Dispatches - The Indian Miracle? (2007)

[below_freezing]

I'll try to explain India's model and its problems.

India's model was to let a small group of extremely well educated, high tech sectors lead its growth. In effect, services before manufacturing.

However, what India didn't realize was that manufacturing in and of itself will allow the manufacturer to learn technology! India promoted technologies related to services without technology related to manufacturing.

China, for example, is a world leader in lithium battery production, telecommunications equipment and industrial boilers. The technology required to make these items are immense - knowledge of solution phase chemistry, circuit design, electromagnetism, signal processing, optics, chemical process engineering, material science, fluid dynamics, thermodynamics, numerical programming, packaging and supply chain management. Just by making these 3 items, we are improving our science in chemistry and chemical engineering, electrical engineering, physics, mechanical engineering and computer science.

These are just 3 items. We produce millions more. Even producing a toy requires immense knowledge of control systems and polymer chemistry.

India on the other hand has put itself into services. Providing IT services only improves your IT sector, nothing else. This is especially apparent when you realize that the hardware that IT services are provided on are all made by others. After all, software without hardware is nothing, and people who know hardware usually know some software, but not the other way around.

In short, India did not allow manufacturing to take its entire technology sector forward. China has. This is the reason why we are ahead in this aspect.

Another aspect is, manufacturing needs many people. A large petrochemical reactor needs over 100,000 employees to operate. Chemists and chemical engineers, supply chain managers, mechanical engineers, IT services, down to truck drivers and floor sweepers, are all needed for the safe operation of a major petrochemical plant.

 

[GodlessBastard]

The majority but not the one's with political power (Malays) or dominance in business (Ethnic Chinese).

With demographic power comes political power. This has been the supreme law of the land since prehistoric times.

Consider this: if every Indian worker in the Arab states went on strike, what would the consequences on the world economy be?

 

[jayron]

The video has made me think about an interesting point. India's growth has been tech lead taking the cream of the Indian workforce and putting them to work. The presenter made a point to praise India for not having sweat shops. BUT this leaves those who aren't the best educated with fewer growth jobs to look to. Now especially with the troubled state of India's small farmers, it seems that these people who aren't benefiting from India's growth are being squeezed more and more.

India does have sweat shops. they are just not as big as China's or as lucrative as Indian IT field. So it is less known. With an infrastructure as bad as ours and the bureaucracy I do not see India becoming a manufacturing hub any time soon. More high value goods like auto mobile and electronic manufacturing are coming up and will employ millions of people.

But I really doubt if the illiterate small scale farmers would ever want to do such jobs. It is tough to persuade them to change. The government spends billions of dollars on subsidies for farmers and still Indian agriculture sector is very inefficient. Lot of the problems the country is facing will reduce if the agriculture sector is reformed.

 

[below_freezing]

... i don't think electronics will become strong in india.

upstream (all the way up to silicon) is split between China, Japan and US.

further downstream (processor) in consumer applications is monopolized by US.

then further downstream, from circuits to consumers, everything else is Chinese.

India's niche is very hard to find.

 

[GodlessBastard]

India does have sweat shops. they are just not as big as China's or as lucrative as Indian IT field. So it is less known. With an infrastructure as bad as ours and the bureaucracy I do not see India becoming a manufacturing hub any time soon. More high value goods like auto mobile and electronic manufacturing are coming up and will employ millions of people.

But I really doubt if the illiterate small scale farmers would ever want to do such jobs. It is tough to persuade them to change. The government spends billions of dollars on subsidies for farmers and still Indian agriculture sector is very inefficient. Lot of the problems the country is facing will reduce if the agriculture sector is reformed.

Actually, the manufacturing sector in India is growing extremely fast, despite the hurdles presented by bureaucracy and poor infrastructure. Just last year, India's manufacturing output as a share of its GDP surpassed the agricultural share for the first time.

The main difference between China's and India's manufacturing sectors is that China's manufacturing spree is the result of years of state investment, while Indian manufacturing will largely be based on private initiative. We will see this trend more clearly in the coming years, provided neither country makes a major policy shift.

 

[CardSharp]

India does have sweat shops. they are just not as big as China's or as lucrative as Indian IT field. So it is less known. With an infrastructure as bad as ours and the bureaucracy I do not see India becoming a manufacturing hub any time soon. More high value goods like auto mobile and electronic manufacturing are coming up and will employ millions of people.

But I really doubt if the illiterate small scale farmers would ever want to do such jobs. It is tough to persuade them to change. The government spends billions of dollars on subsidies for farmers and still Indian agriculture sector is very inefficient. Lot of the problems the country is facing will reduce if the agriculture sector is reformed.

No easy answer, I guess. I want to ask how strong is the resistance of Indian farmers to urban migration.

... i don't think electronics will become strong in india.

upstream (all the way up to silicon) is split between China, Japan and US.

further downstream (processor) in consumer applications is monopolized by US.

then further downstream, from circuits to consumers, everything else is Chinese.

India's niche is very hard to find.

You and I may both be wrong but I think so too. India is entering a very saturated market in just about everything. I really want to get to the bottom of what is driving the Indian economy. Help and opinions would be appreciated

Actually, the manufacturing sector in India is growing extremely fast, despite the hurdles presented by bureaucracy and poor infrastructure. Just last year, India's manufacturing output as a share of its GDP surpassed the agricultural share for the first time.

The main difference between China's and India's manufacturing sectors is that China's manufacturing spree is the result of years of state investment, while Indian manufacturing will largely be based on private initiative. We will see this trend more clearly in the coming years, provided neither country makes a major policy shift.

If I just admit to Indian racial and moral superiority will you go away?

 

[jayron]

I'll try to explain India's model and its problems.

India's model was to let a small group of extremely well educated, high tech sectors lead its growth. In effect, services before manufacturing.

However, what India didn't realize was that manufacturing in and of itself will allow the manufacturer to learn technology! India promoted technologies related to services without technology related to manufacturing.

China, for example, is a world leader in lithium battery production, telecommunications equipment and industrial boilers. The technology required to make these items are immense - knowledge of solution phase chemistry, circuit design, electromagnetism, signal processing, optics, chemical process engineering, material science, fluid dynamics, thermodynamics, numerical programming, packaging and supply chain management. Just by making these 3 items, we are improving our science in chemistry and chemical engineering, electrical engineering, physics, mechanical engineering and computer science.

These are just 3 items. We produce millions more. Even producing a toy requires immense knowledge of control systems and polymer chemistry.

India on the other hand has put itself into services. Providing IT services only improves your IT sector, nothing else. This is especially apparent when you realize that the hardware that IT services are provided on are all made by others. After all, software without hardware is nothing, and people who know hardware usually know some software, but not the other way around.

In short, India did not allow manufacturing to take its entire technology sector forward. China has. This is the reason why we are ahead in this aspect.

Another aspect is, manufacturing needs many people. A large petrochemical reactor needs over 100,000 employees to operate. Chemists and chemical engineers, supply chain managers, mechanical engineers, IT services, down to truck drivers and floor sweepers, are all needed for the safe operation of a major petrochemical plant.

Actually, Indian Government did nothing. It was the effort of individual entrepreneurs that created the Indian IT industry. Since IT did not involve much infrastructure, it was easy to start by individuals without much capital. Then the other Indian software engineers from silicon valley came back and boosted the industry. The government has no part to play.

I agree with you that manufacturing is better for mass employment. Some states in India are a lot more successful than others in creating manufacturing bases , thus creating a lot of employment. But majority of the states are still primarily agricultural economies.

 

[GodlessBastard]

If I just admit to Indian racial and moral superiority will you go away?

No, because I do not believe in either of those.

However, it is understandable that idiotic statements like those are the last refuge of the incompetent.

 

[jayron]

No easy answer, I guess. I want to ask how strong is the resistance of Indian farmers to urban migration.

You and I may both be wrong but I think so too. India is entering a very saturated market in just about everything. I really want to get to the bottom of what is driving the Indian economy. Help and opinions would be appreciated

The growth I think is mainly driven by consumer spending. We should remember that the country was closed to the world till 1990. India has still not opened up fully and as it does the government makes sure the international companies that want to access the Indian market creates jobs for the locals my opening the manufacturing plant locally. The trickle down effect has created a lot of jobs for the less privileged.

 

[Water Car Engineer]

India will never rise anywhere if its culture is not reformed(the caste system is impeding India's huge but uselss workforce). Also, Indian workers need to be more disciplined like Japanese, Chinese, and Korean workers since right now Indians are not as punctual as Japanese, not as hardworking as Chinese, and not as creative/ingenius like the Koreans. The future of the 21st century belongs to East Asians only!

You should keep doubting Indians/India.

I wonder if people did the same for China before the 70s.

If India doesn't improve in the next 50+ years, then you can talk all the **** you want.

 

[true_indian]

It will be very hard for India to build up a manufacturing base unfortunately. China has essentially streamlined itself into a manufacturing monster. The world already has a overcapacity problem. Not enough consumption too much production.

But neither is farming an option, the United States gives a ridiculous amount of subsidies to it farmers, it will be doubtful if India's small farmers can compete.

The thing is that India has domestically driven economy..only 15% of produced is exported.. So we'll have to build manufacturing capacity to supply to our own people.. I would think market with over a billion people is fairly large. That's why I think India didn't reform certain sectors yet so to give local industry fair advantage before reforming. Once the infrastructure is built, manufacturing would pick for sure..


Its all market driven as the yuan appreciates, it would be cheaper to make a product in India than in China because of the wage rates..Also the demographics.. But lets see how it turns out.. In the long run, I'd bet on India..

 

[StingRoy]

The thing is India is domestically driven economy..only 15% of produced is exported.. So we'll build manufacturing capacity to supply to our own people..

Good observation there on the manufacturing and consumer models for India. I see there is still a lot of areas where the Indian companies can add to their output to fill in the domestic needs. As you rightly said, the recent push for investment in infrastructure will make is possible for the local manufacturers to reach farther areas and with a more efficient distribution system and supply chain logistics there would be a huge demand gap to fill.
This is an excellent way to keep our economy immune to global factors.

 

[below_freezing]

The thing is India is domestically driven economy..only 15% of produced is exported.. So we'll build manufacturing capacity to supply to our own people.. I would think market with over a billion people is fairly large. That's why I think India didn't reform certain sectors yet so to give local industry fair advantage before reforming. Once the infrastructure is built, manufacturing would pick for sure..


Its all market driven as the yuan appreciates, it would be cheaper to make a product in India than in China because of the wage rates..Also the demographics.. But lets see how it turns out.. In the long run, I'd bet on India..

wages are not why india has more expensive products. wages are the reason india should be the center of manufacturing but aren't. this statement tells me exactly why india is behind - it doesn't even know what manufacturing is.

 

[LaBong]

It will be very hard for India to build up a manufacturing base unfortunately. China has essentially streamlined itself into a manufacturing monster. The world already has a overcapacity problem. Not enough consumption too much production.

But neither is farming an option, the United States gives a ridiculous amount of subsidies to it farmers, it will be doubtful if India's small farmers can compete.

With China's economic emergence the ultra low wage labours will become/started becoming a myth. So India can offer the world what China offered 2 decades ago, huge cheap workforce.

India have huge internal market of farming products, with 1.2 billion population we don't need to export farming product to other countries.

 

[StingRoy]

wages are not why india has more expensive products. wages are the reason india should be the center of manufacturing but aren't. this statement tells me exactly why india is behind - it doesn't even know what manufacturing is.

Manufacturing to specifications has not been India's forte... totally agree to you. As mentioned, most of the production and manufacturing that is done in India is for the domestic market and some products that are exported are mostly surplus from the local consumption demand.

India's main exports include engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewelery, automobiles, textiles and garments, agricultural products, steel, iron ore and other minerals. There is a need to diversify and move into other areas in manufacturing and given the FDI's coming in we will be able to achieve it soon.