It's difficult to see how India can break out of the "middle income trap" without more emphasis on manufacturing
bloomberg.com
bloomberg.com
More than China, the relevant and contemporary development comparison for India is Vietnam.
Both liberalized in the early 90s. Vietnam more closely adhered to export-based industrialization used by East Asian predecessors like SK, Taiwan and China.
Both liberalized in the early 90s. Vietnam more closely adhered to export-based industrialization used by East Asian predecessors like SK, Taiwan and China.
Vietnam started at around half of India's per capita GDP ($140 vs $300 in 1991).
Today it is >70% higher ($4,500 vs. $2,600).
Today it is >70% higher ($4,500 vs. $2,600).
Indonesia and the Philippines look like closer developmental comps for India.
Indonesia grew per capita GDP 20x over 3 decades from the late 60s to late 90s on the eve of the Asian Financial Crisis
Indonesia grew per capita GDP 20x over 3 decades from the late 60s to late 90s on the eve of the Asian Financial Crisis
The Philippines started from the strongest position (vs other ASEAN countries), benefiting from access to hard US dollars, but growth in per capita GDP started to peter out once it hit lower middle income levels and the economy has not recovered as strongly since the AFC
In both cases varying levels of corruption sapped growth once the easy gains of low-cost labor and basic infrastructure build-outs were exhausted
Industrialization policies did not encourage competition on a global level - instead focusing on import substition ...
Industrialization policies did not encourage competition on a global level - instead focusing on import substition ...
... with the issuance of licenses granting essentially monopolies on certain products, often going to politically connected conglomerates ...
... the key success factor here was playing the political patronage game, not operational excellence ...
... the key success factor here was playing the political patronage game, not operational excellence ...
... and once the license is secured, focus is on maintaining the monopoly position, not on building an organization that can compete on the global markets.
Society does not benefit from a ton of quality job creation and corresponding skills accumulation.
Society does not benefit from a ton of quality job creation and corresponding skills accumulation.
There is still time to change destiny but right now I see the Philippines and Indonesia as the rough bounds of expected value of development scenarios for India.
Meanwhile Vietnam has already caught up to Indonesia ($5,000) and surpassed the Philippines ($3,900) ...
Meanwhile Vietnam has already caught up to Indonesia ($5,000) and surpassed the Philippines ($3,900) ...
... and is (in my view) going to start to converge with Thailand ($8,800) in the next decade and Malaysia ($13,400) within two decades ...
They are doing development the right way, which is leading to skills accumulation in the broad population ...
They are doing development the right way, which is leading to skills accumulation in the broad population ...
... and leading to an increase in quality of life that is more sustainable even after the marginal benefits of low-cost labor and capital accumulation (in a capital-starved economy) start to diminish.
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