Home > Economics, Expat life > Steven Rattner, “India is Losing the Race”

Steven Rattner, “India is Losing the Race”

January 20, 2013

Ishanya Mall

Above you see Ishanya Mall from a few months back.  Kim and I visited yesterday to make some purchases and then, as all the times I’ve been there before, the place was nearly empty, the goods in the stores scattered and poorly presented, and the buildings themselves half-finished and the finished parts already crumbling.  Ishanya is supposed to be Pune’s prime destination for home furnishings.  You definitely can get some things there, but as I think the picture shows the place is hardly “prime”.  Ishanya does not even have its own website – if you go to ishanya.com you end up at a Facebook page for a fleamarket in the mall.

Our shopping experience was fresh in my mind reading an op-ed by Steven Rattner in today’s New York Times: India is Losing the Race.  The article covers a lot of ground but this quote makes a telling point:

Visits to crowded Indian urban centers unleash sensory assaults: colorful dress and lilting chatter provide a backdrop to every manner of commerce, from small shops to peddlers to beggars. That makes for engaging tourism, but not the fastest economic development. In contrast to China’s full-throated, monochromatic embrace of large-scale manufacturing, India more closely resembles a nation of shopkeepers.

Nation of shopkeepers indeed.  Everywhere you go you see these 2-3 person operations, from auto-maintenance, to plumbing, to “medicinals” (drugstores), to furniture, groceries and more.  The predominant Indian business plan goes like this: Get some stuff to sell; Find an unoccupied stretch of sidewalk; Sit down there and sell your stuff.

Meanwhile large scale efforts flounder.  Another example is the mall near my flat, Koregaon Park Plaza (their website was offline when I wrote this).  This mall boasts many western brands but like Ishanya never seems to have any customers – Hypermarket is the only store doing business.  Now, there are successful malls here, like Amanora Park Town, but Amanora is really its own township where 1,000s of better-off Indians live.  Amanora is also very close to Magarpatta City, another self-enclosed township.

From the larger perspective one reason large-scale efforts here are doomed is the transportation.  Average people here get around by motorcycle, scooter, bicycle, autorickshaw, and of course walking.  You can’t buy a lot when you are on a two-wheeler.  You see a lot of this:


I’ve seen a great many ridiculous things being transported by two-wheeler, including ladders, pipes, stacked paint-buckets and more.  The bottom-line is the majority of Indians can’t get to a centralized superstore of any kind, and even if they did they could not bring back much.  Most people do some sort of shopping every day, getting just enough food, for example, for today and tomorrow.

Wait, you say – doesn’t India boast a number of fast growing industrial conglomerates?  What about Tata Group (revenue >$100b in 2011-2012), Reliance Group (revenue >$66b) or Bharti Enterprises (revenue >$10b)?  Surely these examples prove that economies of scale are being used in India?

Yes, these are large, successful companies, but it would be incredible in a country of 1 billion persons that there were not some such enterprises.  A telling example for me is construction, obviously an important industrial category and one critical for growth.  A recent report on top 200 construction firms worldwide includes only 1 Indian firm, Larsen & Toubro, at #43 worldwide, while China has 5 firms just in the top 10 and a great many firms throughout the top 200.  India’s worldwide share of construction revenue is less even than Sweden’s, which takes 2.2% of the total.  A particular embarrassment for India is that in the neighboring country of Bangladesh, Chinese construction firms are overwhelmingly favored over Indian.  A factor here is that China has the cash to extend significant loans to Bangladesh.

One of Rattner’s pictures brings the India/China comparison into focus:


GDP growth is certainly respectable, but look at GDP per capita.  An incredible disparity.

Education has to play a key role here.  Looking at a comparison of education in India and China some things leapt out at me:


(Source: UNESCO)

In some criteria India and China are comparable, or India even excels China.  But look at the pupil-teacher ratio and primary completion rate; is it any wonder the total illiteracy rate is so high? It is no surprise that buildings and roads seem to fall apart so quickly here – imagine how many of the people building those things were illiterate.  And the metrics on females – 39% of school-age girls out of school, and literacy of men nearly double that of women.  India is purposefully not educating half of its people.

While there is substantial public spending on education, Indians at all levels with any disposable income look to enroll their children in private schools.  Recently on my way to work I saw a queue of 100s of people; I later found they were in line to file admission forms at a school close to my office.  My driver, Rupesh – in many things my touchstone for the average guy over here – told me that to enroll his kids in the school he wanted he stood in a queue for 12 hours, beginning at midnight.  Paying their fees, after rent and food, is his major expenditure.

In Pune the city government has a set-aside for poor children to attend private schools.  But that is only for 7,300-some places – this is a city of 5 million people. Even with that, the program is not being used, with only 3,000 places actually filled.  The article tells why:

According an official from the school board, one reason for the seats remaining vacant was that the schools were not being approached by children from the economically and socially weaker sections.

Only by being here can you know what this means.  Many people here in low positions can barely look into the face of a rich person.  It is an incredible act of courage for an Indian of lowly estate – a child, especially – to put themselves side-by-side with their social “betters”.


Once again, I have no answers.  India is a peculiar mix of social democracy – it has an ambitious plan for direct welfare payments – capitalism – Mumbai, India’s financial and entertainment hub is South Asia’s richest city – and libertarianism – private townships and private schools.  Corruption is backdrop to it all, but no worse than the surrounding parts of Asia.  One thing I can say, looking at this picture gives me a new perspective on the needs and challenges of education here.  I would love to do something about this in my work.  I shall have to think …

Categories: Economics, Expat life
  1. January 20, 2013 at 8:30 am

    I don’t think India is losing the race in fact it hasn’t even started to race , what we seeing is warming up towards the best economic cycle the country is yet to see .. its how each understands the India Growth story ….. its the biggest opportunity with all its current adversities , regards

  2. Avshalom Houri
    January 20, 2013 at 12:12 pm

    Very interesting.

    Interesting how culture and way of life are affecting economy so strongly.

    Wonder if the attitude of the endless race that we are accustomed to in the west is the way the most Indian people think.

    Also it seems that the cast system is still very much engraved in people’s mind and makes poorer people to withdraw from a competition.

    Maybe it is possible to organize an afternoon classes for children one day a week at the IBM site? People at the office here (Israel) started doing so and I think that it is succeeding.

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