Tag: infrastructure

Steady As She Goes

Gulzar Natarajan has a typically excellent post (part of a two-part series) on India’s economic growth trajectory. And they key point in the post is a counter-intuitive one.

India cannot, and should not, grow too rapidly.

In Can India Grow, we had argued that India does not possess the capital foundations to sustain high rates of growth for long periods. It does not have the physical infrastructure, human resources, financial capital, and institutional capabilities to grow in the 7-9% ranges without engendering serious distortions and overheating. The last such episode of high growth in the 2003-11 period required nearly a decade for companies to deleverage and for banks to overcome their bad assets. While some commentators have since come forth with similar views citing aggregate demand etc, I think we were the earliest to put forth a clear case for lowering expectations and targeting a 5-6% economic growth rate.

https://gulzar05.blogspot.com/2022/11/indian-economy-thoughts-on-growth.html

Our household owns two cars, a Tata Zest and Tata Nano, and the best analogy I can come up with for 2003-2011 is that it was like racing the Nano along the expressway to Bombay at a 110 kilometers per hour. It might (perhaps) have made it to Bombay at those speeds, but the little blue car would then have needed a long time at the mechanic before being road-worthy again. India, similarly, did grow rapidly in that period, but as Gulzar Natarajan puts it, it did not have the “physical infrastructure, human resources, financial capital, and institutional capabilities to grow in the 7-9% ranges without engendering serious distortions and overheating.”

Or put another way, if we want India to grow rapidy in the next two decades or so (and who wouldn’t?), it is very much a question of whether we’re driving a Nano or a Zest over the course of the next two decades. Or, god willing, an even better car. But a Nano will simply not cut it, and in terms of our infrastructure, human resources, financial capital and institutional capablities, we’re more like Tata’s cheapest car than we are like the Tata’s most expensive car.

But our country needs those upgradations if we want to achieve (and sustain) those aspirational growth rates. And here’s another counter-intuitive bit: even a 6% growth rate would be a challenge when we are talking about sustaining it over the course of twenty long years. That’s not the pessimist in me talking, that’s empirics:

A 6% baseline growth for the next three decades would be extraordinary. Underlining this point, as Ruchir Sharma has written, there are only six countries which have grown at 5% for four decades – Taiwan, Japan, South Korea, Singapore, Malaysia, and China. As the data shows, India has become the seventh. But just two have done it for five decades in a row – South Korea and Taiwan. Given that China looks certain to fall short, India could become just the third. It could go one better and strive to become the only country to grow at 5% for seven decades in a row. This would be exceptional at a time when developed countries will struggle to grow at even 2%.

https://gulzar05.blogspot.com/2022/11/indian-economy-thoughts-on-growth.html

But for that to happen – for us to embark on this journey, we would do well to first take the Nano to the garage, and bring out the Zest instead. We could do with a bigger engine, better suspension, better safety features – why, better everything:

We should simultaneously use the growth to build the capital foundations – increase domestic savings, deepen financial inclusion, develop robust financial intermediation systems, expand physical infrastructure, prioritise human capacity development, and develop and strengthen state capabilities.

https://gulzar05.blogspot.com/2022/11/indian-economy-thoughts-on-growth.html

All of which is easier said than done, as many a “growth star” state of the 20th century will tell you. This stuff is hard, unglamorous, politically risky, and with payoffs that manifest themselves only in the long run. But also, this stuff is unavoidable. Here’s one way to think about it as a student of economics: studying macroeconomics without a deep study of development economics is dangerous.

For as a nation to our north and east is hell bent on showing us in recent times, attemptig rapid growth without getting the basics right isn’t a good idea:

A too rapid growth will invariably drive up signatures of overheating – high inflation, property bubbles and land valuations, spike in wages, environmental damage, clogged infrastructure like traffic congestions and water scarcity etc.

https://gulzar05.blogspot.com/2022/11/indian-economy-thoughts-on-growth.html

Institutions matter. Education matters. Physical infrastructure matters. State capacity matters.

And attempting to engineer rapid growth without getting all (not some, all) of these right is a bad idea.

P.S. If you are a student of the Indian economy, the first chart in this blogpost is worth deep contemplation and reflection. What is your best guess for what comes next, and why is your guess whatever it is? That’s be an excellent essay to assign at the end of a macro semester that focuses on the Indian economy.

Links for 9th May, 2019

  1. “Matters came to a head in the summer of 1745. Nanasaheb Peshwa was in Satara and his grandmother, Radhabai, lived in Pune. Seeing the water crisis, she ordered that no water be drawn from the river for the gardens. However, her order was challenged and a letter of complaint was written to the Peshwa in Satara.”
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    A very nice article in the Pune Mirror about the cities water supply, and how it originated and was developed over time. Also, if you haven’t heard it already, you might want to listen to this short introduction to Visvesvarya.
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  2. “This isn’t to say we don’t learn from these exercises. We do. In both India and Tanzania, we learn that citizens value public services. In Tanzania, the researchers then led deliberative discussions about cash transfers, and some respondents highlighted that “social services encourage a collective voice that helps increase accountability, while cash transfers would focus people on private interests and leave room for corruption.”Listen to the voices of citizens. But before throwing the cash transfer baby out with the bathwater, let’s make sure those citizens have clear information about their trade-offs.”
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    Beware well-intentioned surveys – read this article to find out why. Questions in surveys – and the framing of these questions – should give you a headache. If they don’t, you haven’t thought enough about ’em!
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  3. “Someone reading a book is a sign of order in the world,” wrote the poet Mary Ruefle. Four centuries earlier, while ushering in a new world order, Galileo contemplated how books give us superhuman powers — a sentiment his twentieth-century counterpart, Carl Sagan (November 9, 1934–December 20, 1996), echoed in his shimmering assertion that “a book is proof that humans are capable of working magic.”
    Do you subscribe to BrainPickings? You really should – and clicking through to this link is a good enough reason to start. Amit Varma had a column in the Times of India about much the same thing the other day, which is also worth reading for a rather more, um, practical example of the benefits of reading.
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  4. The lungi is more than just a South Indian sartorial choice. But what are the origins of this popular garment? It is difficult to state this with certainty. The lungi’s well regarded cousin, the dhoti, seems to have, on the whole, cornered much of the attention, in terms of research into its history on account of its elevated social standing.”
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    The Madras Courier on the lungi – its origins, how to wear it, and its apparent near universality.
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  5. “The new regulations have been harder on some of the smaller developers who lack the wherewithal to navigate the labyrinth that is getting construction permits on time causing many to exit the market. The Authority has no jurisdiction to hold different government departments to account for withholding or delaying approvals without a valid cause. Without accompanying reforms that ease the complex permissions process and bring about transparency and predictability in rule implementation, the objective of easing housing supply bottlenecks to lower house prices and benefit homebuyers is going to meet with limited success. ”
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    A short take on what ails the real estate sector in India. And the answer that this paper gives is that there may be too much regulation of the sector, not too little. A classic example of unintended consequences. This paper, from that article, is also worth reading.

Links for 4th April, 2019

  1. “Why does this matter? For one, a large share of the population (at over 50% urban this could be ~250 million people) is forced to live without urban basic services and is grappling with inadequate public service delivery. The slums and informal settlements in most of our cities are direct outcomes of failing to cater to migration at an earlier point in time. Even while we close our eyes to the reality of urban growth, cities and peri-urban areas are continuing to grow, leading to urban sprawl that goes well beyond administrative boundaries. This growth is haphazard and unregulated. Consequently, the quality of the urban fabric – measured by the share of land in streets, access to open space, formally subdivided plots and so on – declines.”
    Excellent, excellent article, and agree wholeheartedly with all of the ten points. The only (minor) quibble – I’d put number ten at number one. But if you want an easy to read and understand manifesto for rewiring India’s urbanization – this is an excellent place to start.
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  2. “Asia is already home to more than half the world’s population. Of the world’s 30 largest cities, 21 are in Asia, according to UN data. By next year, Asia will also become home to half of the world’s middle class, defined as those living in households with daily per capita incomes of between $10 and $100 at 2005 purchasing power parity (PPP).Since 2007, Asians have been buying more cars and trucks than people in any other region — by about 2030 they will be buying as many vehicles as the rest of the world combined, according to LMC Automotive.”
    A fascinating set of data points, and also a pretty nice infographic about economies and their ranking. An article that talks about when, exactly, the Asian century will start.
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  3. “The saddest truth about democratic politics is not that politicians don’t keep their promises, but that they make the wrong ones. This is a bittersweet truth we rediscover every election season. There is no connection between good governance and good politics. What voters want is not necessarily what is good for them or the country. And the manifestos of political parties are designed not to take the country towards progress, but to get that party to power.”
    Speaking of 1. above, this short read links together all of the other pieces related to 1. above – and all of them are, I’d say, worth reading. A manifesto for India, as it were.
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  4. ““We can trace our origins back to that event,” DePalma said. “To actually be there at this site, to see it, to be connected to that day, is a special thing. This is the last day of the Cretaceous. When you go one layer up—the very next day—that’s the Paleocene, that’s the age of mammals, that’s our age.” ”
    A truly beautiful, utterly mesmerizing read about the day the earth died. It’s hard to imagine anybody not wanting to read this. Via
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  5. “Mattis, who had studied philosophy in college, recognized similarities between The Matrix and the ideas of René Descartes, the 17th-century French thinker who wrote about man’s inability to know what is truly reality. “When I first read the script, I called them and said, ‘This is amazing! You wrote a script about Descartes! But how do I sell this thing?'””
    A very long article about a movie that had cult status about twenty years ago, and probably still does – The Matrix.

Links for 22nd February, 2019

  1. “We seem somehow bored with thinking. We want to instantly know. There’s this epidemic of listicles. Why think about what constitutes a great work of art when you can skim “The 20 Most Expensive Paintings in History?”I’m very guided by this desire to counter that in myself because I am, like everybody else, a product of my time and my culture. I remember, there’s a really beautiful commencement address that Adrienne Rich gave in 1977 in which she said that an education is not something that you get but something that you claim.

    I think that’s very much true of knowledge itself. The reason we’re so increasingly intolerant of long articles and why we skim them, why we skip forward even in a short video that reduces a 300-page book into a three-minute animation — even in that we skip forward — is that we’ve been infected with this kind of pathological impatience that makes us want to have the knowledge but not do the work of claiming it.”
    Have you heard of Maria Popova? This interview helps you understand who she is, and her importance in combating what I linked to a couple of days ago – David Perell’s article about the Never Ending Now.

  2. “Thanks to government backing, the state-owned company building the bridge is unlikely to default or go bankrupt. But bridges like Chishi leave local governments and developers struggling with debt, and those who live below nonplused.“If you don’t build roads, there can’t be prosperity,” said Huang Sanliang, a 56-year-old farmer who lives under the bridge. “But this is an expressway, not a second- or third-grade road. One of those might be better for us here.””
    The New York Times on bridges in China – and how there might be one too many of them. Economists have worried for many years now about how China’s economy will slowdown in the years to come, and also about how China’s economy has masked it’s imminent slowdown by building bridges, roads and entire cities when the immediate need is not apparent.
  3. “Turns out the reason was likely the same as the one behind every one of my life choices: it involved the least effort. As Frankie Huang, a writer and strategist based in Shanghai, told me over email, numbers are far easier to type for purposes like websites’ names, as compared to pinyin, the Romanised system for Chinese characters.”
    …speaking of China, Mithila Phadka explains why the Chinese prefer using numbers evreywhere possible – even preferring to use numbers rather than text for URL’s. 12306.cn is preferred to ChinaRail.com, for example.
  4. “In Study the Great Nation, you can catch up on the latest state media reports on Mr. Xi’s decisions, savor a quote of the day from Mr. Xi or brush up on “Xi Jinping Thought.” You can quiz yourself on Mr. Xi’s policies and pronouncements, or take in a television show called “Xi Time,” which is … well, you get the picture.Doing each of these activities can reward users with “study points,” which can be redeemed for gifts in future versions of the app.”
    I worry that China won’t be the only country doing this for very long – far too many leaders in far too many countries are likely to be tempted to be, um, inspired.
  5. “This conclusion, if it withstands open-minded analysis in India, does not mean that India lacks ways to punish Pakistan and motivate it to demobilize groups that threaten to perpetrate terrorism in India. Rather, it suggests that more symmetrical and covert operations would yield a better ratio of risk to effectiveness for India. There are many ways to make Pakistani military leaders conclude that the cohesion, security, and progress of their own country will be further jeopardized if they fail to act vigorously to prevent terrorism against India. Limited, precision air strikes are not India’s best option now or for the foreseeable future.”
    This is from 2015 – but as of that point, this rather well researched article points out that India may not be able to carry out precision air strikes against Pakistan – because of the threat of escalation, because of the technology available with Pakistan today, and because other ground based options may be more operationally feasible.