Atanu Dey On India's Development

Ideas for India

| 19 Comments

Last year in February, Rajesh Jain and I had written a note on “Ideas for India.” Following Rajesh’s example, I am reposting the note here, for the record.

India’s economic growth and development poses challenges that are clear but fortunately are solvable. The hard part is not in the figuring out the solutions but in the implementation, and more specifically in the prioritizing and sequencing of the implementation. The elements that require immediate and sustained effort relate to “infrastructural elements” which are few in number but form the absolutely necessary foundation upon which any functioning economy is based. These elements are interrelated in complex ways and if present simultaneously, they enable that emergent multi-dimensional phenomenon we call development. The elements are:

1. Education. Physical capital-both natural and man-made-combined with human capital produces wealth in all its form, from agricultural to manufactures to services. The quality and quantity of educated people strictly determine the economic prosperity of an economy. India needs a radically different education system as the current one is dysfunctional and largely irrelevant in the modern context. Fortunately, this radical re-engineering is possible through the use of powerful tools presented by the revolution in information and communications technologies. To achieve this, institutional reform of the type that encourages private sector participation in education is necessary.

2. Energy. Any economic activity, like all processes in the universe, depends on energy. Today’s developed nations achieved their level of prosperity on cheap fossil fuels, an opportunity not available to India’s billion plus people. Fortunately, India is large enough to be able to leapfrog the fossil fuel stage and invest in renewable energy sources such as solar and wind. Becoming a world leader in the development and use of these energy sources requires a national will that can be articulated by visionary leadership.

3. Urbanization. Urbanization is both a cause and a consequence of economic development. No country has developed without being also largely urban. India’s economic future depends on India’s success at urbanizing its immense rural population. Therefore in the matter of rural development, there is a distinction between the development of rural areas as opposed to the development of rural people. The former is neither necessary nor sufficient for development; the latter is indispensible and can be achieved most effectively by urbanizing them. This requires the development of liveable cities that would absorb hundreds of millions of people who would be engaged in non-agricultural sectors.

4. Transportation. India is a large country with a large population. For the economy to prosper, people and goods have to be efficiently moved fast over large distances. India is approximately ten times as densely populated as the US. It therefore cannot afford the solution that works for the US for transporting people, namely, air travel. What India needs is a land-based system and more specifically a rail-based transportation system for both goods and people. The technology exists for super-efficient, super-fast rail systems. India has to seriously invest in that and replace the century-old current railway system. Further, within cities, India needs to have efficient public transit system and not rely on automobiles.

Note that each of the four elements has dependencies with the others. For instance, the creation of the human capital (education) requires urbanization, which in turn depends on the availability of energy and a good transportation system.

  • rishi

    A few comments.
    1. Education – Agree 100% with you there. India must have a private education system with the schools competing with each other without regulation of fees. The fee reduction will occur due to competition between the schools, but only if large number of schools are allowed to open. That will also increase the volume of students taught.

    2. Energy – I believe that India must develop alternative energies, but fossil fuels (coal, oil) are the only way forward as of now. We must not be shy of using these fossil fuels until we increase our living standards.

    3. Urbanisation – This is happening today, with the development of tier II and tier III cities. But this should happen naturally by improving the infrastructure (and capacity) of existing cities. Forced development (as in setting up of new cities) is counterproductive. This is because it is more difficult and more costly to get water, drainage, jobs, correct location, people etc than it is to improve an existing city.

    4. Transportation – Railway transport is good for long distances and must be improved. Where a city wide rail system is already available, it can be improved, otherwise buses are the only alternative. For cities, a very good alternative is the 6 seater rickshaws. These are privately owned but work much like buses. They charge the same rate and carry 6-8 passengers. These are currently frowned upon by the authorities and operate on the margins of the cities. They should be allowed throughout the cities to augment the buses.

  • pankaj

    Atanu what india needs urgently on a war footing is curbing the population growth ,the root of all misery faced by india

  • plodder

    Without in anyway diluting your agenda, I would like to suggest adding food security and law and order as necessary items to this list.

    I suppose the following question is directed more towards Rajesh.
    Since education is a state subject, have any of the BJP run states considered starting an education vouchers program and/or inviting private (including international) parties to start schools and colleges there?

  • Sundried Atheist

    May I also suggest a control on India’s population. Since certain sections of Indian society are hell bent upon having more children than they can feed, I feel it is high time that the state jumps in and stops this uncontrolled population explosion that is taking place.
    With the growth in modern medicine, the need to have multiple offsring has been greatly reduced.
    Hence if people don’t willingly stop breeding like rabbits, I guess the Government should step in take measures that make it difficult if not impossible for people to have too many children.
    How about taking a cue from our neigbour due east.

  • http://ketanpanchal.blogspot.com/ Ketan

    Hello Atanu,

    I have very little understanding of economics, but I feel India’s problems are largely because of large population (density), which in turn leads to disguised unemployment in all sectors.

    This problem has largely been compounded by the fact that most of the products and services we require can simply be replicated without much need for humans involvement (automotion).

    A few random examples:

    1. Agriculture and food industry. We have over 1 billion population, but to feed them not as many people are actually required as are currently engaged related activities. Technological advancements cannot be introduced because individual farms are currently too small. Also, one time investment of capital in technology would greatly increase the yield, but the individual farmers either do not have that kind of capital (owing to small farms) or in face of availability of cheap labor do not go in for it.

    2. Entertainment and news. The number of people required to keep 10 crore or 100 crore people entertained and informed would be comparable. Because both the ‘services’ are about niche interests. 10 fold increase in population would not increase the number of peculiar interests in the same proportion. And once a news program/movie/TV serial episode is produced, it only needs to be replicated through broadcasting (automated replication) and assembly-line manufacturing (automated replication) of TVs.

    3. Software. It requires to be developed only once. True, continual innovations are required, but the number of people required to innovate would not be dependent on number of people asking for the software because it can be replicated! Number of different softwares required in a community (say, country like India) would depend on number of different economic activities different people are engaged in for software to be used. Irrespective of the population, number of activities tend to remain the same, only the scale and the number of foci of individual activities change.

    So now the problem: is all means to produce the goods and services needed are almost exist, but the number of people required to produce them is much lesser than India’s population. So, people cannot ‘earn’ because they are not required to work (automated replication). If they cannot earn, they cannot pay for the services and products.

    Do you recognize what I am trying to point out as a problem?

    If yes, what do you think is the solution?

  • Mehul Choube

    i have couple of doubts:

    1. 70% of our population lives in villages so wouldn’t it be good to make villages self-reliant in education and employment?

    if the infrastructure in villages is improved then we can have small-scale industries in villages and with good connectivity with cities the goods produced in villages can be easily transported to the market. this way villagers will get employment in there home town itself rather than migrating to big cities and living in pathetic conditions.

    same way if high-class education system up to graduation level is available in villages then students don’t have to populate cities. good students who want to pursue beyond graduation level can migrate to cities. and tis way i think literacy rate will also increase.

    2. agriculture forms the major part of the employment in India so shouldn’t we focus more on it than non-agricultural sector?

    • http://www.deeshaa.org Atanu Dey

      Mehul:

      Yes, of course, India’s villages can be made self-reliant. Only problem is that India would have to be about 10 times richer per capita than the US for Indian villages to be self-reliant.

      Providing infrastructure at the scale that is required by small villages is about 100 times as expensive providing infrastructure in cities. India is not rich enough.

      Small scale industries are about 100 times less productive than large scale industries. India cannot afford small scale industries. Actually, India is poor because it cannot produce stuff efficiently enough — because it’s population is locked up in villages.

      India is barely able to provide graduate level education to its people in cities, and in the village level it is not able to provide even adequate primary level education. To provide education up to the graduate level at villages (average population 1,000) would require about $100,000 per student. Currently India spends on average $50 per student per year in education. That number of $100,000 per student is not feasible.

      About agriculture and employment: employment can be 100 percent in agriculture. The percent employed is not a relevant measure. How much is produced matters. If the production is limited, income is limited. The relevant measure is income, which is another word for production. I cannot go into why agricultural production has little to do with India’s development.

      So that’s it.

  • http://twitter.com/shrek9 shrek

    I disagree with the commentators that “curbing population growth” should also figure amongst the most important steps to be taken. Ref: J. Simon’s The ultimate resource. IF we can create opportunities for the enormous population we have, we have capability to generate greater economic activity.

    My point of contention is the political will. Such decisions even when taken, will not bear fruits by the end of the term of five years. Especially the infrastructure projects will take a lot more time just to be completed let alone time when they start showing positive utility.

    In such cases, why would an incumbent take a decision like that diverting funds away from his goal of being re-elected? It is much easier to give “free” stuff to people with a sense of entitlement and pump some cash into your pocket while you are at it, isn’t it ?

    Case in question: Chandra babu Naidu of A.P. did some of the very things you are talking about(urbanize, improve transport, privatize) , but he was ousted in 2004 with ysr’s promise of “free power” and now he is a fringe player desperate to get airtime anyway possible.

  • Sundried Atheist

    Shrek, uncontrolled population also leads to the depletion of natural resources and as you know we don’t live in a world of infinite resources. Why do we need such a huge population in the first place?

  • gGill

    About population – India was poor before it had an enormous population. I’d say that what caused India’s poverty is the same thing that caused India’s population explosion. India is poor because of a very complex interplay of circumstances which are rooted in history as well as in the present(the country’s population today would be one of these circumstances).
    Also, a nation that is capable of controlling its population growth is also capable of turning its large population into a boon (can you imagine how many Ramanujans are living in abject poverty???). To control population, you need a good education system, you need a good mechanism to enforce policies, and you need government will. ‘Government will’ is probably the most important factor in population control.
    Its funny, however, that India’s population growth rate is now less than 3 children/woman. Or at least according to the statistics I’m seeing. When I visited India last year, I saw a most brilliant condom commercial – maybe the entry of corporations selling contraception products is what caused the drop in birth rate?

    All of the solutions suggested by the article need strong government will. I wish we could come up with ideas of how the government can be pushed in the proper direction :-( .

    Urbanization: Indians need to start living in apartments. Traditional cities take up way too much land, which is difficult to acquire from the present land-owners. The more compressed a city is, the easier it will be to maintain and organize – up to a point, anyways. Expansion can also be better executed with apartment buildings than communities of houses. It would also cost less for the city’s occupants to travel about the city (in money,time).
    I’m looking at a rating of the highest population density by city right now, and most the top are Indian. What I’d want to see are cities organized from the get-go with the apartment building concept in mind.

    What Indians need to do is to think of a better city – a better way of organizing people.

  • Tiku

    sundried atheist – how do you propose the state should go about regulating birth rates amongst “certain sections of indian society”.
    btw, the certain section you refer to is not popping babies because of infant mortality or any economic reason, but because their religion demands it.

  • Sundried Atheist

    Tiku, read my post above in which I said that we can take a cue from our neighbour.

  • Mehul Choube

    Atanu,

    Thanks for reply.

    i would read more on less productivity of small scale industries. if you have any pointers please provide.

    i have one more question: for largely populated country like India should we go for labour intensive industrialization or an industrialization based on heavy use of machines?

  • Tiku

    sundried – are you serious? or haven’t you heard – the one child policy in china has created a serious problem of gender imbalance there.
    were you to impose a similar rule in india, it will lead to that one certain community producing mostly boys; and down the road, when these boys can’t find girls from their community to marry, it will lead to all sorts of unpalatable problems.

  • larissa

    How about population control? YOu know in some parts of India you can’t even walk without feeling as if you are going to get run over by the sheer amount of people! How about two children at the most? Seems reasonable.
    Something bad happened–at the time of Independence India had nearly the same amount of people as Russia–Russia’s population remained the same but India’s quadrupled. Can you imagine India with fewer people? 3/4 less. Thanks to Congress India will be sererely impaired by a mass population. A mass population leads to a mass culture. Morevoer, certain groups like Muslims are overly fertile (look at Bangladesh–that country’s problem is that they produce too many children without control. Its a tricky subject–as the educated sectors have less children–its largely the poor and illiterate who have the most children! Of course there is the problem that once Hindus reduce their population groups like Muslims will continue to increase without as they did in Bangladesh–and porous borders with Pakistan and Bangladesh makes it indeed difficult…

  • larissa

    How about population control? YOu know in some parts of India you can’t even walk without feeling as if you are going to get run over by the sheer amount of people! How about two children at the most? Seems reasonable.
    Something bad happened–at the time of Independence India had nearly the same amount of people as Russia–Russia’s population remained the same but India’s quadrupled. Can you imagine India with fewer people? like 3/4 less. hard to image is it not. But India was not always overpopulated as now–the last 60 years have been the worst with Congress doing nothing to check the population. Thanks to Congress India will be permanently impaired by a mass population. A mass population leads to a mass culture. Morevoer, certain groups like Muslims are overly fertile (look at Bangladesh–that country’s problem is that they produce too many children without control). Its a tricky subject–as the educated people have less children–its largely the poor and illiterate who have the most children! Also if India embarks on a population control program, it needs to seal borders so Muslims wont be greater than Hindus (one just needs to look at Bangladesh and how fertile they are to see that this is a big possibility)…

  • Tarang

    I strongly feel that urbanization should be the one of the top priorities. India does not have money to develop villages/small towns the way western world has been able to.

    But what can be the ideal approach to this transition? Also, this will be a multi decade project, so what to do with villages in the meantime?

  • http://sodidi.ramjeeganti.com Ramjee

    Urbanization is necessary but as you have pointed out else where on the blog, the traditional methods may not suit. Some amount(or a lot) of out of the box thinking is needed. I just came across this post: http://goo.gl/XRbm. Really liked the idea of a modular houses.

  • omkumar

    Hello Atanu!!!!!!
    Not only this but also there r lot of things dat has to be changed in our country like……
    Corruption , Poverty , etc….