Zoo Station

The more I think of Bono's and Jeff Sachs' Africa aid initiative, the more I find myself in disagreement with it. I probably still believe in the role of humanitarian aid, especially in emergencies and to fight global pandemics. Economic development aid, however, is a serious no-no for me, not just because it has a long history of being wasted and keeping the corrupt elites in power, but also because of the market distortionary effect of aid. You can always depend on some variant of Gresham's Law (bad money chasing good money out) kick in with development aid. Anyways, that's me, but here's Jagdish Bhagwati's slightly different take on the issue in a gentle letter he addresses to Bono in the Financial Times.

The key problem in much of Africa is what has long been called the “absorptive capacity” problem: will aid be used productively or will it be wasted? This issue was understood by the pioneering development economists Paul Rosenstein-Rodan and Gunnar Myrdal. The former famously estimated aid requirements in the 1960s by reference to this notion. He calculated how much investment was required to help accelerate the growth rate of an aid recipient, based on an assessment of that country’s ability to manage such growth. Foreign aid would then be given to finance the investment, provided that the recipient made a matching effort to increase domestic savings as well.

But many economists became sceptical. They argued, with substantial empirical evidence, that when aid was provided, the recipients were likely to reduce, rather than increase, their own savings efforts. This was an early recognition of the “aid curse” that afflicts some aid recipients. Uncritical proponents of aid deny this effect even as they talk of the “oil curse”; as if largesse from the windfall of oil earnings is somehow more corrupting than largesse that comes from aid donors.
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Absorptive capacity is far less of a problem if increased aid for Africa is spent outside the country. Spending can be increased in the rich countries to develop vaccines and cures for diseases that severely afflict Africa, such as Aids and malaria. Research on cures for diseases such as yellow fever and sleeping sickness should be well financed. Since much of Africa suffers from huge skills shortages for virtually every developmental problem, education and training of African students in western universities could be vastly increased. They will mostly stay abroad. But then the west should develop and pay handsomely for programmes where they can contribute in other ways, such as short-term visits to train others, for instance. Until these shortages ease years from now (as they did in the 1990s in India; the “brain drain” was a big issue there in the 1950s) as more nationals are trained and find return attractive, surely we could send out more of our own. I have advocated programmes such as a Grey Peace Corps that would find our aged and retired doctors, engineers and other professionals jobs in Botswana, Zambia and other African nations.
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How, then, are we to translate the enthusiastic altruism that you have generated, dear Bono, into larger, sustained flows of aid? Surely the answer is to go after personal, rather than governmental, flows. Personal spending on aid typically runs into softer budget constraints. With all the charitable spending I do, I could always forego a dinner at Maxim’s and eat at McDonald’s instead, pledging another $100 to the Geldof-Bono aid fund. So, if you take seriously the estimated audience for Live8 concerts at 2bn, halve it for those who were there for a lark or are impoverished themselves, and halve it again for those who attended the concerts twice, you would have half a billion who could sign up for an average pledge of $50 a head as a supplement to their normal giving, yielding a net sum of $25bn outright. The money would be worth almost twice that amount in actual aid, since they would be grants whereas most aid consists of loans that must be repaid.

This would mean abandoning some of your current allies. But you can do nothing less if your efforts are to yield results. In a recent interview, you said that you expected your music would endure forever but poverty would have ended in a hundred years. I wish you good luck on your music. But not even a hundred years would suffice to end poverty if you fail to correct your course.

This is one of the most thoughtful pieces I have seen on the subject of development aid in the recent past, so try and read the whole thing if you can. Regular readers know I disagree with Bhagwati on more than one issue (especially on emigration taxation), but I have to second everything he says here. I am also struck by Bhagwati's call to Bono to rethink his allies. Does that simply one Columbia University professor has had it with the development prescriptions of another CU professor? :)

Malcolm Gladwell, author of Blink and The Tipping Point now has a blog. Go forth and read, spread the word, etc!

This is a heads up for those readers who have access to Charlie Rose's excellent TV show on PBS. Mr Rose is spending the week in India and will be conducting interviews with a wide range of people, including M.K. Narayanan, Azim Premji, Nandan Nilekani, Ratan Tata, Kiran Mazumdar, Anil Agarwal, Shabana Azmi and a panel of Indian writers including Shekhar Gupta, Siddharth Varadarajan and Gurcharan Das. The series kicks off tomorrow (Monday) with an interview with PM Manmohan Singh. If you cannot watch the interviews, you can either stream it the next day off Rose's website, or head to Google Video, where you can purchase each show for $0.99.

Those of us who grew up in India are programmed to be dismissive of the Indian bureacracy. While this is generally justifiable, especially at the lower echelons, it does not do justice to men of the calibre of E.Sreedharan, the chairman of the Delhi Metro Rail Corporation. The last issue of the Economist carried a profile relating how Sreedharan got to become one of the most widely admired people in India by making the Delhi Metro one of the better metro systems in the world.

Mr Sreedharan has a disarmingly simple explanation for his success: the ownership structure of DMRC. Half the equity is held by the central government, and half by the Delhi authorities. Instead of doubling the amount of bureaucratic meddling, Mr Sreedharan says this almost eliminates it: there is no government ministry to which every file has to be passed. Decision-making is speeded up further by the board's delegation of authority to him. When he took the job in 1997—seven years after his scheduled retirement—he demanded, and was given, full power to pick his team and a promise of non-interference.

That shows how much respect he already commanded. An engineer and career officer of state-owned Indian Railways, he had spent much of the 1990s running what was then the world's biggest overground-railway building project. This was the Konkan Railway, along India's south-western coast, which was the first such infrastructure contract in India ever awarded on “build, operate and transfer” principles.

Mr Sreedharan's experience taught him two lessons that seem obvious enough, but that many other developers of infrastructure in India have yet to learn. The first is to insist on the global best, rather than to favour Indian firms. The metro's consultants are led by a consortium from Japan (whose government has financed two-thirds of the metro's cost through a soft loan); the signalling and fare-collection systems are French, the rolling-stock Korean. The second is an emphasis on avoiding the scourge that plagues so many Indian public-sector ventures: corruption. He has tried to purify DMRC's procurement processes by removing almost every element of subjectivity from tender-evaluation. He has also had to show the door to some employees who did not meet his exacting standards.

I know for a fact that there are several people like Sreedharan within the Indian bureaucratic system. The question is how to bring them out of the woodwork, where their skills are utterly under-employed, to head projects where they can make a real difference. We have seen this in the past with the efforts of people like Sam Pitroda in the telecom sector, so there is no real reason these episodes have to be so far so and so few in between, is there?

The idea of India itself militates against the intense consciousness of the separateness of one's own people from others.

-- Rabindranath Tagore, in a letter to C.F.Andrews

Source: The Argumentative Indian, by Amartya Sen, pp 342 (a damn fine book, might I add)

[Via VC Circle] What better way to follow up a post about Kleiner Perkins than with a post on their superstar partner, Vinod Khosla. Khosla, who had reduced his involvement with KPCB, has launched his own VC fund (it’s his personal money, for the time being), called Khosla Ventures, which will invest primarily in alternative energy and clean fuels. As you can see, the website is very much in beta stage, but there are links to some excellent presentations on biofuels and microfinance. Among others papers listed is the Rural Infrastructure Service Commons (RISC) model, which Khosla co-wrote with my friend and colleague, Atanu Dey, and which we tried to implement via Deeshaa Ventures.

Venture Capital major, Kleiner Perkins has announced that it has raised a $200 million fund to fight global pandemic diseases. Obviously, the interest in such a fund is fueled by the spread of the Avian Flu. Whether KPCB’s definition of pandemic includes HIV/AIDS and Malaria remains to be seen.

“This is a call to action,” Brook Byers, a partner at the firm, said in an interview. He said Kleiner Perkins decided to start a separate fund, called the Pandemic and Bio Defense Fund, rather than make investments through its general funds to call attention to the issue. He said the fund was intended to yield profits, not act as a charity.
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Mr. Byers said private investments could help accelerate the preparations. “A lot of innovative companies are waiting for a grant from the government,” he said. “There’s not time to wait.” The fund would invest in about a dozen companies in the next three years, Mr. Byers said. While Kleiner Perkins, based in Menlo Park, Calif., normally invests in privately held start-up companies, its fund will invest mainly in established companies, including publicly traded ones.
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“It’s very time-critical,” he said, “so that leads us to want to invest in companies that have management teams and technology platforms already in place.” The first investment, of $15 million, was made in BioCryst Pharmaceuticals. The company, based in Birmingham, Ala., and publicly traded, has a drug entering early clinical trials that could be an alternative to Roche’s Tamiflu, the anti-influenza drug that is being stockpiled by many governments and that has been in short supply.

The International Private Enterprise Group [beta website here], which I founded, has its next event at 6:15 pm on Feb 28th, Tuesday. IPEG is hosting Alan Patricof [biography], the co-founder of APAX Partners and one the pioneers of the Venture Capital industry. Mr Patricof will be speaking about the role of private equity and venture capital in promoting economic development. This is a very exciting subject given that private capital flows into emerging markets are already 5-6 times larger than conventional develoment aid, though there's been very little serious attention paid to it. So, if any of you are seriously interested in the subject, please shoot me a note or leave a comment and I'll send you an invite.

I have a great personal interest in the Google Foundation and in particular, I've been wondering about what trajectory the foundation would take in terms of their focus areas. Their early investments (Acumen Fund, Technoserve etc) suggested an interest in private sector driven economic development. Rumours also abound about Google's interest in renewable energy. So, I was intrigued by their choice of Dr. Larry Brilliant to head the Foundation. Let's have a look at his background.

Dr. Brilliant played a key role in the successful WHO campaign to eradicate smallpox and has also worked for the UN in the fields of blindness and polio eradication. He was associate professor of International Health and Epidemiology at the University of Michigan for many years. Dr. Brilliant has been the recipient of numerous awards including a 2006 TED Prize, the "Community Peacemaker Award" from Wayne State University, the "International Health Hero Award" from the University of California, Berkeley, WHO's Order of the Bifurcated Needle, and the Government of India's Health Minister's Award.
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Dr. Brilliant is a founder and director of The Seva Foundation, a Policy Advisory Council Member at the University of California, Berkeley School of Public Health, and a member of the Strategic Advisory Group of Kleiner-Perkin's Pandemic and Bio-Defense Fund.

Clearly, Dr Brilliant is a public health expert and it seems like under his direction, Google.org's activities will slant towards that direction. Intriguingly, this will push them squarely into a space that is currently dominated by the Gates Foundation. Intriguing because Google and Microsoft seem to be readying itself for a major battle on each other's home turf, namely search and OS.

Is there such a thing as too much money in public health? Well, the Buffet Foundation is slowly coming online, with a $2.5 billion dollar endowment aimed almost entirely at public health issues. That endowment will grow to $40 billion plus after Buffet dies. There's the $30 billion that's at play at the Gates Foundation. Then there's the Kaiser Family Foundation and a bunch of others.

Does this mean there's too much money going into public health at the expense of other opportunities? I honestly don't know. Nonetheless, I'd prefer it if extraordinarily smart chaps like Page and Brin were more innovative with their philanthropy (rather than just follow a trend); a bit like when Gates shook up the public health space with the creation of the Gates Foundation. Of course, this entire post is based on speculation that the past of the director will influence the future trajectory of the Foundation he heads. That may well not be the case. Watch this space.

On the eve of President Bush's visit to India, the Wall Street Journal has an interesting story on the Manmohan Singh-George Bush equation, which seems unruffled by the fact that Singh's daughter has emerged as one of the Bush administration's fiercest critics. For those who came in late, Amrit Singh is a staff attorney with the ACLU, and she's been very vocal about the systemic abuse of prisoners in Guantanamo Bay, Iraq, Afghanistan etc.

Among the ironies of the post-Sept. 11 world is the fact that this particular critic of the Bush administration is also the relative of one of its newest friends. Amrit, 36 years old, is the youngest daughter of Manmohan Singh, prime minister of India. While the soft-spoken Indian prime minister and his daughter share views on many issues, according to acquaintances, their public personas stand on opposite sides of the debate over the Bush administration's foreign policy.
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"I tease her father that he has a diversified portfolio," says Jagdish N.Bhagwati, professor of economics at Columbia University. He has known Manmohan since their student days at Cambridge University in the 1950s. "He gets along with President Bush, while his daughter criticizes him!" For those tracking the twists and turns of prisoners in U.S. custody overseas Ms. Singh, educated at Yale Law School, is a familiar figure. In late September, she was part of a team that won a U.S. District Court decision in New York City ordering the release from the Defense Department of more photographs taken at Abu Ghraib prison.
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Ms. Singh has spearheaded an ACLU effort that, to date, has obtained nearly 90,000 pages of government documents under the Freedom of Information Act, according to lawyers who work with her. The attorney's public comments about those documents -- in numerous statements and media interviews -- have been part of the sharp debate over the rights of detainees and U.S. civil liberties following the Sept. 11 terrorist attacks. Ms. Singh also is among a cadre of lawyers fighting a case in U.S. District Court in Washington, D.C., against Donald Rumsfeld on behalf of six Iraqis and four Afghans. The suit alleges the 10 were tortured and abused by U.S. forces under the defense secretary's command.
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Those who know Manmohan Singh and President Bush say the two get along well.

The Economist is my favourite magazine -- for all things geopolitics and otherwise -- by a long margin. So, it's with mixed feeling that I read the news about editor-in-chief Bill Emmott's resignation. On the one hand, Emmott Doubled the weekly subscription to over a million, not to mention making the magazine considerably less U.K. focused. On the other hand, Emmott seemed to harbour a peculiar bias for neo-conservative philosophy, a bias he's come to regret in the last couple of years. Going through earlier issues of the magazine, one also gets the feeling that Emmott toned down the high-browness a bit to acquire new readers. Anyways, we'll just have to wait and see what happens to the editorial slant of the magazine once the new editor takes over. The leading candidates to replace Emmott are said to include Emma Duncan and Matt Bishop. In the meanwhile, to those of you who aren't regular readers of the magazine, I ask why not? You do know you can even redeem airline miles for a yearly subscription?

For the cricket mad among you that have no access to the cricket matches, YouTube is hosting the highlights of the 5th ODI between Pakistan and India. Have a look. Trust me, the Yuvraj and Dhoni show is worth a peek.

A couple of weeks back, I had posted a link to a Dean Kamen interview in Makezine. Now, Erick Schonfeld of Business 2.0 has another update on Kamenworld at CNN Money, and it's fascinating what he's up to now, working with Iqbal Quadir, the Harvard prof who founded Grameen Phone.

An estimated 1.1 billion people in the world don't have access to clean drinking water, and an estimated 1.6 billion don't have electricity. Those figures add up to a big problem for the world—and an equally big opportunity for entrepreneurs. To solve the problem, he's invented two devices, each about the size of a washing machine that can provide much-needed power and clean water in rural villages.
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Last year, Quadir took prototypes of Kamen's power machines to two villages in his home country for a six-month field trial. That trial, which ended last September, sold Quadir on the technology. So much so in fact that Quadir's startup, Cambridge, Mass.-based Emergence Energy, is negotiating with Kamen's Deka Research and Development to license the technology. Quadir then hopes to raise $30 million in venture capital to start producing the power machines. The electric generator is powered by an easily-obtained local fuel: cow dung. Each machine continuously outputs a kilowatt of electricity. That may not sound like much, but it is enough to light 70 energy-efficient bulbs. As Kamen puts it, "If you judiciously use a kilowatt, each villager can have a nighttime."
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During the test in Bangladesh, Kamen's Stirling machines created three entrepreneurs in each village: one to run the machine and sell the electricity, one to collect dung from local farmers and sell it to the first entrepreneur, and a third to lease out light bulbs (and presumably, in the future, other appliances) to the villagers.Kamen thinks the same approach can work with his water-cleaning machine, which he calls the Slingshot. While the Slingshot wasn't part of Quadir's trial in Bangladesh, Kamen thinks it can be distributed the same way. "In the 21st century, water will be delivered by an entrepreneur," he predicts. The Slingshot works by taking in contaminated water – even raw sewage -- and separating out the clean water by vaporizing it. It then shoots the remaining sludge back out a plastic tube. Kamen thinks it could be paired with the power machine and run off the other machine's waste heat.
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Kamen's goal is to produce machines that cost $1,000 to $2,000 each. That's a far cry from the $100,000 that each hand-machined prototype cost to build.Quadir is going to try and see if the machines can be produced economically by a factory in Bangladesh. If the numbers work out, not only does he think that distributing them in a decentralized fashion will be good business -- he also thinks it will be good public policy. Instead of putting up a 500-megawatt power plant in a developing country, he argues, it would be much better to place 500,000 one-kilowatt power plants in villages all over the place, because then you would create 500,000 entrepreneurs.

This stuff is very, very interesting, especially if scale economies can drive down the price. If it generates large-scale employment, one could make a strong case for deployment of public money too. I think I need to have a chat with someone at DEKA soon, so if any of you know someone there, please let me know.

The last page of the Economist always has some interesting stats, besides the usual GDP numbers and so on. The last two issues have both carried stats of great interest to me. The Feb 2nd issue carried a graph of mobile phone growth in Africa. Admittedly, the growth is happening from a low user base and therefore you see some staggering growth rates. Nonetheless, this goes to show liberalization is no different in Africa than it is in India or China and that if you let a competitive private sector grow, you will see some amazing results. Now, if only these governments would let the lessons of telecom be replicated across other sectors.





The second graph shows visa restrictions (a non-tariff trade barrier like none other) faced by citizens of various countries. Not surprisingly, Americans and some Scandinavian citizens can travel visa-free to about 130 countries. Surprisingly, Switzerland does not figure in here, but I am sure they would top the list. After all, there are some advantages to being everyone's bank/money launderer :) India is right at the bottom with just 25 countries letting Indians in without a visa. The bigger surprise for me is that there are actually 25 countries that let us in visa-free. I can only think of some of our neighbours, Mauritius, Hong Kong and Thailand (technically visa on arrival). Do you know of any others? I know there's about 17 countries (Argentina, Uruguay, South Africa etc) where Indians do not pay a visa fee, but you still need the visa.




Mind you, part of this visa problem was created by India when it imposed visas on countries where we could travel freely to, thereby inviting reciprocity under the Hague convention. The best way to undo some of that damage would be to unilaterally provide visa-free entry to citizens of at least the OECD countries and the large developing countries. If nothing else, this will drive up tourist arrivals and generate economic activity. The recent move to stop the discriminatory pricing against NRIs and foreigners (entry to tourist sites, airfares, hotel fares etc) is a good first step in that general direction, I guess.

Even as the fundies get their knickers (and a lot else) in a twist over cartoons, an Israeli newspaper has decided to fight the madness with humour.

The story so far: Danish paper publishes cartoons that mock Muslims. An Iranian paper responds with a Holocaust cartoons contest. Now, a group of Israelis announce their own anti-Semitic cartoons contest. Amitai Sandy, the publisher of Tel-Aviv, Israel-based Dimona Comix, and founder of the contest jokes, “We’ll show the world we can do the best, sharpest, most offensive Jew hating cartoons ever published! No Iranian will beat us on our home turf!”

As always, via the amazing Boing Boing.

It doesn't quite have the same ring as Alien Vs Predator, but this story has popped up all over the news today. Briefly, the next issue of Batman will feature the caped one taking on the bearded one in a comic titled "Holy Terror, Batman." ABC News has more.

At the WonderCon 2006 comic-book convention in San Francisco last weekend, legendary comics writer and artist Frank Miller revealed that Batman would hunt down bin Laden and al Qaeda in his next DC Comics graphic novel. In "Holy Terror, Batman!" the Caped Crusader goes after the terror leader and his organization after Gotham City is attacked by terrorists. Though the graphic novel's title is a take on Robin the Boy Wonder's catchphrase, Miller said there was nothing campy about the story.

I know there's at least one ZS reader who is salivating at the prospect of a new Batman comic. You know who you are, and so do many other ZS readers :)

Amit sent me this picture of an absolutely outstanding roadside sculpture from someplace in Philadelphia. Does anyone know where in Philly this is? I'd love to see this for real, and I am sure so will many of you.

Sorry for lull in blogging, folks. I've just been swamped with work, which left very little time for the good things in life, including blogging. I hope things have calmed down a bit, and to celebrate the possibility of a relatively calm remainder of the week, here's a London Times piece by Stephen McLarence that investigates India's enduring love affair with P.G. Wodehouse.

In a country where most books in English sell fewer than 1,000 copies and 5,000 constitutes a bestseller, the corduroy-suited Abraham estimates that his company sells up to 70,000 Wodehouses a year: part of a thriving “retro-market” that ranges from Agatha Christie to Modesty Blaise. Most Wodehouses are bought by middle-class Indians whose public school-like “English-Medium” education arguably equips them to appreciate the author’s verbal virtuosity and literary allusions better than many Brits.
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Back in 1945, George Orwell noted the books’ moral uprightness in his celebrated essay In Defence of P. G. Wodehouse: “Most of the people whom Wodehouse intends as sympathetic characters are parasites, and some of them are plain imbeciles, but very few of them could be described as immoral . . . Not only are there no dirty jokes, but there are hardly any compromising situations.” Orwell recalled meeting a young Indian nationalist who saw Wodehouse as a satirist of English society, “an anti-British writer who had done useful work by showing up the British aristocracy in their true colours . . . On the contrary, a harmless, old-fashioned snobbishness is perceptible all through his work.”

That snobbery may contribute to another, less acknowledged, reason for Wodehouse’s Indian appeal. Some educated Indians, particularly older ones, have a nostalgia for the “British days”. The books offer a chance to indulge that nostalgia, and are conveniently full of effete upper-class dimwits who conform to the Indian stereotype of their former rulers.

I will admit that I haven't read as much Wodehouse as I ought to have, so I'll leave the expert comments to those of you that are Wodehouse fans.

I recently stumbled upon this interesting series of photographs by Melina Mara, titled Changing The Face of Power: Women in the U.S. Senate (the link takes you to her Flash-based website). A couple of photos from the series were particularly striking to me:

Needless to say, the above images are © Melina Mara. Some items for discussion:

• Do you find anything sexist about these images or this series?
• Do you find my asking this question sexist?
• If so, why?

Hat tip: the very interesting BAGnewsNotes, which featured this series a while back. The discussion on that blog, which pertains mostly to the photo on the right, addresses some of the above questions and is itself interesting (but be warned that not all comments are kind to the photographer's subjects).

My cousin sent me this beautiful photograph (click to enlarge) that he snapped during his last trip to Jew Town, Cochin.



Here's some context to this photograph. The old lady is the oldest *white* (Paradesi) Jew in Cochin (there's 6 left, including her). Her husband is dead, and everyone but her brother have immigrated to Israel. The guy in the picture is a Shia Muslim who looks after her. Here's some more context from my cousin's e-mail.

She told us that this guy and 2-3 other Muslim street vendors are her "family." They look after her, do her shopping, help her in the store, etc. She said they don't ask for money; it's just respect, and she helps them out in return. "What does it matter that they are Muslim and I am a Jew," she said.
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She's been to Israel many times to visit her sister, but she doesn't like it there ("I'm a Malayali, what can I do in Israel?") so she always returns.

Every time I feel despondent about the wretched state of Kerala's economy, it's useful to be reminded of the exemplary religious tolerance that prevails, which offers a lesson to a lot of places around the world, most of all to the middle east.

There's also some additional trivia about the Jewish community in Cochin.

There aren't enough "white" Jews to achieve a quorum for services at the synagogue any more. You need ten males who have done bar mitzvah. So what they do is, they call "black" Jews (descendants of the already-then-extant Jewish community, which, according to tradition, dates back to the time of King Solomon - Source: Wikipedia) on the mainland to come over and reach a quorum. There are only very few - 6 to be exact - white Jews left, but there are hundreds of black Jews in Fort Cochin, Mattancherry, and Ernakulam.

(Via VC Circle) First came news that Westbridge Capital Partners had invested in Travelguru, which incidentally gives you some excellent fares both domestically within India and also on international routes. Now, Cleartrip has picked up about $3 million in first round funding in Kleiner Perkins' first big investment in India. Clearly, it's not just the growing number of airlines and aircraft purchases that are pointing to India's booming travel sector.

The IMF has just published an excellent working paper authored among others by Raghuram Rajan, the chief economist of the Fund and Arvind Subramanian, also of the Fund. If you want a comprehensive overview of the idiosyncratic path of the Indian economy since 1947, there's no better read than India's Pattern of Development. In addition, Rajan, Subramanian et al use India's fast growing states as a crystal ball of sorts to try and predict what path the economy as a whole will take in the future. For a taste of what to expect in this paper, here's an excerpt from the introduction.

We argue that the nature of the policies India followed after independence in 1947 created unique specializations prior to the economic reforms that started in the 1980s. Relative to other comparable poor countries, India’s emphasis on tertiary education, combined with a variety of policy distortions, may have channeled the manufacturing sector into more skill-intensive industries. Furthermore, the government’s desire to create capital goods production capability, especially through public-sector involvement, implied that India had a greater presence in industries that required scale (and capital) than other developing countries. Regulatory penalties and constraints on large private enterprise implied, however, that within most industries, the average scale of enterprise was relatively small.

Finally, rigid labor laws as well as constraints on the scale of private enterprises may well have limited India’s presence in labor-intensive manufacture, the usual specialization in a populous developing country. Given these idiosyncratic policies, India had a far more diversified presence across manufacturing industries than the typical developing country. Interestingly, it had a lower-than-normal presence in services in the early 1980s, where the skill-intensive segments such as telecommunications were still dominated by the slow-moving public sector.