Is India a bubble?

After a couple of weeks in India, I began to think to myself, “How could a place such as India with such poor infrastructure and such a large population that is still not prepared can aspire to be an economic superpower?” Of course, anyone who has at least some interests in what is going on in the world would have read, or at least heard of, Thomas Friedman’s megahit “The World Is Flat”.

With the rising costs in India, which include fuel prices which is more than double of that in Malaysia and the rising cost of utilities and labour, not to mention the fickle mindedness of the the labour pool which job hops like mad, I will think that unless India do something to address the basic problems, the Indian bubble will burst very soon.

The economic foundation of India is not the same as in China. China, for what you would want to call it, is still basically a command economy. When something needs to be done, the central government will issue an instruction and it will get done. This system did prove itself to be rather effective in such a giant country like China which has to cope with accelerated growth.

India is the world largest democracy and democracy is not always the best way forward. It may even hamper growth even before the country has grown. To deal with acclerated growth in a huge country like India and China, I do think that democracy will be quite a handicap. This may be one reason why the government of India is fretting on why they are still lagging behind China by so far.

All these are speaking from a speed of growth point of view.

The Indian model, if the government is persistent enough to put through reforms to eliminate bureaucracy and corruption and improve on it’s infrastructure and mass education, will come out of the race with China a stronger country. One key reason is that India is more of a knowledge and services based economy whilst China is still a rather manufacturing based economy. The way the Indian economy is built and it’s foundation in democracy and individual enterprise will make it a more resilient economy. But then again, the government must get things moving forward as soon as possible. Before the bubble bursts.


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Filed under Economics, India, Thoughts & Commentaries

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