Category: India

World Inequality Declines

(p. 6) Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough.
The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history.

For the full commentary, see:
TYLER COWEN. “The Upshot; Economic View; All in All, a More Egalitarian World.” The New York Times, SundayBusiness Section (Sun., JULY 20, 2014): 6.
(Note: the online version of the commentary has the date JULY 19, 2014, has the title “The Upshot; Economic View; Income Inequality Is Not Rising Globally. It’s Falling.”)

Is There “a Fortune to Be Made” in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.
A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book “The Fortune at the Bottom of the Pyramid,” detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.
Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. “People were saying, ‘There’s a fortune to be made. Let’s go,’ ” said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.
But many of the first efforts failed. “There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income,” Mr. Milstein said.

For the full story, see:
STEPHANIE STROM. “Billions of Buyers.” The New York Times (Thurs., Sept. 18, 2014): B1 & B6.
(Note: the online version of the story has the date SEPT. 17, 2014, and has the title “Multinational Companies Court Lower-Income Consumers.”)

The book highlighted in the passage quoted is:
Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.

China May Have Higher Incomes, But India Has Freedom and Hope

(p. A11) The author remains generally optimistic about India’s prospects. Economic reforms that began in 1991 have quickened growth. On average, GDP has grown nearly 7% a year since then. Thanks to a media revolution that began in the 1990s and has exploded over the past decade, a state-owned monopoly over television news has given way to upward of 450 raucous channels that make Fox News look staid by comparison. The author argues that together these two trends have sparked a kind of virtuous cycle: Better-educated and better-fed Indians are demanding more from their politicians. A take-no-prisoners media will keep them on their toes.
. . .
Educated Indians can’t stop complaining about the politicians who lead them. Yet, echoing the historian Ramachandra Guha, Mr. Denyer argues that India’s main success since its independence in 1947 has been political rather than economic. It has strengthened its democratic institutions and nurtured religious and cultural pluralism. Despite the fact that the average Indian earned $1,500 last year, less than a fourth of the average Chinese, it is in New Delhi, not Beijing, that you can afford to call the president (or prime minister) a blithering idiot without worrying about a midnight knock on the door.

For the full review, see:
SADANAND DHUME. “BOOKSHELF; Book Review: ‘Rogue Elephant’ by Simon Denyer; The average Indian earns less than the average Chinese. But it’s in New Delhi–not Beijing–where you can call the prime minister an idiot without worrying about a knock on the door.” The Wall Street Journal (Mon., July 28, 2014): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date July 27, 2014, and has the title “BOOKSHELF; Book Review: ‘Rogue Elephant’ by Simon Denyer; The average Indian earns less than the average Chinese. But it’s in New Delhi–not Beijing–where you can call the prime minister an idiot without worrying about a knock on the door.”)

The book being reviewed is:
Denyer, Simon. Rogue Elephant: Harnessing the Power of India’s Unruly Democracy. New York: Bloomsbury Press, 2014.

Companies Do Less R&D in Countries that Steal Intellectual Property

The conclusions of Gupta and Wang, quoted below, are consistent with research done many years ago by economist Edwin Mansfield.

(p. A15) China’s indigenous innovation program, launched in 2006, has alarmed the world’s technology giants more than any other policy measure since the start of economic reforms in 1978. A recent report from the U.S. Chamber of Commerce even went so far as to call this program “a blueprint for technology theft on a scale the world has not seen before.”
. . .
A comparison with India is illustrative. India has no equivalent to indigenous innovation rules. The government also is content to allow companies to set up R&D facilities without any rules about sharing technology with local partners or the like.
These policy differences appear to have a significant influence on corporate behavior. Consider the top 10 U.S.-based technology giants that received the most patents from the U.S. Patent and Trademark Office (USPTO) between 2006 and 2010: IBM, Microsoft, Intel, Hewlett-Packard, Micron, GE, Cisco, Texas Instruments, Broadcom and Honeywell.
Half of these companies appear not to be doing any significant R&D work in China. Between 2006 and 2010, the U.S. PTO did not award a single patent to any China-based units of five out of the 10 companies. In contrast, only one of the 10 did not receive a patent for an innovation developed in India.

For the full commentary, see:
Anil K. Gupta and Haiyan Wang. “How Beijing Is Stifling Chinese Innovation.” The Wall Street Journal (Thurs., September 1, 2011): A15.
(Note: ellipsis added.)
(Note: the online version of the commentary has the title “Beijing Is Stifling Chinese Innovation.”)

Mansfield’s relevant paper is:
Mansfield, Edwin. “Unauthorized Use of Intellectual Property: Effects on Investment, Technology Transfer, and Innovation.” In Global Dimensions of Intellectual Property Rights in Science and Technology, edited by M. E. Mogee M. B. Wallerstein, and R. A. Schoen. Washington, D.C.: National Academy Press, 1993, pp. 107-45.

Mansfield’s research on this issue is discussed on pp. 1611-1612 of:
Diamond, Arthur M., Jr. “Edwin Mansfield’s Contributions to the Economics of Technology.” Research Policy 32, no. 9 (Oct. 2003): 1607-17.

“Inflexible Labor Laws” Lead Indian Firms “to Substitute Machines for Unskilled Labor”

(p. A19) . . . , India is failing to make full use of the estimated one million low-skilled workers who enter the job market every month.
Manufacturing requires transparent rules and reliable infrastructure. India is deficient in both. High-profile scandals over the allocation of mobile broadband spectrum, coal and land have undermined confidence in the government. If land cannot be easily acquired and coal supplies easily guaranteed, the private sector will shy away from investing in the power grid. Irregular electricity holds back investments in factories.
India’s panoply of regulations, including inflexible labor laws, discourages companies from expanding. As they grow, large Indian businesses prefer to substitute machines for unskilled labor.

For the full commentary, see:
ARVIND SUBRAMANIAN. “Why India’s Economy Is Stumbling.” The New York Times (Sat., August 31, 2013): A19.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date August 30, 2013.)

Dubai Has Strong Ruling Clan, But Weak Institutions

DubaiBK2013-08-12.jpg

Source of book image: http://www.christopherdavidson.net/sitebuilder/images/DVOS_cover-210×300.jpg

(p. 4) For Mr. Davidson, Dubai’s greatest weakness lies in its autocratic governing system. Politics in the emirate, as in most of the Middle East, pivots not on institutions but on clans — a ruling dynasty and its favorites who own and run Dubai in opaque fashion.

True enough, but most of the Middle East is authoritarian, yet Dubai’s enlightened despotism and welcoming social environment have stood out for fostering economic advance. Like China, albeit on a tiny scale, Dubai is engaged in an experiment of economic liberalization without political democracy.
Mr. Davidson further contends that unstable neighbors threaten Dubai’s success, but here he may have matters reversed. When Egypt and Iran stifle their entrepreneurs, many of them find a wide berth in Dubai. When Saudi Arabia imposes cultural restrictions on its population, Dubai offers a place to drink and let loose. When India and Pakistan have trouble creating jobs for their large populations, Dubai absorbs labor migrants. When Iraq or Lebanon descends into war, Dubai profits from rebuilding them.
In short, until a vast arc of countries from East Africa to Southeast Asia changes substantially, Dubai will remain poised to benefit by providing a relatively open, secure, low-tax, business-friendly alternative.

For the full review, see:
STEPHEN KOTKIN. “OFF THE SHELF; The Glittering Emirate, Revisited.” The New York Times, SundayBusiness Section (Sun., December 7, 2008): 4.
(Note: the online version of the review has the date December 6, 2008, and the title “OFF THE SHELF; Dubai, the Glittering Emirate, Revisited.”)

The book under review, is:
Davidson, Christopher M. Dubai: The Vulnerability of Success. New York: Columbia University Press, 2008.

Cities Provide Children “Options for Their Future”

(p. 85) As Suketu Mehta, author of Maximum City (about Mumbai), says, “Why would anyone leave a brick house in the village with its two mango trees and its view of small hills in the East to come here?” Then he answers: “So that someday the eldest son can buy two rooms in Mira Road, at the northern edges of the city. And the younger one can move beyond that, to New Jersey. Discomfort is an investment.”
Then Mehta continues: “For the young person in an Indian village, the call of Mumbai isn’t just about money. It’s also about freedom.” Stewart Brand recounts this summation of the magnetic pull of cities by activist Kavita Ramdas: “In the village, all there is for a woman is to obey her husband and relatives, pound millet, and sing. If she moves to town, she can get a job, start a business, and get education for her children.” The Bedouin of Arabia were once seemingly the freest people on Earth, roaming the great Empty Quarter at will, under a tent of stars and no one’s thumb. But they are rapidly quitting their nomadic life and (p. 86) hustling into drab, concrete-block apartments in exploding Gulf-state ghettos. As reported by Donovan Webster in National Geographic, they stable their camels and goats in their ancestral village, because the bounty and attraction of the herder’s life still remain for them. The Bedouin are lured, not pushed, to the city because, in their own words: “We can always go into the desert to taste the old life. But this [new] life is better than the old way. Before there was no medical care, no schools for our children.” An eighty-year-old Bedouin chief sums it up better than I could: “The children will have more options for their future.”

Source:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.
(Note: italics, an bracketed “new,” in original.)

IKEA Says Government Bureaucracy Slows Job Creation

OhlssonMikaelCEOofIKEA2013-02-03.jpg “The economy ‘will remain challenging for a long time,’ says IKEA Chief Executive Mikael Ohlsson.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B3) MALMO, Sweden–IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book.

With the company set to report record sales on Wednesday, CEO Mikael Ohlsson said the amount of time it takes to open a store has roughly doubled in recent years.
“What some years ago took two to three years, now takes four to six years. And we also see that there’s a lot of hidden obstacles in different markets and also within the [European Union] that’s holding us back,” he said in an interview recently at an IKEA store on Sweden’s western coast.
. . .
IKEA plans to invest €2 billion in stores, factories and renewable energy this year. But the company fell €1 billion short of its goal of investing €3 billion in new projects last year, largely because of bureaucratic obstacles, he said. For 10 years IKEA has tried unsuccessfully to relocate a store in France, for example. The company also is challenging German policy dictating what can be sold and where, saying the rules are out of sync with EU legislation.
“It’s a pity, because it can help create jobs and investments at a time when unemployment is high in many countries,” Mr. Ohlsson said. A new IKEA store creates construction and store jobs for about 1,000 workers, he said.
. . .
The company’s highest-profile headaches have come in India, an untapped market where IKEA wants to open a first store in at least five years and roll out an additional three soon thereafter.

For the full story, see:
ANNA MOLIN. “IKEA Chief Takes Aim at Red Tape.” The Wall Street Journal (Weds., January 23, 2013): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date January 22, 2013.)

Rajan Hired to Open India to Entrepreneurship

RajanRaghuramIndiaSchoolOfBusiness2012-11-20.jpg “Raghuram G. Rajan criticized Indian policy makers during a speech in April at the Indian School of Business. In August, the Indian government offered him a job.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) NEW DELHI — In April, the economist Raghuram G. Rajan gave a speech to a group of graduating Indian students in which he criticized the country’s policy makers for “repeating failed experiment after failed experiment,” rather than learning from the experiences of other countries. A week later, he assailed the government again, this time in a speech attended by Prime Minister Manmohan Singh.

But instead of drawing a rebuke from India’s often thin-skinned leaders, he got a job offer. In August, Mr. Singh, who has frequently sought Mr. Rajan’s advice, called and asked him to take a leave from his job as a professor at the University of Chicago to return to India, where he was born, to help revive the country’s flagging economy. Within weeks, he was at work as the chief economic adviser in the Finance Ministry.
Analysts say the appointment of an outspoken academic like Mr. Rajan, along with the recent push by New Delhi to reduce energy subsidies and open up retailing, insurance and aviation to foreign investment, signal that India’s policy makers appear to be serious about tackling the nation’s economic problems.
. . .
Mr. Rajan said he would like to focus his efforts on three big themes: liberalizing India’s financial system; making it easier to do business, particularly for entrepreneurs and manufacturers; and fixing India’s dysfunctional food distribution system, which wastes a lot of food even as many of the country’s poor are malnourished.

For the full story, see:
VIKAS BAJA. “As Its Economy Sags, India Asks a Critic to Come Home and Help Out.” The New York Times (Sat., October 6, 2012): B3.
(Note: ellipsis added.)
(Note: the online version of the article was dated October 5, 2012.)

Middle Class “Doesn’t Want to Fight Wars. It Has Other Things to Do.”

IndiaTradeShowInPakistanCloseShot2012-05-25.jpg “A booth for Motherson International, an Indian company that produces clothes and costume jewelry, at the Indian trade show in Lahore, Pakistan, in February.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) LAHORE, Pakistan — On the day the Indian trade delegation came across the border, Pakistan was having another political crisis. The prime minister was embroiled in a showdown with the country’s Supreme Court. Early elections were rumored. And Islamists had just staged a rally in Karachi to protest “foreign intervention” on Pakistani soil.

Not, perhaps, the perfect moment to hammer out closer trade ties.
Yet Rajiv Kumar, a leader of the Indian delegation, was pleased. It was mid-February, and his business group was staging the first Indian trade show ever held in Pakistan. Tens of thousands of visitors would attend during three days. And Indian and Pakistani business leaders, as well as both countries’ commerce ministers, swapped cards, sipped tea and feasted at lavish banquets.
“Look at this!” Mr. Kumar exclaimed as his car rolled up to the convention center here in Lahore, where crowds were thronging for the trade show. “My God! Quite good, I’d say.”
. . .
(p. 12) Ashok Malik, a journalist who was one of the writers of an academic analysis of India’s private sector diplomacy, said the influence of Indian business is evident beyond the changed relationship with the United States.
. . .
Mr. Malik noted that the rise of India’s middle class, as well as the growing domestic influence of the private sector, has created a quiet constituency for easing hostilities with Pakistan. “The growth phenomenon has made the Indian middle class less tolerant of adventurism, lawlessness and war,” he said. “It is still worried about terrorism. But it doesn’t want to fight wars. It has other things to do.”

For the full story, see:
JIM YARDLEY. “INDIA’S WAY; Propelling a Nation Onto the World Stage; Industry Opens Doors to India’s Neighbors and Rivals, Including Pakistan.” The New York Times, First Section (Sun., April 1, 2012): 6 & 12.
(Note: ellipses added.)
(Note: the online version of the story is dated March 31, 2012 and has the title “INDIA’S WAY; Industry in India Helps Open a Door to the World.”)

IndiaTradeShowInPakistanWideShot2012-05-25.jpg “India held its first trade show in Pakistan in Lahore.” Source of caption and photo: online version of the NYT article quoted and cited above.

Web Sites Expose Petty Corruption

RamanathanSwatiBribeSite2012-03-07.jpg “Swati Ramanathan, a founder of the site I Paid a Bribe, in India.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) The cost of claiming a legitimate income tax refund in Hyderabad, India? 10,000 rupees.

The going rate to get a child who has already passed the entrance requirements into high school in Nairobi, Kenya? 20,000 shillings.
The expense of obtaining a driver’s license after having passed the test in Karachi, Pakistan? 3,000 rupees.
Such is the price of what Swati Ramanathan calls “retail corruption,” the sort of nickel-and-dime bribery, as opposed to large-scale graft, that infects everyday life in so many parts of the world.
Ms. Ramanathan and her husband, Ramesh, along with Sridar Iyengar, set out to change all that in August 2010 when they started ipaidabribe.com, a site that collects anonymous reports of bribes paid, bribes requested but not paid and requests that were expected but not forthcoming.
About 80 percent of the more than 400,000 reports to the site tell stories like the ones above of officials and bureaucrats seeking illicit payments to provide routine services or process paperwork and forms.
“I was asked to pay a bribe to get a birth certificate for my daughter,” someone in Bangalore, India, wrote in to the Web site on Feb. 29, recording payment of a 120-rupee bribe in Bangalore. “The guy in charge called it ‘fees’ ” — except there are no fees charged for birth certificates, Ms. Ramanathan said.
Now, similar sites are spreading like kudzu around the globe, vexing petty bureaucrats the world over. Ms. Ramanathan said nongovernmental organizations and government agencies from at least 17 countries had contacted Janaagraha, the nonprofit organization in Bangalore that operates I Paid a Bribe, to ask about obtaining the source code and setting up a site of their own.

For the full story, see:
STEPHANIE STROM. “Web Sites Shine Light on Petty Bribery Worldwide.” The New York Times (Weds., March 7, 2012): B1 & B4.
(Note: the online version of the article has the date March 6, 2012.)

RaguiAntonyBribeSite2012-03-07.jpg

“Antony Ragui started an I Paid a Bribe site in Kenya.” Source of caption and photo: online version of the NYT article quoted and cited above.