Atanu Dey On India's Development

Is the Indian Government the Greatest Enemy of India’s Prosperity?

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The Aug 6th edition of the online Wall Street Journal has an article, Asian Entrepreneurs Are Bullish on the Future (behind a subscription wall) which reports on a Legatum Institute study comparing the entrepreneurs in India and China. What it says about India should not come as a surprise to anyone who studies India. The article concludes with this.

There are also significant differences in how entrepreneurs see themselves relating to their policy environments. In India, 81% of business owners say that jugaad, the ability to improvise and find ways around prohibitive rules and institutions, is important to business success. In China, 93% of business owners say guanxi, the networks and relationships (primarily with the state) necessary to succeed in business, are important to their own success. Generally, enterprising individuals in India believe they succeed in spite of the state, while in China they think they succeed through their connections to it.

So far, our findings suggest entrepreneurship in India is marked by a kind of sustainability that is less evident in China. Because India’s entrepreneurs have succeeded amid dysfunctional government and financial institutions by developing a kind of independent and experimental ingenuity, it stands to reason that the enterprising class would prosper even more were India to reduce barriers to business and clean up corruption. In China it is unclear what will happen if state efforts are no longer sufficient to entice and groom the entrepreneurs its economy needs. [Emphasis added]

Note “reduce barriers to business and clean up corruption.” Reduce business barriers? OK, the government erects them; only it can remove them. But it does not have an incentive to do so because those in power actually gain from them while the country loses. The story is the same with corruption. Sure the average smalltime crook is into corruption. But for massive multi-tens-of-thousands of crores corruption, you have to be in government. The high level corruption eventually trickles down and gives support to the petty corruption that the average person encounters daily.

I think a reasonable case can be made that the biggest enemy of India is the government of India. It began with the British, and the job was eagerly taken over by FNehru, and from then on, with only a short few breaks, the FNehru clan has presided over the destruction.