© 2017, Farok J. Contractor, Rutgers Business School
This is an update to my September 7, 2017 post, in which I described seven reasons why India’s manufacturing competitiveness still lags behind China’s — but also how the Modi government is taking steps to alleviate the bottlenecks. (See reader comments in the original post.)
Click for PDF of World Bank report[1]
There was much elation in official New Delhi on October 31, 2017, when the World Bank released its Doing Business 2018 report[1] containing the latest “Ease of Doing Business” indicators for 189 nations: India’s overall ranking jumped upward by 30 places, from a previously dismal position of 130 to number 100. The Prime Minister, Narendra Modi, was quick to tweet a congratulatory message at 7:40 AM that same morning: “It has never been easier to do business in India.”
Source: Twitter[2]
On September 7, 2017, I published the blog post entitled “Thousands of Hindu Gods – Made in China: Seven Bottlenecks to Indian Manufacturing,”[3] in which I decried the fact that India’s manufacturing sector badly lags that of China’s. Despite a supply chain from China to Mumbai extending across 7,367 kilometers, and Chinese labor costs that significantly exceed those in India, each year thousands of polyresin Hindu gods are manufactured in China and shipped to the Indian market, outcompeting local producers. (The cumulative figure since the year 2000 may be well more than a million icons imported from China and now worshipped in Hindu households or perched on car dashboards all over India.)
This inconvenient fact must be embarrassing in a nation that is 82 percent Hindu—and where the party in power (the Bharatiya Janata Party [BJP]) espouses a muscular form of Hindu identity. My post, however, expressed hope that India’s manufacturing competitiveness would improve because the Modi government is aware of the seven institutional problems that are holding back Indian business and is taking steps (some say too timidly) to alleviate the bottlenecks.
On October 31, 2017, my hope mirrored tangible reality when the World Bank released its latest rankings. In contrast to India’s rise of 30 places in the rankings, China’s rank remained unchanged (see the table below).
World Bank “Ease of Doing Business” Rankings of 189 Nations (2016 vs. 2017)
Click for PDF of table (enlarged view)
Indian news media and TV stations, which are increasingly toeing the government line, were quick to crow about the achievement.[4] Sweets were distributed in Udyog Bhawan (Ministry of Commerce) and the Ministry of Finance. Indeed, it is something to celebrate in a country emerging from decades of socialist stagnation in the previous century and a symbolic victory for reformist voices.
I certainly hope that India continues moving toward the goal of efficiency in business and institutions. The fate of 300 million Indians still living below the World Bank’s criterion of grinding poverty ($ 1.90 per person per day)[5] depends on it.
Photo Credit: United Nations/BBC[6]
Even the fate of the middle classes in India hangs in a delicate balance, since meaningful jobs are not yet available for all of the 23 million individuals that reach the age of 18 each year, many of whom with bachelor’sdegrees work as security guards or taxi drivers. Unlike China, where the population growth is near flat, India’s population is expected to keep growing at rates that the current economic setup cannot support (see the chart below).
Source: United Nations/BBC[6]
Further progress in Indian institutions and governance is imperative. The vaunted “demographic dividend” of young people could turn into a demographic time bomb if enough jobs are not created. India should produce more on its own and create jobs in manufacturing, given its low wages, technical talent, and strong tradition of entrepreneurship.
Increasing India’s World Bank ranking from 130 to 100 was relatively easy—but 100th position in a list of 189 countries is really nothing to boast about since it puts India in current company with Fiji, the Dominican Republic, and Nepal, which are hardly exemplars of economic efficiency. Moreover, the path ahead for further reform will be more difficult given the “pushback” Modi is receiving from vested interests within India, the fact that the government is a democracy and the prospect of an election in 2019 looms, and the fact that the 30 nations between rank 70 and 100 are stronger competitors (than those between rank 100 and rank 130).
We can only wait, with continued hope.
References
[1] World Bank (2017). Doing Business 2018: Reforming to Create Jobs—A World Bank Group Flagship Report Comparing Business Regulation for Domestic Firms in 190 Economies (October 31).
[2] Twitter: @Narendra Modi, October 31, 2017.
[3] Contractor, Farok J. (2017). Thousands of Hindu Gods – Made in China: Seven Bottlenecks to Indian Manufacturing (September 7).
Note that a version of that post later appeared as an article at YaleGlobal Online October 24, 2017 as Made in China: Millions of Hindu Gods.
[4] For example, see: (2017). India makes it to Top 100 in ‘ease of doing business.’ Hindu Business Line (October 31).
[5] World Bank (2015). FAQs: Global Poverty Line Update (September 30).
[6] BBC News (2013). India to be world’s most populous country by 2028 (June 14). United Nations data.
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Indian economy has shown a boost since Modi governement came into power. Many financial changes have taken place so far which has strengthened the economy further and curbed circulation of black money in market.
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