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So you agree that BJP is as bad as Congress nowAt least you are honest for a bhakth even if dumb
Yes, you went and checked all the corruption levels personally. Retard
Indian Economy: News and Discussion
- Thread starter Tuco
- Start date
So you agree that BJP is as bad as Congress nowAt least you are honest for a bhakth even if dumb
- Joined
- Apr 27, 2017
- Messages
- 562
- Likes
- 970
All the things you talk about will come on its own if the barriers to their entry,.ie red tape is removed. Even if nothing like that is done, Modi just not fucking things up is more than enough to be honest for the economy to evolve. Even that is expecting too much looking at the way modi has handled the economy so far.
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You are funny, the fastest growing economy tag was achieved during Modis term and then you use his achievement on him.
Don't you have a backbone or what.
Always draging the argument to a piss drinking level. Get some help buddy.
https://www.economist.com/news/brie...ers-face-disappointment-indias-missing-middle
If this is true then Indian economy is a disappointment so far
The elephant in the room India’s missing middle class
Multinational businesses relying on Indian consumers face disappointment
THE arrival of T.N. Srinath into the middle class will take place in style, atop a new Honda Activa 4G scooter. Fed up with Mumbai’s crowded commuter trains, the 28-year-old insurance clerk will become the first person in his family to own a motor vehicle. Easy credit means the 64,000 rupees ($1,000) he is paying a dealership in central Mumbai will be spread over two years. But the cost will still gobble up over a tenth of his salary. It will be much dearer than a train pass, he says, with pride.
Choosing to afford such incremental comforts is the purview of the world’s middle class, from Mumbai to Minneapolis and Mexico City to Moscow. Rising incomes and the desire for status have, in recent decades, seen such choices become far more widespread in a host of emerging markets—most obviously and most spectacularly in China. The shopping list of the newly better off includes designer clothes, electronic devices, cars, foreign holidays and other attainable luxuries.
Many companies around the world are looking to India for a repeat performance of China’s middle-class expansion. India is, after all, another country with 1.3bn people, a fast-growing economy and favourable demography. And China’s growth is flagging, at least by the standards of the past two decades. Companies which made a packet there, both incomers such as Apple and locals like Alibaba, are seeking pastures new. Firms that missed the boat on China or, like Amazon and Facebook, were simply not allowed in, want to be sure that they do not miss out this time.
Enthusiasm about India is boundless. “I see a lot of similarities to where China was several years ago. And so I’m very, very bullish and very, very optimistic about India,” Tim Cook, Apple’s boss, recently told investors. A walk around the Ambience Mall in Delhi shows he is not the only multinational boss with big ambitions in the country. Indian brands like Fabindia, a purveyor of fancy clothes and crafts, are outnumbered by Western ones such as Levi’s, Starbucks, Zara and BMW. The slums that host a quarter of all India’s city dwellers feel a long way off.
Beyond the mall, Amazon has committed $5bn to establish a presence in the world’s biggest democracy. Alibaba has backed Paytm, a local e-commerce venture, to the tune of $500m. SoftBank, a Japanese investor, has funded a slew of start-ups premised on the potential buying power of India’s middle class. Uber, the world’s biggest ride-hailing firm, has hit the streets. Google, Facebook and Netflix are vying for online eyeballs. IKEA is putting the finishing touches to the first of 25 shops it plans to open over the next seven years. Paul Polman, boss of Unilever, has described India as potentially the consumer giant’s biggest market. Reports put out by management consultants routinely point to 300m-400m Indians in the ranks of the global middle class. HSBC, a bank, recently described nearly 300m Indians as “middle class”, a figure it thinks will rise to 550m by 2025.
But for some of the firms trying to tap this “bird of gold” opportunity, as McKinsey once called it, an awkward truth is making itself felt: a lot of this middle class has little money to spend. There are many rich people in India—but they number in the mere millions. There are a great many more who have risen above the poverty line—but not so far above it that they spend much on anything other than feeding their families. And there is less in between the two than meets the eye.
Missing the mark
Companies that have tried to tap the Indian opportunity have found that returns fell short of the hype. Take e-commerce. The expectation that several hundred million Indians would shop online was what convinced Amazon and local rivals to invest heavily. Industry revenue-growth rates of well over 100% in 2014 and 2015 prompted analysts to forecast $100bn in sales by 2020, around five times today’s total.
That now looks implausible. In 2016, e-commerce sales hardly grew at all. At least 2017 looks a little better, with growth of 25-30%, according to analysts (see chart 1). But that barely exceeds the 20% the industry averages globally. Even after years of enticing customers with heavily discounted wares, perhaps 50m online shoppers are active in India—roughly, the richest 5-10% of the population, says Arya Sen of Jefferies, an investment bank. In dollar terms, growth in Indian e-commerce in 2017 was comparable to a week or so of today’s growth in China. Tellingly, few websites venture beyond English, a language in which perhaps only one in ten are conversant and which is preferred by the economic elite.
India has yet to move the needle for the world’s big tech groups. Apple made 0.7% of its global revenues there in the year to March 2017. Facebook, though it has 241m users in India, probably the most in the world in one country, registered revenues of just $51m in the same period. Google is growing more slowly in India than in the rest of the world. Mobile phones have become popular as their price has tumbled—but most handsets sold are basic devices rather than the smartphones that are ubiquitous elsewhere in the world.
Eating their words
Fast-food chains once spoke of a giant market. Their eyes were bigger than Indian stomachs. Despite two decades of investment McDonald’s has hardly any more joints in India than in Poland or Taiwan. The likes of Domino’s Pizza and KFC have struggled to come close to expectations that were once sky-high. Starbucks says it has big plans for India but has opened about one new coffee shop a month over the past two years, bringing its total to around 100—on a par with Utah or the United Arab Emirates. A new Starbucks opens in China every 15 hours, adding to 3,000 already operating.
Executives remain relentlessly upbeat in public—even if investments do not always follow. Anurag Mehrotra, boss of Ford India, told the Financial Times in May that car sales in India were set to double every three to five years. That would be an extraordinary change in fortunes: sales grew by less than 20% overall in the six years to 2016. There is one car or lorry for every 45 Indians, according to OICA, a trade group. The Chinese own five times as many. Motorbike sales have grown fast but only because their price has tumbled by 40% since 2000, points out Neelkanth Mishra of Credit Suisse, another bank.
India-boosters point to middle-class services that have taken off. With 20% annual growth in passengers, aviation is already booming at the rate Mr Mehrotra hopes to see in the car industry. But taken together, all India’s domestic airlines are no larger than Ryanair, the world’s fifth-biggest carrier, according to FlightGlobal, a consultancy. SpiceJet, an airline, says that 97% of Indians have never flown. A mere 20m Indians travelled abroad in 2015, about one in 40 adults.
Optimists also argue that the rapid growth of things like Chinese mobile-phone brands shows that the Indian middle class is out there and spending—just not on Western brands. Locally based fast-food chains that undercut McDonald’s or KFC have done much better than the new arrivals. But local consumer businesses face much the same problem as multinationals. Inditex, Zara’s parent firm, has 46 clothes shops in India, fewer than in Ireland, Lithuania or Kazakhstan. For the kind of goods the global middle class aspires to own at least, executives whether at global or local firms clock the number of potential customers at 50m and no more. Even selling basic consumer goods does not necessarily work. Hindustan Unilever, which purveys sachets of shampoo for just a few rupees, has seen virtually no sales growth in dollar terms since 2012.
“The question isn’t whether Zara or H&M can open 50 stores in India. Of course they can. The question is whether they can open 500,” says a banker who asks not be named, on the ground that it is best not to be seen questioning the Indian middle-class narrative. “You can try to push beyond the 50m people who have money, but how profitable would that be? Companies can expand for a time, but the limits to growth are getting obvious.”
The bullish argument that brought Western brands to India was basically this: although the country remains, for the most part, very poor, its population is so enormous that even a relatively small middle class is large in absolute terms, and fast overall growth will, as in China, quickly increase its size yet further. This assumes two things. One is that the middle class in India is the same relative size as in other developing countries where marketers have succeeded in the past. The other is that growth will benefit this middle class as much as other parts of the population. Neither is true in India, which as well as being poor is deeply unequal, and becoming more so.
For all the talk of wanting to tap the middle class, no firm moving into India thinks it is targeting the middle of the income distribution. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China (see chart 2) and a quarter of that for Russia. What is more, foreign companies have to take their money out of India at market exchange rates, not adjusted ones.
Defining the middle class anywhere is tricky. India’s National Council of Applied Economic Research has used a cut-off of 250,000 rupees of annual income, or about $10 a day at market rates. Thomas Piketty and Lucas Chancel of the Paris School of Economics found in a recent study that one in ten Indian adults had an annual income of more than $3,150 in 2014. That leaves only 78m Indians making close to $10 a day.
Meagre market
Even adjusting for the lower cost of living, that is hardly a figure to set marketers’ heartbeats racing. The latest iPhone, which costs $1,400 in India, represents five month’s pay for an Indian who just makes it into the top 10% of earners. And such consumers are not making up through growing numbers what they lack in individual spending power. The proportion making around $10 a day hardly shifted between 2010 and 2016.
Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one. How many of them will be anywhere near able to buy an iPhone or a pair of Levi’s if they cannot afford a TV set?
To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. But in terms of being able to afford goods sold at much the same price across the world, whether a Netflix subscription or Nike trainers, more than 99% of the Indian population are in the same league as Americans that count as below the poverty line (around $25,000 for a family of four), points out Rama Bijapurkar, a marketing consultant.
The top 1% of Indians, indeed, are squeezing out the rest. They earn 22% of the entire income pool, according to Mr Piketty, compared with 14% for China’s top 1%. That is largely because they have captured nearly a third of all national growth since 1980. In that period India is the country with the biggest gap between the growth of income for the top 1% and the growth of income for the population as a whole. At the turn of the century, the richest 10% of Indians made 40% of national income, about the same as the 40% below them. But far from becoming a middle class, the latter’s share of income then slumped to under 30%, while those at the top went on to control over half of all income (see chart 3).
Such economic success at the top leaves less for everyone else. Consider the 300m or so adults who earn more than the median but less than the top 10%. This group has fared remarkably badly in recent decades. Since 1980, it has captured just 23% of incremental GDP, roughly half what would be expected in more egalitarian societies—and less than that captured by the top 1%. China’s equivalent class nabbed 43% in the same period.
The rich get richer
Some have doubts about Mr Piketty’s methodology. But other surveys suggest pretty similar distribution patterns. Looking at wealth as opposed to income, Credit Suisse established in 2015 that only 25.5m Indians had a net worth over $13,700, equating roughly to $50,000 in America. And two-thirds of that cohort’s wealth was held by just 1.5m upper-class savers with at least $137,000 in net assets.
India’s middle class may be far from wealthy but the rich are truly rich. There are over 200,000 millionaires in India. Forbes counts 101 billionaires and adds one more to the list roughly every two months. It shows. The Hermès shop next door to the Honda dealership frequented by Mr Srinath sells scarves and handbags that cost far more than his scooter. Flats in posh developments start at $1m. In other emerging economies, there are fewer very rich and a wider base of potential spenders for marketers to tap.
In absolute terms, India has wealth roughly comparable to Switzerland (population 8m) or South Korea (51m). Although India’s population is almost the size of China’s, it is central Europe, with a population about the size of India’s top 10% and boasting roughly the same spending power, that is a better comparison. Global companies pay attention to markets the size of Switzerland or central Europe. But they do not look to them to redefine their fortunes.
Confronted by this analysis, India bulls concede the middle class is comparatively small, but insist that bumper growth is coming. The assumptions behind that, though, are not convincing. For a start, the growth of the overall economy is good—the annual rate is currently 6.3%—but not great. From 2002 China grew at above 8% for 27 quarters in a row. Only three of the past 26 quarters have seen India growing at that sort of pace.
Another assumption is that past patterns will no longer hold and that the spoils of growth will be distributed to a class earning decent wages and not to the very rich or the very poor. Yet the sorts of job that have conventionally provided middle-class incomes are drying up. Goldman Sachs, another bank, estimates that at most 27m households make over $11,000 a year—just 2% of the population. Of those, 10m are government employees and managers at state-owned firms, where jobs have been disappearing at the rate of about 100,000 a year since 2000, in part as those state-owned enterprises lose ground to private rivals.
The remaining 17m are white-collar professionals, a lot of whom work in the information-technology sector, which is retrenching amid technological upheaval and threats of protectionism. In general, salaries at large companies have been stagnant for years and recruitment is dropping, according to CLSA, a brokerage.
Might those below the current white-collar professional layer graduate to membership of the middle class? This happened in China, where hordes migrated from the countryside to relatively high-paying jobs in factories in coastal areas. But such opportunities are thin on the ground in India. It has a lower urbanisation rate than its neighbours, and a bigger urban-rural wage gap, with little sign of change. It is not providing jobs to its young people: around a third of under-25s are not in employment, education or training.
There are other structural issues. Over 90% of workers are employed in the informal sector; most firms are not large or productive enough to pay anything approaching middle-class wages. “Most people in the middle class across the world have a payslip. They have a regular wage that comes with a job,” points out Nancy Birdsall of the Centre for Global Development, a think-tank. And women’s participation in the workforce is low, at 27%; worse, it has fallen by around ten percentage points since 2005, as households seem to have used increases in income to keep women at home. Households that might be able to afford luxuries if both partners worked cannot when only the man does.
Spent force
Across the income spectrum, households that do make more money tend to spend it not on consumer goods but on better education and health care, public provision of which is abysmal. The education system is possibly India’s most intractable problem, preventing it becoming a consumer powerhouse. Attaining middle-class spending power requires a middle-class income, which in turn requires productive ability. Yet most children get fewer than six years of schooling and one in nine is illiterate. Poor diets mean that 38% of children under the age of five are so underfed as to damage their physical and mental capacity irreversibly, according the Global Nutrition Report. “What hope is there for them to earn a decent income?” one senior business figure asks.
None of this leaves India as an irrelevancy for the world’s biggest companies. Whether India’s consumer class numbers 24m or 80m, that is more than enough to allow some businesses to thrive—plenty of fortunes have been made catering to far smaller places. But businesses assuming the consumer pivot in India is the next unstoppable force in global economics need to ask themselves why it already looks to have run out of puff—and whether it is likely to get a second wind any time soon.
This article appeared in the Briefing section of the print edition under the headline "The elephant in the room"
If this is true then Indian economy is a disappointment so far
The elephant in the room India’s missing middle class
Multinational businesses relying on Indian consumers face disappointment
THE arrival of T.N. Srinath into the middle class will take place in style, atop a new Honda Activa 4G scooter. Fed up with Mumbai’s crowded commuter trains, the 28-year-old insurance clerk will become the first person in his family to own a motor vehicle. Easy credit means the 64,000 rupees ($1,000) he is paying a dealership in central Mumbai will be spread over two years. But the cost will still gobble up over a tenth of his salary. It will be much dearer than a train pass, he says, with pride.
Choosing to afford such incremental comforts is the purview of the world’s middle class, from Mumbai to Minneapolis and Mexico City to Moscow. Rising incomes and the desire for status have, in recent decades, seen such choices become far more widespread in a host of emerging markets—most obviously and most spectacularly in China. The shopping list of the newly better off includes designer clothes, electronic devices, cars, foreign holidays and other attainable luxuries.
Many companies around the world are looking to India for a repeat performance of China’s middle-class expansion. India is, after all, another country with 1.3bn people, a fast-growing economy and favourable demography. And China’s growth is flagging, at least by the standards of the past two decades. Companies which made a packet there, both incomers such as Apple and locals like Alibaba, are seeking pastures new. Firms that missed the boat on China or, like Amazon and Facebook, were simply not allowed in, want to be sure that they do not miss out this time.
Enthusiasm about India is boundless. “I see a lot of similarities to where China was several years ago. And so I’m very, very bullish and very, very optimistic about India,” Tim Cook, Apple’s boss, recently told investors. A walk around the Ambience Mall in Delhi shows he is not the only multinational boss with big ambitions in the country. Indian brands like Fabindia, a purveyor of fancy clothes and crafts, are outnumbered by Western ones such as Levi’s, Starbucks, Zara and BMW. The slums that host a quarter of all India’s city dwellers feel a long way off.
Beyond the mall, Amazon has committed $5bn to establish a presence in the world’s biggest democracy. Alibaba has backed Paytm, a local e-commerce venture, to the tune of $500m. SoftBank, a Japanese investor, has funded a slew of start-ups premised on the potential buying power of India’s middle class. Uber, the world’s biggest ride-hailing firm, has hit the streets. Google, Facebook and Netflix are vying for online eyeballs. IKEA is putting the finishing touches to the first of 25 shops it plans to open over the next seven years. Paul Polman, boss of Unilever, has described India as potentially the consumer giant’s biggest market. Reports put out by management consultants routinely point to 300m-400m Indians in the ranks of the global middle class. HSBC, a bank, recently described nearly 300m Indians as “middle class”, a figure it thinks will rise to 550m by 2025.
But for some of the firms trying to tap this “bird of gold” opportunity, as McKinsey once called it, an awkward truth is making itself felt: a lot of this middle class has little money to spend. There are many rich people in India—but they number in the mere millions. There are a great many more who have risen above the poverty line—but not so far above it that they spend much on anything other than feeding their families. And there is less in between the two than meets the eye.
Missing the mark
Companies that have tried to tap the Indian opportunity have found that returns fell short of the hype. Take e-commerce. The expectation that several hundred million Indians would shop online was what convinced Amazon and local rivals to invest heavily. Industry revenue-growth rates of well over 100% in 2014 and 2015 prompted analysts to forecast $100bn in sales by 2020, around five times today’s total.
That now looks implausible. In 2016, e-commerce sales hardly grew at all. At least 2017 looks a little better, with growth of 25-30%, according to analysts (see chart 1). But that barely exceeds the 20% the industry averages globally. Even after years of enticing customers with heavily discounted wares, perhaps 50m online shoppers are active in India—roughly, the richest 5-10% of the population, says Arya Sen of Jefferies, an investment bank. In dollar terms, growth in Indian e-commerce in 2017 was comparable to a week or so of today’s growth in China. Tellingly, few websites venture beyond English, a language in which perhaps only one in ten are conversant and which is preferred by the economic elite.
India has yet to move the needle for the world’s big tech groups. Apple made 0.7% of its global revenues there in the year to March 2017. Facebook, though it has 241m users in India, probably the most in the world in one country, registered revenues of just $51m in the same period. Google is growing more slowly in India than in the rest of the world. Mobile phones have become popular as their price has tumbled—but most handsets sold are basic devices rather than the smartphones that are ubiquitous elsewhere in the world.
Eating their words
Fast-food chains once spoke of a giant market. Their eyes were bigger than Indian stomachs. Despite two decades of investment McDonald’s has hardly any more joints in India than in Poland or Taiwan. The likes of Domino’s Pizza and KFC have struggled to come close to expectations that were once sky-high. Starbucks says it has big plans for India but has opened about one new coffee shop a month over the past two years, bringing its total to around 100—on a par with Utah or the United Arab Emirates. A new Starbucks opens in China every 15 hours, adding to 3,000 already operating.
Executives remain relentlessly upbeat in public—even if investments do not always follow. Anurag Mehrotra, boss of Ford India, told the Financial Times in May that car sales in India were set to double every three to five years. That would be an extraordinary change in fortunes: sales grew by less than 20% overall in the six years to 2016. There is one car or lorry for every 45 Indians, according to OICA, a trade group. The Chinese own five times as many. Motorbike sales have grown fast but only because their price has tumbled by 40% since 2000, points out Neelkanth Mishra of Credit Suisse, another bank.
India-boosters point to middle-class services that have taken off. With 20% annual growth in passengers, aviation is already booming at the rate Mr Mehrotra hopes to see in the car industry. But taken together, all India’s domestic airlines are no larger than Ryanair, the world’s fifth-biggest carrier, according to FlightGlobal, a consultancy. SpiceJet, an airline, says that 97% of Indians have never flown. A mere 20m Indians travelled abroad in 2015, about one in 40 adults.
Optimists also argue that the rapid growth of things like Chinese mobile-phone brands shows that the Indian middle class is out there and spending—just not on Western brands. Locally based fast-food chains that undercut McDonald’s or KFC have done much better than the new arrivals. But local consumer businesses face much the same problem as multinationals. Inditex, Zara’s parent firm, has 46 clothes shops in India, fewer than in Ireland, Lithuania or Kazakhstan. For the kind of goods the global middle class aspires to own at least, executives whether at global or local firms clock the number of potential customers at 50m and no more. Even selling basic consumer goods does not necessarily work. Hindustan Unilever, which purveys sachets of shampoo for just a few rupees, has seen virtually no sales growth in dollar terms since 2012.
“The question isn’t whether Zara or H&M can open 50 stores in India. Of course they can. The question is whether they can open 500,” says a banker who asks not be named, on the ground that it is best not to be seen questioning the Indian middle-class narrative. “You can try to push beyond the 50m people who have money, but how profitable would that be? Companies can expand for a time, but the limits to growth are getting obvious.”
The bullish argument that brought Western brands to India was basically this: although the country remains, for the most part, very poor, its population is so enormous that even a relatively small middle class is large in absolute terms, and fast overall growth will, as in China, quickly increase its size yet further. This assumes two things. One is that the middle class in India is the same relative size as in other developing countries where marketers have succeeded in the past. The other is that growth will benefit this middle class as much as other parts of the population. Neither is true in India, which as well as being poor is deeply unequal, and becoming more so.
For all the talk of wanting to tap the middle class, no firm moving into India thinks it is targeting the middle of the income distribution. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China (see chart 2) and a quarter of that for Russia. What is more, foreign companies have to take their money out of India at market exchange rates, not adjusted ones.
Defining the middle class anywhere is tricky. India’s National Council of Applied Economic Research has used a cut-off of 250,000 rupees of annual income, or about $10 a day at market rates. Thomas Piketty and Lucas Chancel of the Paris School of Economics found in a recent study that one in ten Indian adults had an annual income of more than $3,150 in 2014. That leaves only 78m Indians making close to $10 a day.
Meagre market
Even adjusting for the lower cost of living, that is hardly a figure to set marketers’ heartbeats racing. The latest iPhone, which costs $1,400 in India, represents five month’s pay for an Indian who just makes it into the top 10% of earners. And such consumers are not making up through growing numbers what they lack in individual spending power. The proportion making around $10 a day hardly shifted between 2010 and 2016.
Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one. How many of them will be anywhere near able to buy an iPhone or a pair of Levi’s if they cannot afford a TV set?
To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. But in terms of being able to afford goods sold at much the same price across the world, whether a Netflix subscription or Nike trainers, more than 99% of the Indian population are in the same league as Americans that count as below the poverty line (around $25,000 for a family of four), points out Rama Bijapurkar, a marketing consultant.
The top 1% of Indians, indeed, are squeezing out the rest. They earn 22% of the entire income pool, according to Mr Piketty, compared with 14% for China’s top 1%. That is largely because they have captured nearly a third of all national growth since 1980. In that period India is the country with the biggest gap between the growth of income for the top 1% and the growth of income for the population as a whole. At the turn of the century, the richest 10% of Indians made 40% of national income, about the same as the 40% below them. But far from becoming a middle class, the latter’s share of income then slumped to under 30%, while those at the top went on to control over half of all income (see chart 3).
Such economic success at the top leaves less for everyone else. Consider the 300m or so adults who earn more than the median but less than the top 10%. This group has fared remarkably badly in recent decades. Since 1980, it has captured just 23% of incremental GDP, roughly half what would be expected in more egalitarian societies—and less than that captured by the top 1%. China’s equivalent class nabbed 43% in the same period.
The rich get richer
Some have doubts about Mr Piketty’s methodology. But other surveys suggest pretty similar distribution patterns. Looking at wealth as opposed to income, Credit Suisse established in 2015 that only 25.5m Indians had a net worth over $13,700, equating roughly to $50,000 in America. And two-thirds of that cohort’s wealth was held by just 1.5m upper-class savers with at least $137,000 in net assets.
India’s middle class may be far from wealthy but the rich are truly rich. There are over 200,000 millionaires in India. Forbes counts 101 billionaires and adds one more to the list roughly every two months. It shows. The Hermès shop next door to the Honda dealership frequented by Mr Srinath sells scarves and handbags that cost far more than his scooter. Flats in posh developments start at $1m. In other emerging economies, there are fewer very rich and a wider base of potential spenders for marketers to tap.
In absolute terms, India has wealth roughly comparable to Switzerland (population 8m) or South Korea (51m). Although India’s population is almost the size of China’s, it is central Europe, with a population about the size of India’s top 10% and boasting roughly the same spending power, that is a better comparison. Global companies pay attention to markets the size of Switzerland or central Europe. But they do not look to them to redefine their fortunes.
Confronted by this analysis, India bulls concede the middle class is comparatively small, but insist that bumper growth is coming. The assumptions behind that, though, are not convincing. For a start, the growth of the overall economy is good—the annual rate is currently 6.3%—but not great. From 2002 China grew at above 8% for 27 quarters in a row. Only three of the past 26 quarters have seen India growing at that sort of pace.
Another assumption is that past patterns will no longer hold and that the spoils of growth will be distributed to a class earning decent wages and not to the very rich or the very poor. Yet the sorts of job that have conventionally provided middle-class incomes are drying up. Goldman Sachs, another bank, estimates that at most 27m households make over $11,000 a year—just 2% of the population. Of those, 10m are government employees and managers at state-owned firms, where jobs have been disappearing at the rate of about 100,000 a year since 2000, in part as those state-owned enterprises lose ground to private rivals.
The remaining 17m are white-collar professionals, a lot of whom work in the information-technology sector, which is retrenching amid technological upheaval and threats of protectionism. In general, salaries at large companies have been stagnant for years and recruitment is dropping, according to CLSA, a brokerage.
Might those below the current white-collar professional layer graduate to membership of the middle class? This happened in China, where hordes migrated from the countryside to relatively high-paying jobs in factories in coastal areas. But such opportunities are thin on the ground in India. It has a lower urbanisation rate than its neighbours, and a bigger urban-rural wage gap, with little sign of change. It is not providing jobs to its young people: around a third of under-25s are not in employment, education or training.
There are other structural issues. Over 90% of workers are employed in the informal sector; most firms are not large or productive enough to pay anything approaching middle-class wages. “Most people in the middle class across the world have a payslip. They have a regular wage that comes with a job,” points out Nancy Birdsall of the Centre for Global Development, a think-tank. And women’s participation in the workforce is low, at 27%; worse, it has fallen by around ten percentage points since 2005, as households seem to have used increases in income to keep women at home. Households that might be able to afford luxuries if both partners worked cannot when only the man does.
Spent force
Across the income spectrum, households that do make more money tend to spend it not on consumer goods but on better education and health care, public provision of which is abysmal. The education system is possibly India’s most intractable problem, preventing it becoming a consumer powerhouse. Attaining middle-class spending power requires a middle-class income, which in turn requires productive ability. Yet most children get fewer than six years of schooling and one in nine is illiterate. Poor diets mean that 38% of children under the age of five are so underfed as to damage their physical and mental capacity irreversibly, according the Global Nutrition Report. “What hope is there for them to earn a decent income?” one senior business figure asks.
None of this leaves India as an irrelevancy for the world’s biggest companies. Whether India’s consumer class numbers 24m or 80m, that is more than enough to allow some businesses to thrive—plenty of fortunes have been made catering to far smaller places. But businesses assuming the consumer pivot in India is the next unstoppable force in global economics need to ask themselves why it already looks to have run out of puff—and whether it is likely to get a second wind any time soon.
This article appeared in the Briefing section of the print edition under the headline "The elephant in the room"
nongaddarliberal
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News
Jobless growth? It’s all about reskilling India
By
- India may be adding almost 15 million new jobs a year. Of this, the contribution of the organised sector has been just about 7 million, says the report, compiled by SBI's chief economist Soumya Kanti Ghosh and IIM professor Pulak Ghosh.
The data clearly suggests that despite the government's best efforts, new job creation in the manufacturing and allied sectors has been relatively low.
This is quite disheartening, as an inference can be drawn that the Modi government's flagship programmes like 'Make in India' and 'Skill India' may have failed to deliver.
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Industry captains say new jobs of 5.9 lakh a month are way below India's potential, and the government will have to reskill the work force to crank up the growth engines. As the countdown begins for Budget 2018, ET NOW sets the stage for the big jobs debate.
What should be the focus areas to ensure that enough jobs are created, especially in the organised sector? Shouldn't there be an all-new approach to skill development to meet the changing dynamics of the job market?
Here are excerpts from the India Development Debate on Tuesday:
SANJAY JHA
NATIONAL SPOKESPERSON, CONGRESS
The truth is that jobless growth is not a problem just for India; it's a global challenge. The truth is that qualified people are applying for the job of a peon and other smaller jobs in state governments. That is the reality. If any independent study or a study paid by the government begins to create the hype that there is no jobless growth in India, good luck!
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GVL NARASIMHA RAO
NATIONAL SPOKESPERSON, BJP
This is based on actual payroll data and this cannot be fudged. Each and every record of an employee who has joined the workforce is available with the government. Only because it doesn't suit the Congress party's political narrative, it doesn't become fiction. What the authors of the report are saying actually falls into place with what the world has been talking about the Indian economy.
KIRAN MAZUMDAR-SHAW
CMD, BIOCON
You can have an academic discussion on jobless growth, but the fact is that 5.9 lakh new jobs a month means there is still a long way to go. There are a large number of opportunities that we are not tapping. We get lost in numbers. We should look at the macro-economy for job creation. There has to be a holistic policy, otherwise it will not sustain. We need to reskill the labour force.
SK GHOSH
GROUP CHIEF ECONOMIC ADVISER, SBI
There has been an increase in the services sector, but there is a decline in the manufacturing sector. The debate should now move to where you should create jobs, where the skill is required, etc. We could also emulate the skilling programmes of other countries. The government should make it mandatory for the informal sector to file the job data.
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PULAK GHOSH
PROFESSOR, IIM-B
This is an independent study not sponsored by anyone. There is a gap between skilling and where the job growth is. The amount of money employees take home is the real issue.The major policy fous in India has been incentivised capital investment, not job creation. By the time the government decides what skill to impart, the demand for that skill is gone. There is a mismatch.
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These fools don't even consider MSME sector or informal jobs and merely say that formal to informal ratio is 1:1. They must be retarded to say such things. India is mostly informal and job growth is generally skewed as 1:10 to 1:5 wrt formal and informal. So, it is clearly wrong to say that job growth is not there. If 7 million formal jobs are created, that means even more informal ones are created
Butter Chicken
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Direct tax collection jumps 19% to Rs 6.89 lakh crore this fiscal
NEW DELHI: Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7 per cent to Rs 6.89 lakh crore, the tax department said today.
The collections till January 15, 2018 represent over 70 per cent of the Rs 9.8 lakh crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.
"The provisional figures of direct tax collections up to January 15, 2018, show that net collections are at Rs 6.89 lakh crore which is 18.7 per cent higher than the net collections for the corresponding period last year," it said.
Gross collections (before adjusting for refunds) have increased by 13.5 per cent to Rs 8.11 lakh crore during April, 2017 to January 15, 2018.
Refunds amounting to Rs 1.22 lakh crore have been issued during this period.
Stating that there has been "consistent and significant" improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10 per cent in Q1, to 10.3 per cent in Q2, to 12.6 per cent in Q3 and to 13.5 per cent as on January 15, 2018.
Similarly, the growth rate of total net direct tax collections has climbed up from 14.8 per cent in Q1, to 15.8 per cent in Q2, to 18.2 per cent in Q3 and to 18.7 per cent as on January 15, 2018.
NEW DELHI: Direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7 per cent to Rs 6.89 lakh crore, the tax department said today.
The collections till January 15, 2018 represent over 70 per cent of the Rs 9.8 lakh crore revenue target from direct taxes, the Central Board of Direct Taxes (CBDT) said in a statement.
"The provisional figures of direct tax collections up to January 15, 2018, show that net collections are at Rs 6.89 lakh crore which is 18.7 per cent higher than the net collections for the corresponding period last year," it said.
Gross collections (before adjusting for refunds) have increased by 13.5 per cent to Rs 8.11 lakh crore during April, 2017 to January 15, 2018.
Refunds amounting to Rs 1.22 lakh crore have been issued during this period.
Stating that there has been "consistent and significant" improvement in the position of direct tax collections during the current fiscal, the CBDT said the growth rate of total gross collections has improved from 10 per cent in Q1, to 10.3 per cent in Q2, to 12.6 per cent in Q3 and to 13.5 per cent as on January 15, 2018.
Similarly, the growth rate of total net direct tax collections has climbed up from 14.8 per cent in Q1, to 15.8 per cent in Q2, to 18.2 per cent in Q3 and to 18.7 per cent as on January 15, 2018.
Bahamut
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You cannot build a tall building if the base is weak .
Sure there are course like carpenter ,plumber ,welder etc which can be attend by average manual labourer but if we want a strong economy we need a big middle class.For that education is must ,many of our citizen are barely literate . It time to reform our education system special primary education system , so future generation have a better change at upward mobility.
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Homegrown auto major Tata Motors sold 40,447 units of commercial vehicles in December, up 62 percent year ago, while the truck segment sales witnessed a massive 83 percent year-on-year growth in December, at 15,828 units, due to an uptick in demand. Similarly, Ashok Leyland sold 19,253 units of medium and heavy, as well as light commercial vehicles in the month of December, up 79 percent from a year ago.
Goods are flying off faster from shop shelves. Companies are showing signs of adding extra capacity lines to meet extra consumer demand. Hiring appears to have picked pace. Key intermediate products such as steel and cement production has scaled multi-year growth highs.
Kshatriya87
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Argument can be made that this is an indirect benefit of GST. Since companies need not keep warehouses in each state now, they are planning more efficient supply chain management.
Kshatriya87
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Time for India to have its own Walmart and Ikea stores.
Pandeyji
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Based on very flawed assessment. They forget to figure that majority of middle class businessmen and farmers do not pay taxes. As if that is not enough Indian middle class believes in saving instead of buying things on loan. Only time I have saw people take loan was to earn some tax benefits.https://www.economist.com/news/brie...ers-face-disappointment-indias-missing-middle
If this is true then Indian economy is a disappointment so far
The elephant in the room India’s missing middle class
Multinational businesses relying on Indian consumers face disappointment
THE arrival of T.N. Srinath into the middle class will take place in style, atop a new Honda Activa 4G scooter. Fed up with Mumbai’s crowded commuter trains, the 28-year-old insurance clerk will become the first person in his family to own a motor vehicle. Easy credit means the 64,000 rupees ($1,000) he is paying a dealership in central Mumbai will be spread over two years. But the cost will still gobble up over a tenth of his salary. It will be much dearer than a train pass, he says, with pride.
Choosing to afford such incremental comforts is the purview of the world’s middle class, from Mumbai to Minneapolis and Mexico City to Moscow. Rising incomes and the desire for status have, in recent decades, seen such choices become far more widespread in a host of emerging markets—most obviously and most spectacularly in China. The shopping list of the newly better off includes designer clothes, electronic devices, cars, foreign holidays and other attainable luxuries.
Many companies around the world are looking to India for a repeat performance of China’s middle-class expansion. India is, after all, another country with 1.3bn people, a fast-growing economy and favourable demography. And China’s growth is flagging, at least by the standards of the past two decades. Companies which made a packet there, both incomers such as Apple and locals like Alibaba, are seeking pastures new. Firms that missed the boat on China or, like Amazon and Facebook, were simply not allowed in, want to be sure that they do not miss out this time.
Enthusiasm about India is boundless. “I see a lot of similarities to where China was several years ago. And so I’m very, very bullish and very, very optimistic about India,” Tim Cook, Apple’s boss, recently told investors. A walk around the Ambience Mall in Delhi shows he is not the only multinational boss with big ambitions in the country. Indian brands like Fabindia, a purveyor of fancy clothes and crafts, are outnumbered by Western ones such as Levi’s, Starbucks, Zara and BMW. The slums that host a quarter of all India’s city dwellers feel a long way off.
Beyond the mall, Amazon has committed $5bn to establish a presence in the world’s biggest democracy. Alibaba has backed Paytm, a local e-commerce venture, to the tune of $500m. SoftBank, a Japanese investor, has funded a slew of start-ups premised on the potential buying power of India’s middle class. Uber, the world’s biggest ride-hailing firm, has hit the streets. Google, Facebook and Netflix are vying for online eyeballs. IKEA is putting the finishing touches to the first of 25 shops it plans to open over the next seven years. Paul Polman, boss of Unilever, has described India as potentially the consumer giant’s biggest market. Reports put out by management consultants routinely point to 300m-400m Indians in the ranks of the global middle class. HSBC, a bank, recently described nearly 300m Indians as “middle class”, a figure it thinks will rise to 550m by 2025.
But for some of the firms trying to tap this “bird of gold” opportunity, as McKinsey once called it, an awkward truth is making itself felt: a lot of this middle class has little money to spend. There are many rich people in India—but they number in the mere millions. There are a great many more who have risen above the poverty line—but not so far above it that they spend much on anything other than feeding their families. And there is less in between the two than meets the eye.
Missing the mark
Companies that have tried to tap the Indian opportunity have found that returns fell short of the hype. Take e-commerce. The expectation that several hundred million Indians would shop online was what convinced Amazon and local rivals to invest heavily. Industry revenue-growth rates of well over 100% in 2014 and 2015 prompted analysts to forecast $100bn in sales by 2020, around five times today’s total.
That now looks implausible. In 2016, e-commerce sales hardly grew at all. At least 2017 looks a little better, with growth of 25-30%, according to analysts (see chart 1). But that barely exceeds the 20% the industry averages globally. Even after years of enticing customers with heavily discounted wares, perhaps 50m online shoppers are active in India—roughly, the richest 5-10% of the population, says Arya Sen of Jefferies, an investment bank. In dollar terms, growth in Indian e-commerce in 2017 was comparable to a week or so of today’s growth in China. Tellingly, few websites venture beyond English, a language in which perhaps only one in ten are conversant and which is preferred by the economic elite.
India has yet to move the needle for the world’s big tech groups. Apple made 0.7% of its global revenues there in the year to March 2017. Facebook, though it has 241m users in India, probably the most in the world in one country, registered revenues of just $51m in the same period. Google is growing more slowly in India than in the rest of the world. Mobile phones have become popular as their price has tumbled—but most handsets sold are basic devices rather than the smartphones that are ubiquitous elsewhere in the world.
Eating their words
Fast-food chains once spoke of a giant market. Their eyes were bigger than Indian stomachs. Despite two decades of investment McDonald’s has hardly any more joints in India than in Poland or Taiwan. The likes of Domino’s Pizza and KFC have struggled to come close to expectations that were once sky-high. Starbucks says it has big plans for India but has opened about one new coffee shop a month over the past two years, bringing its total to around 100—on a par with Utah or the United Arab Emirates. A new Starbucks opens in China every 15 hours, adding to 3,000 already operating.
Executives remain relentlessly upbeat in public—even if investments do not always follow. Anurag Mehrotra, boss of Ford India, told the Financial Times in May that car sales in India were set to double every three to five years. That would be an extraordinary change in fortunes: sales grew by less than 20% overall in the six years to 2016. There is one car or lorry for every 45 Indians, according to OICA, a trade group. The Chinese own five times as many. Motorbike sales have grown fast but only because their price has tumbled by 40% since 2000, points out Neelkanth Mishra of Credit Suisse, another bank.
India-boosters point to middle-class services that have taken off. With 20% annual growth in passengers, aviation is already booming at the rate Mr Mehrotra hopes to see in the car industry. But taken together, all India’s domestic airlines are no larger than Ryanair, the world’s fifth-biggest carrier, according to FlightGlobal, a consultancy. SpiceJet, an airline, says that 97% of Indians have never flown. A mere 20m Indians travelled abroad in 2015, about one in 40 adults.
Optimists also argue that the rapid growth of things like Chinese mobile-phone brands shows that the Indian middle class is out there and spending—just not on Western brands. Locally based fast-food chains that undercut McDonald’s or KFC have done much better than the new arrivals. But local consumer businesses face much the same problem as multinationals. Inditex, Zara’s parent firm, has 46 clothes shops in India, fewer than in Ireland, Lithuania or Kazakhstan. For the kind of goods the global middle class aspires to own at least, executives whether at global or local firms clock the number of potential customers at 50m and no more. Even selling basic consumer goods does not necessarily work. Hindustan Unilever, which purveys sachets of shampoo for just a few rupees, has seen virtually no sales growth in dollar terms since 2012.
“The question isn’t whether Zara or H&M can open 50 stores in India. Of course they can. The question is whether they can open 500,” says a banker who asks not be named, on the ground that it is best not to be seen questioning the Indian middle-class narrative. “You can try to push beyond the 50m people who have money, but how profitable would that be? Companies can expand for a time, but the limits to growth are getting obvious.”
The bullish argument that brought Western brands to India was basically this: although the country remains, for the most part, very poor, its population is so enormous that even a relatively small middle class is large in absolute terms, and fast overall growth will, as in China, quickly increase its size yet further. This assumes two things. One is that the middle class in India is the same relative size as in other developing countries where marketers have succeeded in the past. The other is that growth will benefit this middle class as much as other parts of the population. Neither is true in India, which as well as being poor is deeply unequal, and becoming more so.
For all the talk of wanting to tap the middle class, no firm moving into India thinks it is targeting the middle of the income distribution. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China (see chart 2) and a quarter of that for Russia. What is more, foreign companies have to take their money out of India at market exchange rates, not adjusted ones.
Defining the middle class anywhere is tricky. India’s National Council of Applied Economic Research has used a cut-off of 250,000 rupees of annual income, or about $10 a day at market rates. Thomas Piketty and Lucas Chancel of the Paris School of Economics found in a recent study that one in ten Indian adults had an annual income of more than $3,150 in 2014. That leaves only 78m Indians making close to $10 a day.
Meagre market
Even adjusting for the lower cost of living, that is hardly a figure to set marketers’ heartbeats racing. The latest iPhone, which costs $1,400 in India, represents five month’s pay for an Indian who just makes it into the top 10% of earners. And such consumers are not making up through growing numbers what they lack in individual spending power. The proportion making around $10 a day hardly shifted between 2010 and 2016.
Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one. How many of them will be anywhere near able to buy an iPhone or a pair of Levi’s if they cannot afford a TV set?
To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. But in terms of being able to afford goods sold at much the same price across the world, whether a Netflix subscription or Nike trainers, more than 99% of the Indian population are in the same league as Americans that count as below the poverty line (around $25,000 for a family of four), points out Rama Bijapurkar, a marketing consultant.
The top 1% of Indians, indeed, are squeezing out the rest. They earn 22% of the entire income pool, according to Mr Piketty, compared with 14% for China’s top 1%. That is largely because they have captured nearly a third of all national growth since 1980. In that period India is the country with the biggest gap between the growth of income for the top 1% and the growth of income for the population as a whole. At the turn of the century, the richest 10% of Indians made 40% of national income, about the same as the 40% below them. But far from becoming a middle class, the latter’s share of income then slumped to under 30%, while those at the top went on to control over half of all income (see chart 3).
Such economic success at the top leaves less for everyone else. Consider the 300m or so adults who earn more than the median but less than the top 10%. This group has fared remarkably badly in recent decades. Since 1980, it has captured just 23% of incremental GDP, roughly half what would be expected in more egalitarian societies—and less than that captured by the top 1%. China’s equivalent class nabbed 43% in the same period.
The rich get richer
Some have doubts about Mr Piketty’s methodology. But other surveys suggest pretty similar distribution patterns. Looking at wealth as opposed to income, Credit Suisse established in 2015 that only 25.5m Indians had a net worth over $13,700, equating roughly to $50,000 in America. And two-thirds of that cohort’s wealth was held by just 1.5m upper-class savers with at least $137,000 in net assets.
India’s middle class may be far from wealthy but the rich are truly rich. There are over 200,000 millionaires in India. Forbes counts 101 billionaires and adds one more to the list roughly every two months. It shows. The Hermès shop next door to the Honda dealership frequented by Mr Srinath sells scarves and handbags that cost far more than his scooter. Flats in posh developments start at $1m. In other emerging economies, there are fewer very rich and a wider base of potential spenders for marketers to tap.
In absolute terms, India has wealth roughly comparable to Switzerland (population 8m) or South Korea (51m). Although India’s population is almost the size of China’s, it is central Europe, with a population about the size of India’s top 10% and boasting roughly the same spending power, that is a better comparison. Global companies pay attention to markets the size of Switzerland or central Europe. But they do not look to them to redefine their fortunes.
Confronted by this analysis, India bulls concede the middle class is comparatively small, but insist that bumper growth is coming. The assumptions behind that, though, are not convincing. For a start, the growth of the overall economy is good—the annual rate is currently 6.3%—but not great. From 2002 China grew at above 8% for 27 quarters in a row. Only three of the past 26 quarters have seen India growing at that sort of pace.
Another assumption is that past patterns will no longer hold and that the spoils of growth will be distributed to a class earning decent wages and not to the very rich or the very poor. Yet the sorts of job that have conventionally provided middle-class incomes are drying up. Goldman Sachs, another bank, estimates that at most 27m households make over $11,000 a year—just 2% of the population. Of those, 10m are government employees and managers at state-owned firms, where jobs have been disappearing at the rate of about 100,000 a year since 2000, in part as those state-owned enterprises lose ground to private rivals.
The remaining 17m are white-collar professionals, a lot of whom work in the information-technology sector, which is retrenching amid technological upheaval and threats of protectionism. In general, salaries at large companies have been stagnant for years and recruitment is dropping, according to CLSA, a brokerage.
Might those below the current white-collar professional layer graduate to membership of the middle class? This happened in China, where hordes migrated from the countryside to relatively high-paying jobs in factories in coastal areas. But such opportunities are thin on the ground in India. It has a lower urbanisation rate than its neighbours, and a bigger urban-rural wage gap, with little sign of change. It is not providing jobs to its young people: around a third of under-25s are not in employment, education or training.
There are other structural issues. Over 90% of workers are employed in the informal sector; most firms are not large or productive enough to pay anything approaching middle-class wages. “Most people in the middle class across the world have a payslip. They have a regular wage that comes with a job,” points out Nancy Birdsall of the Centre for Global Development, a think-tank. And women’s participation in the workforce is low, at 27%; worse, it has fallen by around ten percentage points since 2005, as households seem to have used increases in income to keep women at home. Households that might be able to afford luxuries if both partners worked cannot when only the man does.
Spent force
Across the income spectrum, households that do make more money tend to spend it not on consumer goods but on better education and health care, public provision of which is abysmal. The education system is possibly India’s most intractable problem, preventing it becoming a consumer powerhouse. Attaining middle-class spending power requires a middle-class income, which in turn requires productive ability. Yet most children get fewer than six years of schooling and one in nine is illiterate. Poor diets mean that 38% of children under the age of five are so underfed as to damage their physical and mental capacity irreversibly, according the Global Nutrition Report. “What hope is there for them to earn a decent income?” one senior business figure asks.
None of this leaves India as an irrelevancy for the world’s biggest companies. Whether India’s consumer class numbers 24m or 80m, that is more than enough to allow some businesses to thrive—plenty of fortunes have been made catering to far smaller places. But businesses assuming the consumer pivot in India is the next unstoppable force in global economics need to ask themselves why it already looks to have run out of puff—and whether it is likely to get a second wind any time soon.
This article appeared in the Briefing section of the print edition under the headline "The elephant in the room"
Bahamut
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Government can provide free open software for business to manage supply and demand and allow online and automatic order. This can be based on blockchain which will lead to more transparency and reduction in corruption. Plus supplier can see the record of the party ordering the item, so they know are they trustfull or not . Small business will benifit as thier efficiency will rise.
nongaddarliberal
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BloombergQuint
UN-MIX India’s Economy: Completely. Totally. Brutally.
BloombergQuintOpinion
Raghav Bahl @Raghav_Bahl
January 17 2018, 1:08PM January 17 2018, 11:37AM
If you were born in India in the 1950s through the 70s, you grew up believing India invented the ‘mixed economy’. We were fed golden tales about how the commanding heights of our industry were not mortgaged to any seth-ji(capitalist) but to a cuddly and ‘altruistic’ state. It’s only when our economy blew up in the early 90s that we realised how hopelessly ‘mixed up’ we were!
But unknown to most of us, the principles of a “mixed economy” had taken shape in the United Kingdom in the 1930s/40s, within the thinking echelons of the British Labour Party. The philosophy took strong roots in Europe in the post-war years, but was largely defined as a “form of capitalism where most industries are privately owned with only a minority of public utilities and essential services under public ownership… governments provide environmental protection, maintenance of employment standards, a standardised welfare state, and maintenance of competition”. Essentially, such a mixed economy envisaged a pre-dominantly free market system where the government intervened via rational regulation to ensure fair play, social justice and competition.
Treacherous Trinity Of Government Dominance, Ownership And Control
But in India, government dominance and ownership became the hallmark of what we called a ‘mixed economy’. It descended into a wealth-destroying form of state capitalism where the government assumed monopolistic control of operations ranging from transportation, banking, telecoms, hospitality, steel, coal, armaments, healthcare, universities and what not. Instead of evolving into an enlightened welfare state, we got tripped and trapped into a nowhere economy, neither a well-regulated free market nor a Soviet-style command and control structure.
Most discordantly, agriculture, our biggest employer, remained totally in private hands, unreformed and chained to medievalism, outside the pale of even the ‘mixed up’ economy.
The most renowned economists have described this policy muddle as the primary villain that produced “both the slow growth of socialism and the inequalities of capitalism”. In short, the worst of both worlds; no wonder our 1991 bankruptcy was foretold and inevitable.
Wasting The 1991 Crisis
Unfortunately, we wasted the crisis of 1991 by not ripping up the mixed economy and nixing its contradictions. Instead we chose the path of ‘liberalisation’, which essentially opened up trade, industry and investment to the world. While it was a productive deconstruction, and undoubtedly successful in unleashing growth impulses, it wasn’t quite the revolutionary change it was made out to be. It did propel India onto a much higher plane, but we are now plateauing at 7-8 percent, unable to clear the 10 percent threshold that pulled China out of grinding poverty (that China had once shared with us).
As we get ready to elect a new government in less than 18 months, what should we expect from it? Should they do more of the same, or craft a ‘post-liberalisation’ vision of India’s economy?
I hope the next government decisively sheds the incrementalism of the past 7 decades and creates an economic model that is neither Left nor Right, neither capitalist nor socialist nor mixed, but one that is uniquely suited to our current station; which grapples with and overcomes today’s political constraints and realities; one that is not half-way or half-hearted, but courageously goes through and UN-MIXES our economy. Yes, UN-MIXES it!
An UN-MIXED Economy: To Make India Rich Again
To begin with, we must stop hero worshipping 1991’s ‘revolutionary reforms’. I readily concede these trade, industry and investment policy changes were hugely positive (even radical) in unshackling us from the command and control apparatus of the 1970s.
But the gear only shifted from 1st to 2nd, while the chassis of India’s economic motor remained split, mixed and wobbly between private industry and a domineering government.
So when we preen about the “dramatic transformation unleashed by the revolutionary economic reforms of 1991”, I find it difficult to suppress a sardonic grin. Look where we have reached:
Women and children clean and draw water from a pipe in the village of Shyampura in Tikamgarh, Madhya Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)
I can go on and on with this litany, but that would be as wasteful as the mess created by our mixed economy. To reiterate, the time has come to UN-MIX it.
An UN-MIXED Economy: More Government, Total Entrepreneurship
No, it’s not a typo. Usually, all free-market prescriptions begin with “roll back the state, free up entrepreneurial energy”. Instead, I am asking for ‘more government’, but in only 5 areas:
Workers build a wall in Amargarh, Jammu and Kashmir, India, on Nov. 14, 2017. (Photographer: Dhiraj Singh/Bloomberg)
That’s it. Once our state has become much bigger and invested all its energy and resources in these 5 areas, it should shrink completely from all areas of private economic activity, where markets can work and be regulated efficiently. Just don’t be half-hearted about this pull out.
Make.It.A.Total.Brutal.Complete.Withdrawal.
That then is the mantra of an UN-MIXED Economy: More Government, Total Entrepreneurship.
India’s economic salvation shall lie in such a separation of the State and Entrepreneur. Else we shall muddle along and stay hopelessly moored to middling outcomes.
UN-MIX India’s Economy: Completely. Totally. Brutally.
BloombergQuintOpinion
Raghav Bahl @Raghav_Bahl
January 17 2018, 1:08PM January 17 2018, 11:37AM
If you were born in India in the 1950s through the 70s, you grew up believing India invented the ‘mixed economy’. We were fed golden tales about how the commanding heights of our industry were not mortgaged to any seth-ji(capitalist) but to a cuddly and ‘altruistic’ state. It’s only when our economy blew up in the early 90s that we realised how hopelessly ‘mixed up’ we were!
But unknown to most of us, the principles of a “mixed economy” had taken shape in the United Kingdom in the 1930s/40s, within the thinking echelons of the British Labour Party. The philosophy took strong roots in Europe in the post-war years, but was largely defined as a “form of capitalism where most industries are privately owned with only a minority of public utilities and essential services under public ownership… governments provide environmental protection, maintenance of employment standards, a standardised welfare state, and maintenance of competition”. Essentially, such a mixed economy envisaged a pre-dominantly free market system where the government intervened via rational regulation to ensure fair play, social justice and competition.
Treacherous Trinity Of Government Dominance, Ownership And Control
But in India, government dominance and ownership became the hallmark of what we called a ‘mixed economy’. It descended into a wealth-destroying form of state capitalism where the government assumed monopolistic control of operations ranging from transportation, banking, telecoms, hospitality, steel, coal, armaments, healthcare, universities and what not. Instead of evolving into an enlightened welfare state, we got tripped and trapped into a nowhere economy, neither a well-regulated free market nor a Soviet-style command and control structure.
Most discordantly, agriculture, our biggest employer, remained totally in private hands, unreformed and chained to medievalism, outside the pale of even the ‘mixed up’ economy.
The most renowned economists have described this policy muddle as the primary villain that produced “both the slow growth of socialism and the inequalities of capitalism”. In short, the worst of both worlds; no wonder our 1991 bankruptcy was foretold and inevitable.
Wasting The 1991 Crisis
Unfortunately, we wasted the crisis of 1991 by not ripping up the mixed economy and nixing its contradictions. Instead we chose the path of ‘liberalisation’, which essentially opened up trade, industry and investment to the world. While it was a productive deconstruction, and undoubtedly successful in unleashing growth impulses, it wasn’t quite the revolutionary change it was made out to be. It did propel India onto a much higher plane, but we are now plateauing at 7-8 percent, unable to clear the 10 percent threshold that pulled China out of grinding poverty (that China had once shared with us).
As we get ready to elect a new government in less than 18 months, what should we expect from it? Should they do more of the same, or craft a ‘post-liberalisation’ vision of India’s economy?
I hope the next government decisively sheds the incrementalism of the past 7 decades and creates an economic model that is neither Left nor Right, neither capitalist nor socialist nor mixed, but one that is uniquely suited to our current station; which grapples with and overcomes today’s political constraints and realities; one that is not half-way or half-hearted, but courageously goes through and UN-MIXES our economy. Yes, UN-MIXES it!
An UN-MIXED Economy: To Make India Rich Again
To begin with, we must stop hero worshipping 1991’s ‘revolutionary reforms’. I readily concede these trade, industry and investment policy changes were hugely positive (even radical) in unshackling us from the command and control apparatus of the 1970s.
But the gear only shifted from 1st to 2nd, while the chassis of India’s economic motor remained split, mixed and wobbly between private industry and a domineering government.
So when we preen about the “dramatic transformation unleashed by the revolutionary economic reforms of 1991”, I find it difficult to suppress a sardonic grin. Look where we have reached:
- 300 million citizens, our entire population at independence, still continue to live below the poverty line; that is, they don’t have enough money to buy the required number of daily food calories, putting us at an abysmal 100/119 in the Global Hunger Index, behind, hold your breath, North Korea and war-ravaged Iraq!
- Our public sector companies have inflicted untold misery on our poor — just the Top 5 losers have sucked out Rs 1 lakh crore over ten years.
- For all our glorious “reforms”, we are at 131/188 on UNDP’s Human Development Index — half of our 5th standard students would flunk a 2nd standard reading test.
Women and children clean and draw water from a pipe in the village of Shyampura in Tikamgarh, Madhya Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)
I can go on and on with this litany, but that would be as wasteful as the mess created by our mixed economy. To reiterate, the time has come to UN-MIX it.
An UN-MIXED Economy: More Government, Total Entrepreneurship
No, it’s not a typo. Usually, all free-market prescriptions begin with “roll back the state, free up entrepreneurial energy”. Instead, I am asking for ‘more government’, but in only 5 areas:
- Education — treble your spend, upgrade teaching/measurement skills and effectively administer a massive school voucher program.
- Health — treble your spend, put massive focus on TB, Malaria and HIV, and effectively implement a universal health insurance program for the poor.
- Treble your spend on rural and agriculture infrastructure; wherever possible, spin off developed assets into local private management and plough back the sales proceeds.
- Set up urban infrastructure on a war footing, but sell completed assets to private management, redeploying the proceeds in newer assets.
- Invest massively in modernising the architecture of state governance.
Workers build a wall in Amargarh, Jammu and Kashmir, India, on Nov. 14, 2017. (Photographer: Dhiraj Singh/Bloomberg)
That’s it. Once our state has become much bigger and invested all its energy and resources in these 5 areas, it should shrink completely from all areas of private economic activity, where markets can work and be regulated efficiently. Just don’t be half-hearted about this pull out.
Make.It.A.Total.Brutal.Complete.Withdrawal.
That then is the mantra of an UN-MIXED Economy: More Government, Total Entrepreneurship.
India’s economic salvation shall lie in such a separation of the State and Entrepreneur. Else we shall muddle along and stay hopelessly moored to middling outcomes.
nongaddarliberal
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Basically what I've been saying.
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Not yet. There are still mom and pop Kirana stores which need to be shown alternative. There are already signs that online stores and existing departmental stores are hitting their sales.
These neighbourhood kirana stores giving credit to familiar people reduced the negative impact during first two weeks of demonetisation.
Bahamut
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It is due to the socialist economist present in the government which were against development of high tech manufacturing fearing job loses.Public sector has became unproductive.It time to implement streamline bureaucracy in public sector company and ask their director to start posting profit in 5 year or the company and its asserts will be sold off to pay its debt . Provide money for them to modernize but only if the promise to be profitable in 5 year .
Politician will talk about caste , farmer suicide etc but not the root of the problem. We can no longer be a agriculture dominate economy .Our education is partly poor because we have policy of failing no child before class 10 .As a result children whose basic concept and reading skill are not developed do not get attention. Instead of reducing dependency on monsoon , bring new water harvesting techniques ,along with use of better farming techniques and asking farmer to from cooperatives , government simply gives them money .50% of population is employed in agriculture but is responsible for just 13% GDP ,they are underemployed .
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Sir ji I am talking about outside India. I want Indian alternatives to Walmart and Ikea, If only Indian business stop acting like pussies and start taking risk.
