Institute for Strategic Studies reported that 53 per cent of India’s 2023 defence budget spending goes towards salaries and pensions.20
services only for the poor are poor services.
With the simple requirement that an individual’s tax ID be linked to the individual’s unique ID, the tax authorities can eliminate the many fraudulent tax accounts created by unscrupulous individuals to evade their tax liability.
Today, nearly 95 per cent of UPI transactions go through non-banks such as PhonePe, Google Pay and Paytm,
In the landmark Puttaswamy case in 2017, the Indian Supreme Court rejected the government’s stance that there was no fundamental right to privacy, and instead held that under the Constitution the right to privacy was ‘an intrinsic part of the right to life and personal liberty’.
such tools for corrupt or perverse purposes. As legal scholar Gautam Bhatia argues, India has to move from a culture of authority (where the state’s actions are seldom questioned) to a culture of justification (where the state’s actions have to be justified).12
what is sometimes called the sandbox approach—might permit innovation without the system taking on too much risk.
The Chinese had a way of describing their reforms—crossing the river by feeling the stones. Essentially, they felt the next stone in the bridge of stones across the river to see if it was stable before stepping on it. Put differently, rather than taking huge untested steps, reforms used to occur incrementally and after experimentation. Often the reform was tested in a few localities or in a specific sector to learn what its effects might be and to iron out any teething problems. Then, as the authorities gained confidence that the reform worked, it was rolled out nationally.
Some have challenged this metric, arguing that Indians’ genetics give them a different growth, that is height-for-age, pattern. Yet Sri Lankans, who presumably come from similar gene pools, have a much lower level of stunting than Indians, and studies have found that South Asian children in the United States and the United Kingdom approach the mean height of their peers within one generation;1 so it is not entirely ‘genetics’. We are simply not feeding our pregnant mothers and children well enough!
Even within India, the heterogeneity is stark. If you take a train from the north of the country to the east, stopping in small towns, as Rohit did sometime ago, you will clearly notice how the average height decreases steadily from Punjab and Haryana to western Uttar Pradesh (UP) and then eastern UP and Bihar. Our people are simply less nourished in UP and Bihar than in Punjab and Haryana. According to the National Family Health Survey 2019–21, stunting in Punjab is 24 per cent, and in Bihar it is 43 per cent; moreover, 12 per cent of women in Punjab have body mass index below normal, and it
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Many women in the childbearing age in India are anaemic and hence more likely to give birth to nutritionally weak children.
Poor sanitation and disease contribute to all this. If a village lacks clean drinking water and a child has chronic diarrhoea, she may be unable to absorb key nutrients even if these are fed to her regularly. Open defecation distributes faecal matter in the soil, contributing to such diseases—the positive impact of government’s campaign to install toilets in every home and stop open defecation should soon start showing up in the statistics.
Following the advice of an advisory committee that Raghu was on, the Tamil Nadu government ran an after-school remedial programme run by community volunteers for 60–90 minutes daily in the evening, called Illam Thedi Kalvi (Education at Doorstep). By June 2022, it employed approximately 2,00,000 volunteers, who were residents of local communities with high-school or college degrees but were not necessarily trained teachers. The programme provided supplementary instruction to 3.3 million students,
