It’s become fashionable to say that India is the only part of the BRICS set of countries that deserves adulation; only the “I” in BRICS is still standing.
Current macro data and investor sentiment supports this point of view. Currency and stock markets are more robust than most and global media and India’s finance minister expressed optimism in Davos earlier this week. In international relations too, India is in vogue, having buddied up with the US and Japan, as the media follow Prime Minister Narendra Modi in his soirées across the globe. Of course, India’s ability to pack this geopolitical punch is ultimately dependent on its putative economic rise.
No one knows this better than the PM, originating in India’s commerce-minded state of Gujarat where his courting of industry as its then Chief Minister was indeed first-rate. This past weekend, PM Modi reaffirmed his oft-delivered message to India to “Start-Up and Stand-Up.” The reason for the heavy emphasis on start-ups is not a Silicon Valley-inspired fascination with changing the world. Simple arithmetic shows that it’s the only way to add the ten million incremental jobs that India needs annually. Without these jobs, India’s demographic dividend will be its unyielding albatross.
The PM’s announcement was accompanied by the same festivities I witnessed at previous events in Silicon Valley, New Delhi, and Bangalore. The theatre is important, of course. But more encouraging by far is the substantive organization that has been created behind-the-scenes to raise the odds that these aspirations are translated into reality.
Science and technology are receiving a much-overdue fillip. I’m particularly heartened by the emphasis on the life sciences, to complement India’s demonstrated prowess in information technology. Additionally, the government is paying heed to an increasingly vocal domestic chorus in favor of advancing intellectual property protection. History teaches us – from China recently and the US in history– that domestic voices are far more effective than the shrill complaints of outsiders. There is better governance, at least of some functions in Delhi, which provides sound economic thinking as ballast to the country’s development agenda. And there is more solicitation of global technical expertise than was apparent in the previous decade.
The reason to pay attention to India, then, is not today’s bullish investor sentiment – that’s rather like chasing a will-o’-the-wisp. However, we should be encouraged by the attention to substance, propelled by a “can-do” attitude, rather than by the PM’s roadshows. The hope is that these allow India to capitalize on its encouraging fundamentals.
What are these fundamentals? The first of three that I would point to has to do with the existence of pockets of vibrant entrepreneurship. These have arisen as a result of enclaves of adaptable merchant communities through the past century, and as a result of the information technology boom of the past three decades. Neither has anything to do with government activism. The life-sciences sector is itself building on relationships with the IT sector (for example, in computational biology or combinatorial chemistry), and the mobile revolution is robust as in other developing countries. Significantly, much activity by non-profits and NGOs has also been influenced (positively) by sound management principles, so that there is a bustling social entrepreneurship sector. Small-and medium enterprises – most visible in auto components and medical equipment– provide a worthy complement to the start-up flurry. While there are many sectors untouched by such reinvention (agriculture foremost among these), a transformation is well underway.
The second fundamental has to do with encouraging demography. India is the by far the largest of the young countries and is likely to be a significant exporter of talent in the decades to come. On this dimension, India, if she plays her cards right, will benefit from a demographic tailwind the likes of which powered China over the past few decades, but which has now passed it by.
The third is the increasing connectivity between India and her diaspora. The diaspora has been nurtured by over a century of out-migration to the Americas, the Middle East, eastern Africa and South-east Asia. But it has been largely shunned historically. Only in the past two decades, with the accumulation of economic influence in the Indian community in the United States, has a foundation for cross-border economic exchange become visible.
Mine is not a Panglossian assessment. There are many reasons to be skeptical, or to even despair were one predisposed to worry. The list is sobering: religious frictions, under-enforced women’s rights, grinding poverty, tens of millions of uneducated children condemned not to realize their potential, wanton urbanization, rural displacement, and environmental degradation.
Yet, as an incorrigible optimist, I prefer to see the glass as half-full. Some of the engines propelling India will ensure that the inevitable headwinds that India encounters will more likely than not have transient effects. The fundamentals, and the entrepreneurship astride these fundamentals, are the reasons we should celebrate India.