Can India change the world?

NEW DELHI — Is India the world’s next tiger economy, poised to succeed a slowing China as a pillar of the global economy?اضافة اعلان

That would not be anything new, simply a recovery of its traditional position. One economic historian estimates that as recently as 1700, India accounted for about 24 percent of global GDP, similar to the share now of the US or Europe. But today India makes up just 3 percent of global GDP, up from 1 percent in 1993.

As India overtakes China as the most populous country in the world, and as international companies seek new bases for manufacturing outside China, India has a historic opportunity to recover its mojo in a way that would change the world.

But can this lumbering giant of a nation actually pull that off?

It is difficult to nurture a modern, educated workforce when so many children are badly malnourished, for this can also impair brain development and cognitive bandwidth.

Some experts are optimistic. “I fully believe this can be not just India’s decade, but also India’s century,” Bob Sternfels, the global managing partner of McKinsey & Co., told me — from Mumbai, which he was visiting. And Morgan Stanley, the investment bank, says that India is on track “for unprecedented economic growth” that will allow it to leapfrog Japan and Germany to become the world’s third-biggest economy by 2027.

I am not quite that confident in India’s future, but I do believe it has a fighting chance to soar economically — if it faces up to three major challenges: It needs to improve education, boost women in the labor force, and improve the business climate to increase manufacturing.

Reading, writing, and arithmeticLet us start with education, which should be an Indian national embarrassment. In Kolkata, a city renowned for its intellectual tradition, I dropped in on a government school and chatted with some ninth graders.

What is six times nine, I asked them. They did not understand in English, which is part of the curriculum, so a teacher translated the question into Bengali, their native language. The students still did not know. That is not their fault, but that of an educational system that leaves too many behind.

In rural Rajasthan, I visited an impoverished village and came across a handful of children who simply had not attended school that day. Absenteeism is a national problem, and the school later told me that attendance that day was just 68 percent.

One boy in the village who had skipped class, Mukesh, was a fifth grader and the first child in his family ever to register for school, which sounded impressive. His mother told me she had never attended school at all.

But when I asked Mukesh through a local interpreter what five plus eight equaled, he guessed 11. I wrote the letter P in my notebook and asked him what English letter it was; he had no idea. My interpreter wrote down a couple of simple words in Hindi, the state’s official language, and he could not read them.

National surveys confirm that even when Indian children go to school, they do not necessarily learn much. Fewer than half of fifth graders can read a text at a second-grade level.

China has thrived in part because it made enormous investments in human capital — transforming what in the early 1980s had been a broken education system — and that created a literate, numerate workforce. In contrast, India is not even in the ballpark. Figures vary, but perhaps only 35 percent of Indian children make it to grades 11 and 12.

“Many girls are still underfed, malnourished, and suffer from stunting and anemia. They don’t have access to secondary schools, and young women don’t have enough access to universities, training programs and most of all, to jobs in the formal sector.”

One gauge of the broader human capital challenge in India: Some 35 percent of children are physically stunted from malnutrition, higher than in much poorer African countries like Somalia and Burkina Faso. It is difficult to nurture a modern, educated workforce when so many children are badly malnourished, for this can also impair brain development and cognitive bandwidth.

Educational improvementsBut wait! Maybe there is hope. In the 41 years that I have been visiting India, I have seen tremendous improvements in education and well-being. Teacher absenteeism used to be routine, and in Bihar state I once came across a school that opened only once a year, for exams, which teachers then filled out so that it would look as if students were learning. All that is much rarer today, and the authorities in some states have eliminated book fees, uniform fees, and other informal charges that were a barrier to school attendance. Free hot lunches and deworming are now routine, and it is rare to find young children who are completely outside the school system.

In Rajasthan on this trip, I visited a school that had only two classrooms for eight grades, so some of its classes were conducted outside. But the teachers were qualified, present, and engaged. I was impressed that the school had a free pre-K attached to it, open to all — and, most startling, the school provides free sanitary pads to girls to encourage them to attend school during their periods.

Moreover, parents these days seem to care deeply about education. Perhaps one-half of Indian children attend private schools — a huge strain on family budgets — because parents want their kids to get the best education possible, including schooling in English. These private schools often are not very good, but they reflect families’ recognition that education is the path to success.

Naurti Bai, a 77-year-old woman in Rajasthan, never went to school as a child, although later she went to night school and learned to read and write. She proudly told me that she has 13 grandchildren, all of whom have finished high school; four have university degrees. One granddaughter even has a master’s degree, she added — and it is that kind of trajectory that gives me hope for Indian education.

Leveraging female talentBeyond improving education, India also has to offer opportunities for educated women in the economy. The East Asian economic boom rested on very different economic models. South Korea’s path looked nothing like Taiwan’s, and China’s was different from Malaysia’s. But one common thread was that these countries prospered in part by educating village girls and then moving these educated women into the urban labor force, hugely expanding their country’s productivity. Bangladesh has done something similar.

India in contrast squanders the talent of the female half of its population, at least in economic terms. Only 23 percent of Indian women are in the labor force — compared with 61 percent in China and 56 percent in the US — and in India female labor force participation has actually been dropping for most of the past two decades.

“The entry of Apple is significant — that is the space to watch,” he said. “If Apple thinks India can be a competitive place from which to export to the world, there could be demonstration effects.”

While health and education obstacles affect all children, they are often particularly acute for girls because of age-old discriminatory attitudes.

“Many girls are still underfed, malnourished, and suffer from stunting and anemia,” noted Ruchira Gupta, founder of an anti-trafficking organization called Apne Aap. “They don’t have access to secondary schools, and young women don’t have enough access to universities, training programs and most of all, to jobs in the formal sector.”

Facilitating manufacturingOn top of educating its children better and empowering its women, India also needs pro-growth economic policies. The government recognizes this and has taken some steps in that direction, and there is also some healthy competition among the states for investors. Infrastructure has improved enormously and made it easier to do business. Airports once were a nightmare but now are smooth, fast and efficient: I would rather deal today with an average Indian airport than with an American one.

As for the IT sector, it is dazzling and in some respects ahead of the US. Here in India, digital data on mobile phones is extremely cheap, and you can buy a mango from a street vendor with your phone. Digital transactions are everywhere, and people easily keep digital records securely on their phones.

Nandan Nilekani, a pioneer in information services, says that India’s digital public infrastructure enables a technology-led growth model, and there are indeed signs of a boom in entrepreneurial activity in the tech sector: India had 452 startups in 2016 and 84,000 last year.

But it is export-led manufacturing that traditionally has provided the path for economic breakout in Asia because it can employ an enormous number of people. In India, manufacturing’s share of the economy has stagnated, and international executives share horror stories about red tape and the difficulty of doing business.

“The point of manufacturing is really job creation,” noted Alyssa Ayres, an India specialist at George Washington University, and that is not happening much. “People are worried about why the needle isn’t moving.”

If India can boost education, free its women to join the labor force, and attract the companies that are desperate to find new bases for manufacturing, it can surprise us again.

India has had false dawns before. For a while in the 2000s, it was enjoying economic growth rates of roughly 8 percent per year, and it seemed that it might become the next Asian tiger economy. In 2010, The Economist published a cover story, “How India’s Growth Will Outpace China’s”.

Today India has a new chance to lure manufacturers. China has an aging population, its brand is tarnished by repression, and global companies are eager to find new manufacturing bases. India has English speakers, a familiar legal system, low-cost workers, and first-rate engineers emerging from the Indian Institutes of Technology.

The hindrance of red tapeYet India also has air pollution that is a significant threat, it is veering in a more authoritarian and Hindu nationalist direction, and it has relatively high tariffs that make it difficult to import materials used in supply chains. There also seems to be a persistent suspicion in India that foreign manufacturers are exploitative, exacerbating labor tensions.

Ford Motor is the kind of corporation that should be expanding manufacturing in India, to target the large auto market here and to use India as an export base. But after making an effort and setting up dealerships, Ford gave up in 2021 and pulled out of India. General Motors and Harley-Davidson quit the local market earlier.

Arvind Subramanian, a former economic adviser to the government of India who is now at Brown University, is skeptical that India will change its policies enough to seize the opportunity presented by China’s difficulties. But he thinks Apple’s efforts to manufacture iPhones in India offer a ray of hope by encouraging other companies to follow.

“The entry of Apple is significant — that is the space to watch,” he said. “If Apple thinks India can be a competitive place from which to export to the world, there could be demonstration effects.”

I am a bit more optimistic, partly because I lived in China in the late 1980s, when people complained vociferously about how it was impossible to get anything done there. I remember a frustrated foreign executive telling me that he could not even manufacture Popsicles in China because he could not reliably source something as basic as Popsicle sticks. “You need to start by sourcing trees and make your own Popsicle sticks,” he grumbled.

India likewise felt hopeless in the 1980s, as resistant to modernization as the Hindustan Ambassador cars that were creeping along impossibly winding roads. And then it adopted market reforms in 1991 and changed everything.

If India can boost education, free its women to join the labor force, and attract the companies that are desperate to find new bases for manufacturing, it can surprise us again.

If it can do that, it will recover its historical role as an economic powerhouse, and the past few centuries of poverty will be forgotten — a blink of the eye in the context of India’s ancient civilization. It would again be normal to think of India as a great power and one of the pillars of the global economy, and that would change the world.