What are the key industries today, and where do you believe India is heading when it comes to the rise in divisive politics, along with a disastrous sense of economic decision-making?
India is doing well for the rich and the upper middle class. They have good jobs, and government policies are helping them. The economy is not working so well for the lower middle class, who haven’t seen it produce the jobs they need. Our labour data are bad, but anecdotal evidence is worrisome. For instance, employment in agriculture, as a share of employment, is up, when economies should see it fall as they develop. The government’s emphasis on erecting tariffs to protect domestic producers and offering subsidies for manufacturing in India is simply not creating the jobs we need. We believe government spending priorities are wrong—why spend $2 billion in government subsidies on attracting Micron to set up a plant in Gujarat for just 5000 jobs in assembly and testing? Why not spend the money on improving the quality of our schools and colleges so that we can produce more capable workers and engineers that firms will be eager to hire? More generally, we argue in the book that India has to focus on building the human capital of its citizens—better nutrition, education and healthcare—and not be fixated on following a manufacturing export-led growth path a la China. Instead, let’s focus on an Indian way, which will emerge naturally once we focus on improving our fundamentals.
This may build on our strength in services (with jobs ranging from consultants and software engineers to sweepers and security guards) and services embedded in manufacturing, such as chip design, where India has a 20 per cent share of the world market. We don’t minimise the role that manufacturing will play, only suggest not over-privileging it with subsidies and tariffs, which echoes the mistakes we made during the License Permit Raj. For instance, it’s really short-sighted to propose limiting the import of computers to increase domestic production when computers are a key input to our most successful industry—software. There’s a lot that is going right in India today, but there’s a lot that’s also going wrong. Unfortunately, given the slant in much of the press, you would simply not know about the latter. That leaves problems unaddressed, and they fester.
