September 6, 2023
India's Fake Growth Story
Behind the billboards in Delhi advertising this month’s G20 summit are slums whose residents can no longer earn a living. Their roadside stalls and shops have been demolished, lest they tarnish Prime Minister Narendra Modi’s carefully curated image of a rising India. India’s GDP statistics are also on display as part of this “branding and beautification” exercise.
August 6, 2023
Only a cheaper rupee can spur Indian Growth
A result of India’s low productivity growth has been its generally higher inflation rate than in countries with which it competes in international markets. This, along with poor investment in human capital and low female labor force participation, has meant that India has repeatedly lost the competitiveness race to East Asian economies, from Japan in the 1950s, through Taiwan, Korea, China, and now Vietnam. Unlike the East Asian economies, which have been only too willing to strategically use currency devaluation to boost exports at times of lagging competitiveness, Indians have viewed the currency’s value with a bogus pride. And for the last three decades or so, Indian elites have also viewed a strong currency in their economic interest. Today, rather than the government’s dodgy tax incentives and subsidies to spur exports, a rupee that is closer to Rs 100 per dollar—rather than the current 82—will boost Indian exports, to maintain which there will be no option but to invest in human capital and more women in factories.
The hype about India includes the mindless use of the phrase “economic superpower.” Drawing on Oded Galor’s observation that no country since the Industrial Revolution has achieved long-term productivity growth—the essence of economic success—without substantial investment in human capital and bringing more women into the workforce, I argue that India specifically lacks these prerequisites. India, moreover, has no plan or strategy on overcoming these crucial deficits and relies rather on the fantastical expectation that “digital infrastructure” will help leapfrog over these human deficiencies. On the other hand, China, always the counterpoint for India, has invested precisely in human capital for decades. For this reason, I throw in my two-bit into the raging prognostications of China’s imminent decline. My reading of history is that while the macro-economic imbalances that China is saddled with will undoubtedly damage its economic prospects, the human capital—which places it at the frontiers of the old and new economies—will see it through its current muddle.
June 30, 2023
This essay drills down into some of India’s most acute problems. As a student at the Centre for Development Studies in the late 1970s, I was taught that you cannot understand India without understanding the condition of Indian agriculture. Sadly, that is even more true today than it was then. The sector employs 45 percent of the country’s workforce (which is more than before the pandemic) and produces 15 percent of the GDP. People are crowding into a hopelessly unproductive agriculture just when the world is celebrating its digital transformation and leapfrogging moment. Farm sizes are shrinking and groundwater levels have fallen so sharply that India might soon be unable to maintain its agricultural output. And the climate crisis is making everything worse.
An editor at the New York Post invited me to write on India’s economic problems. This piece repeated the key messages: Commentators were reading the dead-cat bounce from the second COVID-19 wave as a measure of India’s growth potential—and projecting it into the future. In fact, India’s average GDP growth over the past four years was 3.5 percent, which was, therefore, also the best predictor for growth going forward.
June 16, 2023
Get Back to the Basics
Contrary to the popular notion that southern states are clearly superior to northern states, Karnataka’s economic and political indicators closely track Indian averages, as if India's progressive and destructive forces are locked in battle in the State. What happens next in Karnataka will tell us which force is winning. If the new Karnataka government remains seduced by technology and handouts while ducking the basics of public goods and jobs, democracy would have again betrayed the people. Hindutva’s visceral appeal will attract even more followers.
May 12, 2023
India’s Law-of-the-Jungle Raj
Beneath the veneer of Indian democracy, deeply undemocratic private and state behaviour has become the norm, which, not surprisingly, rejects reform of India’s electoral and judicial systems. This ‘bad equilibrium’ seems impossible to undo.
April 25, 2023
India’s Demographic Dividend Will Remain Unpaid
The occasion of India’s population going past China’s has created a flutter about India’s so-called “demographic dividend.” The fact is that India has had a demographic dividend for the entire 75 years of its post-independence history. And that dividend has never paid because India’s employment challenge has kept growing more insurmountable. That challenge cannot be measured by the “unemployment rate” because most Indians cannot afford to be unemployed. Rather, they are “underemployed” in work-sharing arrangements on farms and in small businesses. Together, the unemployed and under-employed constitute India’s growing surplus labor. Most of the rest toil unforgiving hours on pitiful wages with no social security benefits. Only about 10 percent of the workforce receives a regular monthly or weekly wage with at least one social security benefit. The simple truth is that the economy does not generate good jobs on anywhere close to the scale needed to employ its working-age population.
March 29, 2023
India’s boom is a dangerous myth
Indian and international elites have a giddy—indeed, hyperbolic—view of India’s imminent economic rise. They sustain this view with a disingenuous numbers game, which amounts to wishful thinking clothed in bad economics. Buoyed by the hype, Indian policymakers offer policy gimmicks and silver bullets, which amplify the hype. Fundamental development deficits are thus left unaddressed, doing neither India nor the world a favor.
February 20, 2023
India’s Broken State
The town of Joshimath may be nestled 6,000 feet (1,800 meters) above sea level in the Himalayas, but it is sinking fast. In early January, large cracks split homes, hotels, and roads, leaving the town’s future hanging in the balance. Joshimath is a grim metaphor for India’s woefully unaccountable state.