India’s Prosperity is Made in India

I am not a fan of the Modi government’s “Make in India” advertising drive. My view is certainly unpopular. I think that advertising cannot (and must not) replace real changes in policies that could make India attractive to domestic and foreign manufacturers. As it happens, the prevailing sentiment, even among many domestic manufacturers, is that India is really a very hard place to make things. Which partly explains why so much of what’s consumed in India is made in China. So trying to woo foreign manufacturers through advertising slogans is pointless.

I wrote this piece for the July edition of India Currents. Here it is, for the record.

India’s Prosperity is Made in India.

Many superlatives have been applied to India. Some are laudatory—the largest democracy;  some are appalling—home to the largest number of illiterates; and some whose overall value is hard to assess. In that last category must be the designation of India’s prime minister Narendra Modi as the most foreign-traveled Prime Minister (PM) in world history. He is, as some have remarked, India’s first non-resident Indian (NRI) prime minister.

Globe Trotting Prime Minister
Since becoming the PM, Modi has visited 38 countries. Between June 2014 and June 2016, Modi has traveled abroad 42 times, or close to two foreign trips per month, including four visits to the United States, and two visits each to Afghanistan, France, Nepal, Russia and Singapore. Compared to him, his predecessors preferred to stay home. Vajpayee had only six foreign visits during his first two years, and during his entire tenure as PM from 1999 to 2004, he went abroad only 19 times, including just twice to the United States.

All this globetrotting would have earned Modi an enviable truckload of frequent flyer miles had he been flying commercial. Unfortunately since he takes the state owned and taxpayer funded Air India, he does not get miles credit. The taxpayers, instead, get saddled with the cost of his travels, an informed estimate of which, to date, is around US $400 million at an approximate average of $10 million per trip.

Selling India Abroad
One could object to that kind of bean counting by noting that the expenditure is investment into India’s economic growth. With his foreign visits, so the argument would go, Modi has elevated India’s image globally and cemented vital relationships. This enables significant investment flows into India, it would seem.

There are two reasons why this argument is problematic. The first is that it is basically an advertising and sales job. The second is that India is a large economy and therefore its prosperity is internally driven and cannot be predicated on external factors.

Not Easy to Make in India
The “Make in India” initiative is a marketing job. Bombastic rhetorical claims that India is the prime destination for global investment sound hollow and tired when the facts on the ground speak differently. The World Bank ranks economies on the ease of doing business (www.doingbusiness.org) in 189 countries. Methodological and precision issues of the ranking aside, it does reflect an underlying reality.

As one would expect, the high ranks go to open, free enterprise economies like Singapore (#1), Hong Kong, United States, Taiwan, Germany, etc. Bringing up the rear are South Sudan, Libya and Eritrea (#189). India comes in at #130, a solid 46 places behind China (#84). That’s a terrible place to be for a country that has delusions of becoming a giant in world commerce.

Marketing and sales jobs, though valuable, are ultimately futile if the product doesn’t work as advertised. Like all of us, multinational corportations are rationally self-interested. Their investment decisions depend entirely on how easy it is to do business in India and have practically nothing to do with PM Modi’s sincere entreaties to “make in India.” A nice paint job may draw in the curious buyer but the car ultimately gets sold based on what’s under the hood, not on the shiny hood ornament.

Is the United States an Indispensable Partner?
The second problem with the view that Modi is attracting investment into India by frequently selling India abroad is that India’s prosperity, like that of any large economy, depends on what Indians and Indian firms do, which in turn depends on government policies. Certainly, a few tens of billions of foreign investment could not hurt but that all amounts to rounding errors in the spreadsheet of real growth.

In his speech to the U.S. Congress, Modi said, “In every sector of India’s forward march, I see the United States as an indispensable partner.” That mindset is not that of winners. Given that India is clearly not indispensable to United States’ prosperity, that attitude reflects a reliance on an unhealthy relationship of asymmetric power. Did Modi really mean, for instance, that India’s domestic affairs are now open for U.S. administrations to interfere in? Does that “partnership” extend to the United States making interventions in Indian rural and urban administration, labor laws, agricultural and industrial policies, law and order, banking and finance —all sectors that are critically important to India’s “forward march?”

His assertion to the Congress about non-resident Indians in the United States speaks volumes:  “Today, they are among your best CEOs, academics, astronauts, scientists, economists, doctors, even spelling bee champions. They are your strength. They are also the pride of India. They symbolize the best of both our societies.”

Mr Modi’s pride is misplaced and frankly pathetic. With all due respect to him, those facts actually speak to what’s wrong with India and symbolize the worst failures of Indian governments. Talented people were forced to migrate abroad because they could not do in India what they were evidently good at. India embraced socialism and is paying heavily for that by seeing human capital flight. That’s nothing for India to crow about. At the very least Mr. Modi should get better speech writers.

The Answer is at Home, Not Abroad
The United States did not become what it is by partnering with some large industrialized nation or dancing to foreign tunes. It marched to its own drumbeat of freedom and free enterprise that created unprecedented prosperity. It crafted its own constitution—not its colonial master’s rules—which guaranteed freedom of speech and private property rights to its citizens and which was (note the past tense) implacably opposed to socialism. Thus the United States attracted talented people from all across the world, not just from India, in the recent decades. Modi needs to ask what it is that compels so many highly productive people to leave at the first opportunity they can.

An honest answer to that could easily form the backbone of the structural reforms that are urgently needed for India to succeed. The key to India’s development is freedom. No country whose citizenry are bound by the arbitrary will of government functionaries empowered to implement needless, incomprehensible, vitality-sapping, senseless rules and regulations that inhibit enterprise—in short socialist policies—has ever escaped poverty.

Indians have had the utter misfortune of being forced to live in virtual serfdom under the licence-control-permit-quota-inspector raj, a legacy of the British Raj that impoverished India, for nearly seven decades. There was some hope that Modi would dismantle the horror that imprisons India because he did talk loudly about “minimum government.” After two years, that hope is vanishing fast. Government is not only becoming more intrusive but it is expanding its vice-like grip on Indian entrepreneurship and enterprise.

United States prosperity was built in the United States, not abroad. That’s par for the course, not some outlandish exception. India’s progress does not depend on the United States or any other external entity. India is an independent, sovereign nation and that fact places its destiny within it, and only within it. Mr Modi needs to demonstrate that understanding and act accordingly.

Genghis Khan, the great Khagan, reportedly said, “Conquering the world on horseback is easy; it is dismounting and governing that is hard.” Flying around the world on state-owned Air India promoting India is easy; it is disembarking and staying at home to free India from the controls of an oppressive government that is hard.