This is a tried-and-true path to growth, and it is one India is poised to follow. These and so many other Indian-American tech sector executives are testament to the power of the immigration-innovation nexus in the U.
Home grown, and still home centered, companies like Tata Consultancy Services TCS , Infosys and Wipro are real world leaders when it comes to information technology. And Indian entrepreneurs are killing it today in startups.
The growth of Indian tech has been fueled by large-scale private-sector investment, from both India and abroad. About a decade ago, some optimists thought India could leapfrog over the manufacturing and physical infrastructure stage of development widgets to build the whole economy around digital bits.
What will determine whether India can become a bit more Chinese when it comes to infrastructure and manufacturing? Unlike China, the answer will not be government investment because the Indian state is hamstrung by endemic budget deficits of big subsidies and limited taxation. The good news for India is that the private sector is ready to step in.
I find Indians such delightful people to be around, and not only because so many of them share my love of cricket. Indians also love politics. To say Indian democracy is vibrant is an understatement. That is a wonderful thing when it comes to passion for public debate and participation in public discourse.
But it creates challenges when it comes to the types of economic reform that the Chinese state simply does not encounter. When the Chinese government wants to build a high-speed rail line, they just acquire the land and move and compensate the adversely affected people. There is often pushback, but it seems rarely enough to stop a major project going forward. But the state-owned Indian Railways seems to want to defend the status quo, or at least take a long time to make and implement decisions.
And that is even before the battles are fought, one Indian state at a time, regarding acquiring land for new infrastructure politics. This piece was first published on the IMF blog. He joined the IMF in and worked in several departments on fiscal issues and macroeconomic analysis of emerging and developing countries. Since joining the IMF in , he has worked as an economist for several emerging countries and natural resource producers and conducted training of IMF staff and government officials.
Twitter LinkedIn. November 20, Reda Cherif. Senior Economist at International Monetary Fund. Fuad Hasanov. Print Share. Disruption Investment. Get ahead in a rapidly changing world. Sign up for our daily newsletter. First Name. Last Name. Enter Industry. By subscribing, you agree to our terms of use and privacy policy. Rural workers got few welfare benefits, because the plan was to push them off the farms and into factories.
Taiwan rolled out unemployment insurance, and South Korea extended it to rural labourers, after the crisis had passed. In other words, they began spending on welfare for the poor and jobless only after they could readily afford it.
Though India is much poorer, its government spends a similar share of GDP — and spends more heavily on social welfare. India spends around 7. The East Asian model also included labour laws designed to protect corporations more than workers. The aim was not to guarantee safety or limit hours, but to give management control. In response to strikes in the s, South Korean dictator Park Chung Hee imposed increasingly strict rules on unions, enforced by the police and soldiers.
In India it is companies who worry about labour law crackdowns. India has tried to encourage large manufacturers, but most prefer to stay small, because if they get big they face stricter labour rules and higher taxes.
The Modi government speaks of pushing labour and other reforms to attract investment, but it also promotes a full buffet of welfare programmes, and its latest budget reflects a commitment to continued welfarism more than new investment. For that, it would need more than incremental reform. It would need to roll back government, reduce taxes, cut welfare spending and reallocate funds for new roads, bridges and other infrastructure, which in turn would boost private investment.
As always, India will follow its own model and, most likely, fall short of becoming the next Asian economic miracle.
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