India's per capita GDP is on track to exceed the pre-Covid level this year. But the recovery is "K-shaped", meaning that the rich are doing better than ever and the poor worse.
Ultimately, the old curse for India is that their economic model was always top-heavy. IT, pharma and finance. Jobs for the small, educated elite. China chose a "mass manufacturing" strategy and only worried about the high-end after many decades.
We can clearly see which strategy was the winning one.
Indeed. China just chose a tried and proven economic strategy. Build a manufacturing economy first, build genuine wealth, and then the service economy would emerge to support that newfound wealth. Then after that, transition to high-tech manufacturing, and expand further, the service economy. This has also been true in Europe, USA, Japan, South Korea, Hong Kong, and Singapore. A strong manufacturing economy provides a strong foundation for the service economy to stand on top. It is indeed a winning strategy that is obvious to almost everyone, but India.
India is a strange case. It boasts a big service economy, and a limited high-tech industry in pharma. But India does not have a strong manufacturing economy. Without that big manufacturing economy, the service economy can only grow so much from domestic consumption. Hence, India heavily 'exports' its the service economy to the developed world. For that, India has tremendous fortune with its large English-speaking middle-class to elite populace, and the arrival of the internet. But such an economy is imbalanced. It heavily benefits the educated, and the upper class. But provides extremely limited opportunities for the less educated, and the lower class. When the majority of India are from the lowly-educated lower class, this leaves a massive demographic in stagnation. The Indian economy could only truly grow so much. So what we see now is that India, like America would mostly 'grow' via their richest people growing richer. To me, that is not true economic prosperity, that looks like a dystopian society that only the Jai Hinds can live with.
But India forgets that the service economy is only best at building up 'soft skills' like finance, people skills and partially, IT. The 'hard skills' like engineering, and STEM cannot be easily obtained in a service economy. We see India is competitive at exporting CEOs, managers, pharmaceuticals, IT services, and call centers. But India is far from competitive in exporting ships, machinery, military arms, construction, and transport vehicles. All major world-class economies have at least some competitive manufacturing exports. Even the USA and Britain can export something at least. Like GE MRI machines, Qualcomm chips, and Rolls-Royce turbine engines.
P.S.: India likes to boast about its CEO and manager exports. But are Indian CEOs and managers really that impressive? What have they done better than their non-Indian peers other than just being good at maintaining the status quo and politicking? Lisa Su (a Taiwanese-American), the CEO of AMD was able to bring AMD back to being a competitive CPU manufacturer again. While Intel fired its Chief Engineer, Murthy Renduchintala in 2020 for production failures:
Maintaining that innovative advantage became Renduchintala’s job when Swan promoted him to the chief engineering role, but any sense of progress regaining its edge was destroyed last week when the company said the latest technique for building the most advanced semiconductors was a year behind schedule.
In public appearances and interviews, Renduchintala is garrulous and exudes confidence, unafraid to dominate the conversation. He wasn’t on last week’s earnings conference call, where Swan was forced to defend Intel’s position and earnings amid constant questions from analysts about the manufacturing delays and Intel’s plans to mitigate them.
Good at talking, confident, and unafraid to dominate the conversation. But when it comes to results, disappointing. When it comes to taking responsibility for failure, missing in action. We all have seen a good amount of Indian CEOs, managers, and politicians who does the exact same things. Hire Indians if you must, but only the genuinely good ones. Nevertheless, if you still prefer to have these kinds of charismatic, ego-massaging, conmen to run your proud companies, then best of luck!
