Khagesh
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Thanks for the 101.@Khagesh
The rupee will gain. You cannot drive it down artificially without having other problems, as the Chinese are finding out. Wages for all types of jobs increase relative to world standard for the same output. The cost of most products produced in the country (including food items) goes up due to rupee's gain. Higher education standards means higher living standards. This means higher regulation standards (e.g. food regulations, packaging standards, everything). Most sectors will be more structured. Also, the wage gap decreases between high skilled and skilled jobs. The size of the domestic consumer market will also stabilize, which is increasing now. Indians companies will have to outsource jobs outside India to remain profitable because of higher wages. This will increase social spending. A developed nation has a stable population as parents spend more on fewer kids than trying to have multiple kids. This also leads to wage growths, but this is generally offset by immigration.
I think India can become a developed country only when the population stabilizes.
However before I move further, let me tell you the premise of my arguments:
All said and done India has grown despite the overt and covert competition from the rest of the world. And so has China. All implies all good and all bad, notwithstanding.
And in the worldwide economic value creation China was third last population, India is second last and only the Africa now remains. You have highlighted how higher wages lead to migration of Industry. But with the whole world resetting to a different economic reality in next 30 years compared to the situation of last 70 years where First world constituted 60%-70% of the world output, don't you think that the place for the industry to scoot to rapidly declining, even while technology has enabled a complete workaround to the problem of cheap labour arbitrage. For example India is producing high end military and space tech yet another part of India (Tirupur) is persisting with intermediate level tech of garment manufacturing and yet another part of India (Rural India) is persisting with bullock cart technology of vintage ~10000 ybp. Thus my view is that even if there is labour cost increase there is enough space within India to absorb the fleeing industry. Only risk being a left-lib bunch getting into governance. Manpower cost increases, have not chased out the IT industry and in the ITES space we actually already have ITES that serves the domestic sector. Thus the whole argument of "higher wages will lead to economic slowdown / stagnation" has no legs to stand on. IOW the points you raise are not relevant to India at this stage at all. I admit you had said that 'higher wages will lead to economic slowdown in future'. My counter point to that being it will not be relevant even in the future, unless of course the left-libs impose their NACxalite policies. I have many more issues with you line of thought but its difficult to address all.
Merely because the west has had these issues does not mean we too will experience the same. Anyways I had asked for a logic to your argument and not an unlinked listing of factors you thought were pertinent. You are welcome to plead uncertainty into your logic. I feel that uncertainty being an evidenced reality is a valid argument only precaution necessary being people have to be able to commit where and how much the uncertainty affects their arguments.
My difficulty gets compounded because of more reasons eg. in the case of your argument that "The size of the domestic consumer market will also stabilize, which is increasing now", I am unable to understand how that implies a 'stagnation' or even 'slow down'. BTW are using the two words interchangeably. While I don't use these in that manner, I think I have read some people on the net do that. And this difference in definitions could be a reason for our respective argumentation.
One great thing about western economic thought is that you can begin to call upon theories for both an upside and a downside at any given point. I love these westerners. They are almost like Dabang shooting his police pistol.
For reference:
I had reservations to the following quotes as being presumptions:
@ 23-02-15, 04:34 AM #77 Kay http://defenceforumindia.com/forum/politics-society/66770-one-more-down-time-amartya-sen-6.html,:
@ 26-02-15, 04:20 AM #1438 Kay http://defenceforumindia.com/forum/economy-infrastructure/64-indian-economy-news-discussion-96.html:"Europe is developed, that's why its growth is slow. Once we reach their levels of development, our growth will slow down as well."
"The reason growth rates become stagnant once countries reach a certain level of development is because wages increase and cheap labor becomes available elsewhere"
I will repeat my initial question that is still unanswered
What decides how wealthy I/we can be?
And let me add other queries where I think we could be using different tools –
What is value?
What is the perception of value?
Don't people pay a price to get whatever they think is valuable?