India became an economic powerhouse before our eyes

Feb 01, 2004 Success, Sunday Nation

This is my 50th article since I started writing this column nearly a year ago. To mark the milestone, let me take you on a trip beyond our borders.

When I was a schoolboy in Nairobi in the early 1980s, we would often compare our economy with that of India. Kenya was growing at a rapid clip in those days, and the future seemed entirely rosy. On all the measures we were taught in our economics and geography classes, Kenya seemed streets ahead of India. And India seemed to have an entrenched problem with poverty. It was famous for its images of perennial scarcity and abject hopelessness. Those of us with Indian cousins looked upon them with condescension – much as Nairobians regard rural relatives in Kenya. They invariably seemed like impoverished, unsophisticated bumpkins looking for handouts.

Well, a lot can change in 20 years. As India celebrated its 54th Republic Day earlier this week, the shoe is very firmly on the other foot. India is a major force in the world economy, while Kenya is a nonentity. Let me tell you a little about India’s achievements. If you have not followed the performance of the Indian economy in recent times, prepare to have your eyebrows raised and your jaw dropped.

India is believed to be on the threshold of 8% annual growth in GDP, having achieved an annual average of 6% since 1990. This puts it behind only China out of the world’s major economies. Much of that growth is export-led, with the result that India today sits on US$ 100 billion in foreign-exchange reserves. India is the second-largest exporter of computer software and services in the world. The World Bank places India’s services sector in the global top 5.

And here’s the startling prediction: Goldman Sachs, one of the world’s leading investment banks, expects India to become the world’s third-largest economy by 2050, behind China and the United States, in that order. You can make what you like of this projection, but one thing is undeniable: if India maintains 6%-plus annual growth in coming years, achieving global economic superpower status is well within its reach. India will soon take its place at the top table of nations.

How on earth did this happen? In the early 1980s, Kenya had prospects, while India seemed only to have the ball-and-chain of entrenched poverty around its ankle. Today, we are left looking on in amazement as our once-mocked cousin prepares to enter an economic league we cannot even dream about.

To unravel the mystery, let us examine a few more pertinent facts and figures. The Economist pointed out recently that every major American or British company now feels the need to have an ‘India strategy’ – to exploit the potential of using India as a ‘back-office’ service centre. These services include software development, accounting, insurance-claims processing, customer call-centres, etc. Indians were very quick to see the potential for providing these services from offshore – by recognising the huge potential of the global information-technology and telecommunications revolution. Hardly a week goes by without an announcement by a major firm that it is moving jobs to India. Global giants like Microsoft, GE, HSBC, Barclays, American Express, and IBM already employ tens of thousands in India. This IT-service and back-office work is expected to swell five-fold by 2008, to an industry employing 4 million people and earning US$ 57 billion.

India’s dominance is not only on Indian soil. Indian entrepreneurs and executives are beginning to straddle the globe. The global head of Vodafone, the world’s largest mobile-phone company, is Indian; so, until recently, was the Chairman and CEO of Citibank, the world’s leading bank. Indians dominate senior jobs in America’s Silicon Valley. India is penetrating America’s economic core, so much so that a political backlash has already begun.

The success is not limited to services. In the 1970s and 1980s, ‘made in India’ was a black mark on any manufactured product, a sure indicator of shoddy quality. Today, many Indian products are taking pride-of-place in the global supermarket. Garment exports, supplied to the likes of Ralph Lauren, Tommy Hilfiger and The Gap, could become a US$ 50 billion industry by 2010. Exports of Indian motorcycles and passenger cars could soon cross the half-million units mark. Indian pharmaceutical exports are estimated to grow five-fold by 2010.

Enough of the mind-boggling figures, and back to the question that must be buzzing in your mind as it does in mine. How? How was it done? What’s the secret? In its essence, the answer is simplicity itself. I have written it many times in this column, and will do so again. The secret to success in today’s global economy is knowledge. India and Indians have made huge and sustained investments in knowledge. The country produces 3.1 million college graduates every year; this number, too, is expected to double by 2010. In four years’ time, it will have nearly 1,600 engineering colleges. Elite institutions like the Indian Institute of Technology (IIT) provide an education that is the envy of the world.

India today sits on a deep source of brainpower: low on cost, high on IQ. Indian research and development activity employs the best brains in the world, but costs as little as a tenth of equivalent western programmes. What kind of killer competitive advantage is that? The ideas developed by these scientific minds are then given to management professionals to turn into cutting-edge products and services. Indian companies have won no fewer than six prestigious Deming global quality awards in the past two years. Indeed Businessweek, in a recent cover story, stated: “If India can turn into a fast-growth economy, it will be the first developing nation that used its brainpower, not natural resources or the raw muscle of factory labour, as the catalyst.”

Of course, India still has entrenched problems to deal with. It may have made dramatic inroads into the problem of poverty, but it still has over 300 million people living on less than a dollar a day. Visibly, India is still a Third World country. Mumbai is still lined with slums choking with human detritus. The civil service, despite valiant modernisation efforts, is still bloated and dysfunctional, much like ours. And only the burgeoning middle class has so far seen the real benefits of the economic revolution. Nevertheless, India is growing, and growing fast. It knows, very clearly, the source of its present and future wealth. Its makeover may still be work in progress, but young Indians today have a newfound confidence about their place in the world.

At the end of the day, however, we must take a hard look back at our own country. What have we to learn from the experience of India? What is it that we must do in our own economy, companies and homes to haul ourselves out of the economic backwater? Where should we start? For a look at the possible answers to these burning questions, see you here next week.