From comments to Anatoly Karlin:
* I think that many Westerners have the unfortunate tendency to overstate India’s potential.
We mustn’t forget that the average IQ of India is only 82 and oftentimes the standard of living in India is barely different than that among blacks in Sub-Sahara Africa.
I have lived both in India and Africa (with my parents), and I can safely say that the quality of life in India is only barely better than black Sub-Sahara Africa. I don’t think that many Westerners truly realize how corrupt, dysfunctional and dirty India is. I mean, at our local river we’d actually see dead bodies and feces floating by on a regular basis.
The real potential lies with China, not India.
* By GDP India has significantly fallen behind China.
In 2013, the World Bank estimates for GDP per capita (nominal rather than PPP adjusted) that India had a per capita of 1509 versus a per capita in China of 6959.
In 15 years the gap will grow from 4:1 now to 8:1.
I take into account currency depreciation and appreciation which is routinely left out in discussion about future GDP.
The Indian currency will probably depreciate from 60 to 1 us dollar to 120 us dollar in the future while in the same time period the Chinese currency may appreciate to 4 to 1 us dollar.
This is because of China’s strong export performance. Wages are increasing in China but exports are becoming higher value.
India has a poor export performance with the exception of services in IT and business process outsourcing. Wages are increasing very fast in these sectors but so is the value of service exports. From low level IT customer service work, Indian IT companies are moving into IT consulting.
However, all of IT and BPO in India employs just 3 million workers. This includes even the low level work. With wage increases in the double digits, I think the size of this industry is limited in terms of number of employees but it still has much potential in the complexity of work it can obtain.
Chinese factories employ 120 million workers. Chinese factories have boosted productivity and are maintaining position in low level areas like textiles but also moving into higher value industries like big bulldozers (e.g. long ago Caterpillar lost its top place in construction exports to Russia to Chinese competition)
The smart fraction in India could one day demolish Booz Allen from Bangalore but its service sector employs only 1/40th of China’s manufacturing sector.
Gives you a sense of the magnitude of under performance in India. Can such a small smart fraction pull it off?
