Indians Stagnate at Home

On returning to Delhi after some months abroad, the standard question everybody asked me was, “What do Americans think of India?” The answer is that Americans hardly think of India at all. The country is barely on their radar screen. US businessmen see India as a country with lots of potential that simply has not got its act together. When it does, they will be interested. Till then, they have other fish to fry.

But while India is not in the news, Indians are. Not a week goes by without US newspapers carrying stories on great feats by Indians in Silicon Valley and other sections of, US business, or quoting the many pundits of Indian origin that litter Wall Street. A recent issue of Businessweek devoted its cover story to whiz kids from five Indian Institutes of Technology, who have made their way to the very top in the most competitive market in the world. Some examples:

Rajat Gupta is Managing Partner of Mckinsey and Co., the top business consultancy organisation in the world.

  • Victor J. Menezes is the co-CEO of Corporate and Investment Banking in Citigroup, the biggest financial giant in the world.
  • Rakesh Gangwal is CEO and President of US Airways, one of the most successful airlines in the US in recent times.
  • Vinod Khosia is a partner of Kleiner Perkins, and a co-founder of Sun Microsystems, one of the top companies of Silicon Valley.
  • Raj Gupta has become CEO of Rohm and Haas, an important chemicals multinational.
  • Anil Thadani is Chairman of Schroder Capital Partners, an investment bank,
  • Suhas Patil is founder and chip designer. Cirrus Logic.
  • Romesh Wadhani is CEO and founder of Aspect Development.
  • Desh Deshpande is founder of Cascade Communications.

The list goes on and on. Yet it is a very partial list, covering only graduates from the IITs. It does not cover people from other universities, like Sabeer Bhatia, who created, possibly the best-known e-mail system in the world, which he later sold to Microsoft for $ 400 million. Rana Talwar has become CEO of Standard Chartered Bank pie, the first Asian to head a British boardroom.

A bunch of youngsters— Venky Harinarayan, Rakesh Mathur, Anand Rajaraman and Ashish Gupta—created an internet browser called, which they later sold to Amazon (the top online seller of books in the world) for $180 million.

What this proves beyond all doubt, is that Indians are highly competitive and can hold their own against the best in the world. Indians do brilliantly everywhere in the world except in India.

The system here drags down and stamps on talent. The system rewards manipulators, crooks and politically powerful groups (like trade unions and farmers) but mercilessly puts down talent. Only when talented Indians get out of the country do they suddenly bloom and become world-beaters. In India itself, they shiver at the thought of competing with Western businessmen, and seek protection in a multitude of ways.

But why? The success of Indians abroad proves that we are not infants in need of protection; that argument itself is infantile. If only we create conditions in India comparable to conditions in the US, we will take off just like our IIT graduates are doing abroad. Unfortunately that is one thing no political party seems interested in doing.

I can think of no other country in the world where you put up a large fertiliser factory (like the one at Haldia) which is so badly constructed that it does not work for a single day, yet the company continues to exist and the staff continue to get paid forever. Not a single political party wants to end this outrageous state of affairs.

The signal is clear: our politicians have no interest at all in creating systems that reward productivity and efficiency and penalise the lack of it. They wish to cater to a limited labour aristocracy.

Only 8 per cent of Indian workers are in the organised sector, and only 4 per cent are in companies with over 100 workers, which by law cannot be closed without government permission (which is never given). Yet these 4 per cent of workers are well organised, can close down entire cities sing threats of violence, and have strong links with every political party.

Britain has only one Labor Party. But in India every political party is also a labour party. The Congress has INTUC, the Marxists have CITU, the CPI has AITUC, and so on.

The BJP is supposedly a right-wing party. Yet it controls the Bharatiya Mazdoor Sangh, the biggest trade union in India. Where else but in India could the most right-wing party also be the biggest labour party?

The labour wing of BJP, let by Dattapant Thengdi, strongly opposes foreign investment in insurance and much else.

It wants the interest of all other sections of Indian society to be sacrificed to preserve the interest of the labour aristocracy. And, like all aristocracies, it claims that what is good for the aristocracy is good for the people.

Our labour laws are only a small part of the problem. Business continues to be strangled by red tape despite some liberalization. Take a look at any international comparison of economic freedom, like the tables compiled by the World Economic Forum, Fraser House, Freedom House, Heritage Foundation. In all these India is way down in the bottom half of countries. Yet many politicians think liberalization has gone too far.

This, then, is why Indians in India cannot compete with foreigners. They have the talent, but lack the right environment.

And the entire political class is determined to thwart the right environment. So talented Indians who stay in India will remain trapped in the mire, while those that leave will soar and conquer the world. This is the end result of 50 years of independence.

What do you think?