How India's Economy Can Break the Mold

Breaking the Mould: India’s Untraveled Path to Prosperity is a big new book by the economists Raghuram Rajan and Rohit Lamba. The book is both a critique of India’s development model as well as a manifesto for reform.
Most notably, it challenges the conventional wisdom that India’s primary goal should be to transform the country into a blue-collar manufacturing powerhouse. Rajan and Lamba argue that India cannot duplicate China’s development model, but it has the opportunity to leapfrog by focusing higher up the value chain.
To discuss the book’s ideas and its policy implications, Milan is joined on the show this week by Rohit Lamba. Rohit is an economist at New York University-Abu Dhabi and will soon be joining the Economics Department at Cornell University. He’s twice worked in the chief economic advisor’s office in the Indian Ministry of Finance.
The two discuss what the critics get right about the Indian economy, why India cannot blindly follow the Chinese model, and how India can pivot “from brawn to brain.” Plus, Rohit and Milan discuss the manufacturing versus services debate, India’s inward economic turn, and what India must do to upgrade its human capital.
Episode notes:
1. W. Arthur Lewis, “Economic Development with Unlimited Supplies of Labour,” The Manchester School 22 (1954): 139-191.
2. Rohit Lamba and Arvind Subramanian, “Dynamism with Incommensurate Development: The Distinctive Indian Model,” Journal of Economic Perspectives 34, no. 1 (2020): 3-30.
3. Devesh Kapur, “Why Does the Indian State Both Fail and Succeed?" Journal of Economic Perspectives 34, no. 1 (2020): 31-54.
4. Devesh Kapur, “Exit,” Seminar 677 (2015)..
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[@AKumar-co7oe]

great, so we are reviewing this joke of a book but you don't have the balls to bring on a sanjeev sanyal or surjit bhalla

[@rakadus]

The speaker is missing out the "Purchasing Power Parity" aspect. 900 million Indians might have a per capita of USD 1,000/-. However, in India, USD 1,000/- goes a long way by US standards, I would say as long as upto USD 5,000/-.
Therefore, when defining 900 million in economics to a western audience, it's appropriate to introduce this segment as a "USD 5,000 per capita".
A classic example will be coffee. Excellent coffee in India might cost USD 50 cents, max. Same in US or UK would be at least USD 3, if not more.

[@AKumar-co7oe]

i mean, this guy is so bad with this math and economic fundamentals that he's applying ppp growth rates to nominal gdp. India's nominal gdp per Capita growth trend is around 10-11 percent - i.e doubling every 7 years which leads you to a $25000 number in 2047.
let's not even get into the fact that 'development' should be measured by PPP gdp per Capita not nominal. and in ppp 6 percent growth leads you to around 40,000 ppp per Capita in 2047 in today's prices, vs 10000 today. that's also ignoring that india's real gdp ppp is likely higher (~12000) since it's been over a decade since the last rebasing.
how is one supposed to take the rest of the talk seriously when the premise is so mendacious?
and note, I'm not a modi supporter, have never voted for bjp, yet i find this intellectually bankrupt
As for the rest of the thesis, that Indian growth model will be more services heavy that China, is common knowledge/group wisdom amongst Indian elites already at this point - the author is describing what is already happening. We will steal some manufacturing, some tourism, some services and use construction to drive a mini version of the Chinese boom.
What is the policy prescription? More spend on education and healthcare? More patents? come on. It's shows such a superficial understanding of the Indian ecosystem. The missing link in Indian education isn't the number of colleges - but the lack of industry-academia linkages - and the main reason for that in turn is the lack of world class industries to incubate talent - bringing in those sectors into india gives Indians an understanding about those sectors creates the space for them to build services and/or manufacturing businesses to solve problems in that space.
Otherwise you will end up in a situation where the aerospace engineer from IIT Kanpur goes and does a phd in America or joins a bank after an MBA instead of joining the aerospace sector within india, understanding the unmet needs of that space and building something to address those needs. If there isn't a single chip manufacturing unit in India how does India figure out what services that sector need?
Why should Indian consulting services be limited to law, medicine, accounting instead of specialized sectors like aerospace, electronics, biomedical or battery technology? Indians across the world have high tech consulting shops like this all over the world but you don't want them to do it within India where there is possibility to scale the business.
This is in line with Ricardo Haussmann's economic complexity model - what's lacking in India today isn't college education, but it's lacking industrial incubators of the vast numbers of students graduating from colleges that can translate theoretical knowledge into practical applications.
Can we stop using the bullshit term 'comparative advantage' for everything you like and pretend like it doesn't exist for everything else? As long as India has salaries 1/20th that of the US we have a potential *unrevealed* competitive advantage in practically everything - saying that we should do 'more chip design' after we've already captured the entire marketplace for designers is hardly adding anything anything of value - even Milan seems to recognize this.

[@PradeepVasudev]

At least get Trinh from Nataxis. When you get people like Rohit Lamba, you simply reinforce the idea that you're partisan - not a good look for an academic.