Getting Ready for India

Wen and I were originally going to visit Nepal and then India but due to poor weather in Nepal (and poorer planning on our part), we’re only going to India for a now massive five weeks.

I love India, having been there twice in 2006. While the second trip was purely a vacation, the first one was a visit to a technology conference and highlighted their seemingly inexorable rise to a leading power in the 21st century.

In preparation for this trip, I’ve been doing a bit of reading on the country. If you want to get a sense of just what India’s rise could mean and a sense of the staggering challenges they’re going to face to realize their full potential, I highly recommend In Spite of the Gods: The Rise of Modern India by Edward Luce. They book is about four years old now and it’s remarkable how prescient many of his predictions/comments have been.

As a tease, here are a couple of gems from the book.

On the organization of India’s economy:

Less than 10 percent of India’s dauntingly large labor force is employed in the formal economy [i.e., not farming], which Indians call the “organized sector.” That means that fewer than 40 million people, out of a total of 470 million workers, have job security in any meaningful sense. It means that only 35 million Indians pay any kind of income tax.

Of the roughly 35 million Indians with formal sector jobs … 21 million are direct employees of the government. These are the civil servants, the teachers, the postal workers, the tea makers and sweepers, the oil sector workers, the soldiers, the coal miners, and the ticket collectors of the Indian government’s lumbering network of offices, railways stations, factories, and schools.

Fewer than 1 million – that is, less than a quarter of 1 percent of India’s total pool of labor – are employed in information technology, software, back-office processing and call centers.

I found this fascinating. Despite all the wealth created by India’s massive software companies it’s a drop in the bucket in terms of employment. Moreover, there are only 7 million people employed in manufacturing in India vs. more than 100 million in China. It will be interesting to see if India can turn themselves into a private sector job machine.

Another theme in the book is how the political process is breaking down as people elect people from their caste to ensure more public sector jobs for their caste members (as you literally cannot fire a public sector worker even if they do no work). This is compounded by reputed criminals seeking election as a way of making themselves legally untouchable. The net result is widespread corruption in both the political and bureaucratic sector.

Here’s a snippet of one revealing interview with a politician:

A few months after election I visited Reddy in his office at the state secretariat in Hyderabad. I asked him what he was doing to provide irrigation to the poor farmers. A large man with an equally large mustache, Reddy was every inch the local satrap. The rooms and corridors outside his office resembled a bustling railway station with dozens of local supplicants awaiting the chance to ask a favor of their chief minister. “Every detail is being taken care of,” he replied to my question. And what are the details? I asked. “Everything is possible,” he said. What was possible? “Every little detail.” Can you provide me with some? “In time, we will fix everything,” he said. And so on. At one stage during this singularly uninformative interview, Reddy started scrambling around for a bit of paper. His secretary handed him something. “Yes,” he said, reading it. “Sir Arthur Cotton built lots of irrigation for the farmers in this area. He was British. You are British.” But what are you doing? “We are doing everything possible to ensure irrigation gets to the farmers.”

The book is full of examples like this – and, in fairness, also inspiring interviews with some remarkable officials who are building a great future for Indians (check out the section on New Delhi’s now-former mayor).

Two other interesting areas that the book explores: gender discrimination and the spending habits of New India.

Here are some stats on gender discrimination:

In large tracts of northern and western India, the so-called “gender gap” between boys and girls has sharply increased. The average ratio of births of girls to boys for India was 945 to 1,000 in 1991. By 2001 it had fallen to 927. … Gujarat has fewer than 900 girls to 1,000 boys. Punjab has below 800.

Put another way, over time, 3-4% of the Indian population may never be able to marry because there simply won’t be enough girls to marry. Given India’s size this will mean millions of sex-starved men. Moreover, the traditional solutions to this problem never really worked and are already fading. China’s got this problem too; India’s going to have to learn from it.

The spending habits are interesting as India is its own juggernaut and is going to have to decide what values it wants to promote. Will it adopt Western consumerism or create something uniquely Indian?

Alok [a successful entrepreneur] said his employees, most of whom are dressed such that they would blend in with their counterparts in San Francisco, never talk about money in cash terms. The measure their pay in EMIs, or equal monthly installments. These are monthly deductions from your bank account that continue for years, enabling you to pay off the car, motorbike, microwave, freezer, air-conditioning units, and flats you have not earned. You can even take an EMI holiday. … “Saving is the last thing on these guys’ [his employess] minds,” Alok said.

We’ve seen how this movie ends.

I can’t wait to go back to India. I recommend that everyone go there as it’s fascinating – and read In Spite of the Gods before you go to have a better sense of what is happening behind the scenes.