For some one who has Indian origins but has spent a reasonable amount of time in the Western world, a trip to India can simultaneously be a pleasant and an aggravating experience.
Pleasant because one meets old friends and family, as well as appreciates the economic growth that is quite visible – particularly in cities and towns. Aggravating because the same old bureaucratic ways of daily business and commerce leave a lot to be desired.
In this month’s guest post, KKP points out the areas of improvement that can propel India to faster economic growth.
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Pros and Cons of Westernizing the East
The Westernized world (viz. North America and Western Europe) has developed over many decades into a refined economy with many pillars to the structure. Each of these pillars form the foundation on which the western economies have grown, multiplied and provided the prosperity that people deserve.
Today, those same pillars are being built in the East. However, many of the pillars of the western economies are now becoming wobbly due to the size and flaws in their structure - like too much enthusiasm with debt (personal and corporate). One of the historians (Niall) explains these shifts in what he calls “killer apps”. There are six to be precise: Competition, Science/Technology, Rule of Property Rights, Medicine, Consumer Society and Work Ethics.
In a recent trip to India, I have analyzed the Indian marketplace from many angles and spoke with several HNIs. Each of them called the West ‘a world waiting to blow up’, and name the East as the place to be. I do not disagree with this ‘macro-call’. What I fail to see very clearly is the dominance in India of all of the “killer apps”, without which the economy will either wobble, or even begin to fall. We all know that some of the pillars are still being built, but what I clearly found amiss was the older generation continuing to run the country (in Nationalized Banks, Government Offices and other places).
- Competition is all around, but there is still nepotism and corruption that leaves the door wide open
- Science/Technology is being adopted, but there is too much automation of old bureaucratic processes
- Property Rights rules are being modified, but old rental rules still dominate in large cities
- Medicine is advancing, but it is riding on old rules, processes and a bit of ‘short cut approaches’
- Consumers are getting smarter, using technologies, but it is limited to the new young middle class
- Work Ethics are outright missing among the masses, and this is the shortest pillar of the economy
Without all the pillars of the structure strong and growing, we will see a deteriorating environment that runs on black money, inefficient processes costing manpower, high error rates in each task, paper-based society that will not change for another 10-20 years, and finally, an uncontrolled inflationary environment due to lack of resources.
None of the above means that we will falter, because people know how to work ‘around’ the system, but yet, it will take another 10-20-30 years for the dominance of India to show up at the Global Level, with a level of confidence that was shown by some of the Western Nations in the mid-1990’s or mid-2000’s, and by China now.
All in all, let’s give a lot of credit to India (and Indians) for working away amongst this turning tide of sustaining the energy of going after each task 2-5 times before it is completed to its required intent, being patient or pushy depending on the day to get the job done, and finally, for improving at the rate that it has since 1990. Long working hours within the new institutions is a norm that people face today to sustain growth, but everyone works happily in this environment, moving themselves from one step of the financial ladder to the next higher one. With people like Modi forcing change upon change at the government level, we might be able to shorten the 10-20-30 years that I predict into something less, but that has to be proven between now and 2020.
Bottom line is to stay invested come thick or thin in the Indian economy, but simultaneously believe in China and Commodities to diversify and distribute wealth, since East is the place to be, and West is fading away in my lifetime.
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KKP (Kiran Patel) is a long time investor in the US, investing in US, Indian and Chinese markets for the last 25 years. Investing is a passion, and most recently he has ventured into real estate in the US and also a bit in India. Running user groups, teaching kids at local high school, moderating a group in the US and running Investment Clubs are his current hobbies. He also works full time for a Fortune 100 corporation.
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