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Mr. Modi, You Must Solve India's Serious Globalization Problem!

Forbes, 16 December 2014 - Indian Prime Minister Narendra Modi has launched a campaign entitled MAKE IN INDIA. To boost growth, but especially to generate employment, the goal is to create an environment for foreign investment in manufacturing. India has a huge demographic youth bulge, with an estimated 100 million young people joining the workforce over the next decade. Dearth of skills, red tape and poor infrastructure are among the obstacles to overcome. Fundamentally, however, there is also a deep psychological globalization problem that influences policy and national behavior that needs to be tackled.

tape and poor infrastructure are among the obstacles to overcome. Fundamentally, however, there is also a deep psychological globalization problem that influences policy and national behavior that needs to be tackled.

Credit: REUTERS/Larry Downing

Credit: REUTERS/Larry Downing

It starts with trying to get a visa. I have coined an acronym – PIVASS: post-India-visa-application-stress-syndrome. Before making in India, there is the considerable challenge of actually getting into India! According to indices that assess globalization by country, India ranks very low – invariably well behind China.

Historical Legacies – India and China

Had one been asked in, say, 1950, which of the two countries would be most successful in facing and mastering globalization it would have been the proverbial no-brainer: India, of course!

Historically both countries were the wealthiest on the planet: from the fifteenth to the eighteenth centuries jointly accounting for 50% of global GDP. In the nineteenth and first half of the twentieth centuries both were conquered, plundered and impoverished by Western (and in the case of China, Japanese) imperialism. By 1950, the time of India’s Independence (1947) and China’s Liberation (1949), their combined total GDPs accounted for less than 10% of world GDP.

Though the economic results for the two countries were similar, the experiences differed considerably. Britain’s colonization of India lasted almost two centuries, from 1757 to 1947, involved relatively little bloodshed when compared to China’s “era of humiliation”: from the outbreak of the first Opium War (1839) to the end of World War Two (1945), conflict with the Western powers and Japan never ceased.

The contrast between the two nations’ respective founding fathers, Mao Zedong and Jawaharlal Nehru, could hardly be starker. Nehru was suave, sophisticated, and worldly. He was a graduate of Trinity College, Cambridge, where he had studied law and subsequently trained as a barrister.

Mao, on the other hand, was a crude country-bumpkin. He first left his native Hunan province for Beijing at the age of 25. Thirty-two years later he made his first trip abroad: to Moscow to meet Stalin; the meeting did not go well. Mao did however receive foreign guests, notably Richard Nixon in 1972, a seminal historical turning point.

Mao Nehru

India’s elite was Anglicized, spoke English and studied abroad. When I was doing my doctorate at Oxford (1967-1970), there were lots and lots of Indians. Though there were Chinese from Taiwan, Hong Kong and Southeast Asia, there was none from the People’s Republic; it was in any case during the throes of the Cultural Revolution when it was much preferred to be red than expert.

Fast forward to the early 21st century: China is the global era’s rising power, India lags far behind. This is in spite of many assets.

India’s Diaspora

India’s diaspora was then and is now highly globalized. China also has a huge and impressive diaspora, but not as global as India’s. Though there are many Chinese big-shots in Southeast Asia, in the West they are comparatively few. Indians, especially in the UK and US, are prevalent in business, academe, the media, medicine and the arts. In 2008, Indians accounted for 38% of doctors in the US, 36% of scientists at NASA, and 34% of employees at Microsoft Microsoft, 28% at IBM and 17% at Intel.

It is indeed perhaps one of the greatest (of many) Indian paradoxes that the elite should be so globalized, the diaspora so globally integrated and successful, but that the nation of India should remain so closed and so poor.

Globalization Indicators – China and India

India’s low level of globalization, especially when compared to China, can be measured from numerous indicators.

In exports, China ranks first, India seventeenth. In imports: second and tenth. China has four times more stock of inward foreign direct investment than India. China, in fourteenth place in stock of outward foreign direct investment, also surpasses India (26th) by a multiple in excess of four; on the basis of current trends this gap will widen.

Tourism tells a comparable story. China, with close to sixty million foreign tourists, ranks third in the world and first in Asia; while India with barely seven million ranks twelfth in Asia – after China, Thailand, Malaysia, Hong Kong, Macao, South Korea, Singapore, Japan, Indonesia, Taiwan and Vietnam – and fails to make the global top twenty. This is a reflection of the weakness of Indian soft-power, but also no doubt in good part the difficulties of getting visas. A comparable narrative applies to outbound tourism, with China having surpassed hundred-million and India at fifteen. Tourism is a high employment creation sector: India’s low figures illustrate a mammoth missed opportunity.

A critical indicator of globalization can be gauged from students going abroad. According to data from UNESCO in 2012 there were 695,400 Chinese students abroad and 189,500 Indians. Against approximately 89,000 foreign students studying in China, the number for India was a bit more than a third at 31,000 (mostly from other South Asian countries). Whereas foreign universities are numerous in China, entry barriers in India are daunting. To cite only two out of many examples: 1) the prestigious Johns Hopkins University School of Advanced International Studies (SAIS) has a campus in Nanjing, but nothing in India; 2) the European Union in one of its most successful foreign academic initiatives has formed the CEIBS (Europe International Business School) in a joint venture in Shanghai – in 2014 it was ranked in 17th place by Forbes. There is no comparable institution in India.

Globalization and Poverty

The correlation between globalization and poverty reduction is a matter of considerable academic debate. For our purposes, suffice it to say that whereas China and India had similar levels of poverty thirty years ago, today 6.3% of Chinese live below $1.25 a day and 18.6% below $2.00; the respective figures for India are 24.7% and 60.6%. Surely there is a link.

From Autarchy to Openness

In the first few decades of the mid-twentieth century both China under Maoism and India under Nehruvian socialism adopted autarchic economic policies. This was understandable given their histories of exploitation, but also reflected some of the prevailing theories at the time. Suspicion of foreign investment and trade and the fear that they would result in economic neo-imperialism and dependence were motivating factors.

In China in the late 1970s under the reforms initiated by Deng Xiaoping, there came a sudden and quite definite break. As Zheng Bijian, the leading Chinese economist and reformer put it: “The most important strategic choice the Chinese made was to embrace economic globalization rather than detach themselves from it.” The result has been stellar economic growth and unprecedented poverty reduction.

India also underwent reforms under the premiership of P. V. Narasimha Rao, but so far as globalization was concerned there most emphatically was no embrace. Perhaps a distant, cold, suspicious peck on the cheek!

On balance the globalization of China has been good for the Chinese and for the world economy. Were India to globalize, the benefits would also accrue to Indians and to the world.

For India, this is an urgent imperative. There are huge problems of poverty, illiteracy, social injustice. Unless India abandons its autarchic mindset and embraces globalization in all likelihood the problems will fester and worsen. Mr. Modi needs to bring about a radical change among policy makers and indeed the entire bureaucracy. India needs to embrace globalization. The prospects of the twenty-first century depend on it.


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