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TECH TALK: India Rising: An Answer from Atanu

January 27th, 2006 · No Comments

Atanu Dey built on Lee Kuan Yews incisive analyses and summarized his learnings. The harsh truth:

Why, one may wonder, dont the leaders of India see what LKY so easily sees? Are they merely incapable of clear thought, or is it that they think but are prevented from acting due to circumstances, or is it a combination of both? Surely, one would think, that if the Indian leaders are not competent thinkers, they would at least have the intelligence to hire intelligent advisors to figure out the problems. So what is the problem?

I think the answer lies in what economists call the objective function. Individuals have a certain goal which can be stated as the maximization of a function given a set of constraints. For instance, for someone maximizing the amount of money given the constraints of time and effort may be the objective function; for another it could be to maximize leisure given the constraint of a reasonable income and time; for another, it could be to do social work subject to leisure, time and money constraints.

LKYs objective function, I believe, was to rapidly develop Singapore. He was not looking to win elections, or to maximize his personal wealth, or to be a mahatma, etc. Given that he is a man of amazing practical genius, he figured out the sequence of interventions and implemented them. Under his autocratic rule, he did what Indias autocrats have been either unwilling or unable to do.
Indias autocrats have had different objective functions. I suspect that to a first approximation, their objective function have been to maximize personal wealth, not the development of the economy, through corruption, nepotism and bribery. Of course there was the matter of elections every so often and funding this costly farce required even more corruption.

Atanus short and simple prescription: Manufacturing has to be the base upon which Indias growth must be based. To produce stuff, you have to have infrastructure. Build infrastructure first.

India is a large economy (in terms of population numbers) and like any other large economy, it has to be largely self-sufficient in that what is consumes, it has to produce itself. Small economies can specialize and import the other stuff they need, but India cannot. In other words, India has to grow its own food (and therefore must have a large agricultural sector), must manufacture its own stuff (and therefore have large manufacturing sector), and provide its own services. Large here means production capacity, not necessarily employment capacity.

I am not in favor of employment; I am in favor of producing stuff. If you produce enough stuff, you can give stuff away to unemployed people. On the other hand, if the obsession is with employment, and if this employed population produces zilch, then all can be employed and yet all can be dirt poor.

You cannot produce much with your bare hands. So you need factories, You need power to run those factories. You have to have roads and ports and airports to bring inputs to the factory and take the output out. Invest in infrastructure.

And you dont need to bring out the excuse that the government does not have the capacity to fund the infrastructure. The private sector at home and abroad is more than eager to build them, provided the asinine policies blocking this investment were discarded.

Last Word

India is the flavour of the day. But we need to make it more than that. India needs a few decades of sustained development to make up for all the lost time. We have the worlds youngest population. If we are not to disappoint and lose this generation, we need to work on building the India of tomorrow. We may not be easily able to change our politicians and policies, but I firmly believe that we can use our innovation and entrepreneurial abilities to bring about change. We have to do this not between two generation, but between two elections. The India Rising story needs to not become a chapter but a book.


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