Wednesday, October 13, 2004
Stephen Roach visits India again
So, Stephen Roach visited India again, this time visiting some of the manufacturing hubs in the Bombay-Pune corridor (he rates the highway a B-, compared with what he's seen in China). As I have mentioned on this blog several times, I really dont understand Roach's continued insistence that a nation of 1 billion people can somehow skip the manufacturing stage and move straight to a services dominated economy. I wish this were true, but.... Roach's insistence seems to revolve around the fact that services are labour intensive and therefore better for India than manufacturing, which is getting less labour intensive. Whatever. Anyway, here's Roach.
In today’s intensely competitive world, manufacturing success is all about productivity prowess -- and the capital-for-labor substitution strategies that are central to achieving such efficiencies. Manufacturing has become an intrinsically labor-saving endeavor, even in low-wage economies such as India and China. Services, by contrast, remain labor-intensive endeavors.
My services-led argument basically fell on deaf ears in India. At least that’s the pushback I have gotten consistently from a broad cross-section of Indian investors, corporate executives, policy makers, government officials, politicians, and academics. Services are viewed as interesting but not essential to India’s economic development. For me, that’s a huge disconnect -- not just from an analytical point of view, but also out of step with India’s intrinsic strengths and recent successes in services. A new India still aspires to do it the old way -- the manufacturing way.
Despite Roach's ideas, I find it difficult to even imagine 700 million Indians writing software code and answering phones. Perhaps a smaller sized economy could pull off a switch to a services economy without bothering with manufacturing, but India?
In today’s intensely competitive world, manufacturing success is all about productivity prowess -- and the capital-for-labor substitution strategies that are central to achieving such efficiencies. Manufacturing has become an intrinsically labor-saving endeavor, even in low-wage economies such as India and China. Services, by contrast, remain labor-intensive endeavors.
My services-led argument basically fell on deaf ears in India. At least that’s the pushback I have gotten consistently from a broad cross-section of Indian investors, corporate executives, policy makers, government officials, politicians, and academics. Services are viewed as interesting but not essential to India’s economic development. For me, that’s a huge disconnect -- not just from an analytical point of view, but also out of step with India’s intrinsic strengths and recent successes in services. A new India still aspires to do it the old way -- the manufacturing way.
Despite Roach's ideas, I find it difficult to even imagine 700 million Indians writing software code and answering phones. Perhaps a smaller sized economy could pull off a switch to a services economy without bothering with manufacturing, but India?
