India isn't going to become China just by magic

By Mihir Sharma

There’s one clear favourite in the world’s biggest election, which kicks off in India today and runs for six weeks: incumbent Prime Minister Narendra Modi. Buoyed by his personal popularity, Modi’s ruling Bharatiya Janata Party isn’t even pretending to offer dramatic new programs if it returns to power. Its election manifesto, released earlier this week, was a relatively uninspiring document -- a few populist promises to Indian farmers mixed in with a heavy dollop of hyper-nationalism.

What it did contain was a long list of claims about Modi’s record over the past five years. There was a faint but unmistakable tinge of smugness. A few more years of what we’ve just had, the message was, and India would be a developed nation.

Don’t blame Modi and the BJP: This sort of unearned confidence is characteristic of Indian expectations of the future. In 2019, however, such confidence is dangerously misleading. While the country does have a huge population and is currently the fastest-growing big economy in the world, its rise to superpower status is hardly guaranteed.

The uncomfortable reality is that unless India changes a great deal about itself -- and fast -- it’s in danger of never performing to its potential. Indeed, its chances of becoming the sort of country that can provide a decent life to all its citizens are rapidly declining with every year that it puts off much-needed reforms.

Modi wisely began his term with talk of “Make in India,” his shorthand for reviving India’s anemic manufacturing sector. That task has been left undone because it would have required fundamental changes to how labour and land are regulated in India -- reforms that demanded too much political capital. There’s little mention of the program in the BJP’s new manifesto.

If India delays much longer, it will miss the chance to generate mass manufacturing jobs entirely. Already, new factories employ far fewer people than they used to: Making things is no longer solely about cheap wages and the competitive edge possessed by countries such as India is fast eroding.

The next few years are crucial. If India can pick up some of the manufacturing work that’s becoming available because of rising costs in China and trade tensions with the U.S., it could make up for lost time. What it can’t do is lean back and assume that an industrial policy based on import substitution will spur the creation of manufacturing jobs. India needs to make for the world, not just its own supposedly “huge” market. (Remember, two-thirds of its consumers are still unable to afford more than the basics, which is why companies focused on bottom-of-the-pyramid buyers such as Walmart Inc. are the most interested in India.) For that to happen, the country needs to create a far more competitive environment than it has to date.

Then there’s the question of India’s workforce. Analysts are already worrying that India’s demographic dividend -- its vast pool of young people -- will become a curse: Without jobs, all those young people could drag down the country instead of pushing it towards upper-middle income status. The problem is that they are desperately short of preparation for both the old economy and the new.

India has done well over the past decade or so to get most of its children into school. It has done less well at getting them to learn anything. Too many students are left behind; overworked and under-motivated teachers, poor incentives and botched government policy have ensured that educational outcomes are among the poorest in the world.

You can’t create a nation of digital entrepreneurs when too many of your graduates struggle to add at a primary-school level. Indeed, you won’t even be able to build a skilled manufacturing workforce. The economist Karthik Muralidharan at the University of California, San Diego has argued that India needs a “universal numeracy mission,” focused on ensuring that all children can at least do third-grade mathematics. This doesn’t seem like much or even enough, but it would be an essential start.

Many of these changes need to be implemented as soon as possible if they are to have a meaningful impact on Indian development over the critical next few decades. But, there’s simply no sense of urgency in New Delhi. The smugness that one can detect in the BJP’s manifesto is only one indication of this complacency. Too many of us in India seem to believe that the future is inevitably ours -- that a few more highways and a few tax concessions will be sufficient for India to replicate China’s path to power and affluence.

Nothing could be further from the truth. No country has a right to become rich. Unfortunately, we in India seem to believe that it is not only our right, it is our sacred destiny. And so we’re not willing to put in the work needed to get there.

(Mihir Sharma is a Bloomberg Opinion columnist. He is the author of “Restart: The Last Chance for the Indian Economy.”)