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From Mumbai to Pune
作者:汤敏    发布:2004-11-08    阅读:9032次   
From Mumbai to Pune

Stephen Roach (New York), 4 October 2004
Back in India for the second time in five months, I was eagerly awaiting the drive to Pune.  On my first trip, I concentrated on India’s dynamic IT-enabled services sector.  I knew nothing first-hand of the manufacturing story.  A journey to Pune, 115 miles southeast of Mumbai and one of India’s major manufacturing centers, would change that.  I must confess I was also curious about the quality of the excursion.  I had been told that the Mumbai-Pune expressway was Chinese-like in modern construction.  For a nation with a glaring infrastructure deficiency, maybe this was a hint of how India might close that gap.
The physical experience of the drive bore little resemblance to several comparable journeys that I have made in China.  It took about three-quarters of an hour to snake through the outskirts of Mumbai before we actually reached the expressway, itself.  The road was certainly a huge cut above any other motor routes I had been on in India -- especially the three-hour trek from New Delhi to Agra to see the Taj Mahal.  But by Chinese standards, I would rank the six-lane, barely-divided Mumbai-Pune expressway a B-minus, at best.  The exit experience was even worse than the approach -- a tedious drive on low-quality local roads to get from one company to another.  And then there was the equally uncomfortable return-trip to Mumbai -- all in all, a six-hour driving experience that left me exhausted, head-spinning, and with a sore back.  If this is progress in closing India’s infrastructure gap, the problem is even worse than I had imagined.
After two trips to India this year, I am struck by the extraordinary paradoxes of its economic growth model. Despite the stunning successes of its IT-enabled services companies, India believes that prosperity ultimately will come from a thriving manufacturing sector. I certainly understand this aspiration in one important respect: Unlike the IT sector, which hires India’s best and brightest out of its universities, manufacturing attracts lower-skilled and less-educated -- offering opportunity at the lower end of the income spectrum for a nation with a staggering poverty problem. But the Indian manufacturing model, in my view, continues to suffer from three major deficiencies -- a lack of infrastructure, a low national saving rate (a little over 20%), and anemic inflows of foreign direct investment (barely US$4 billion in 2003).  Of those constraints, the infrastructure gap is the most serious.  Not only does it risk crimping the efficiencies of supply-chain management and nationwide delivery capabilities, but it raises serious questions about the transportation requirements of a dynamic export sector. Services, by contrast, need none of the above. Moreover, India’s new services dynamic plays to some of the nation’s greatest strengths -- education, entrepreneurial spirit, and IT literacy.  Services also rest on a platform of e-based connectivity -- offering an important end run around a massive physical infrastructure deficiency.
But I have long felt that there is another glaring shortcoming of India’s manufacturing solution -- a mistaken impression of its job-creating potential. Two of the plant visits I made in Pune drove this point home. First, there was the Bajaj motorcycle factory -- a most impressive facility that was using state-of-the-art technology (i.e., Japanese robotics enabled with Indian IT) and Japanese production techniques to turn out 2.4 million two-wheel vehicles annually with approximately 10,500 workers. By contrast, in the mid-1990s, Bajaj needed a workforce of some 24,000 to produce only 1 million vehicles. Then there was Tata Motors -- a jewel in the crown of one of India’s oldest and greatest companies. The vast 510 acre Pune facility felt like an Indian Detroit -- complete with a university-like training campus, design, engineering, and testing facilities, and vertically-integrated production and assembly lines for cars, light- and heavy-trucks, buses, and, of course, SUVs. Yet the Tata Motors workforce has also shrunk significantly over the past decade as its vehicle output has soared; in early 2004, about 21,000 workers produced 311,500 vehicles, whereas in early 1999, it took some 35,000 workers to produce 129,400 vehicles. These examples are indicative of the tough uphill battle India faces in achieving a manufacturing-led solution to its daunting unemployment and poverty problem.  Even as reforms accelerated over the course of the past decade, job growth in India’s manufacturing sector -- which employs only about 11% of the nation’s total workforce --- averaged just 2.1% per annum over the 1994 to 2000 period, identical to the sluggish pace over the 1983-94 interval.
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. That’s especially the case for knowledge-based activities that are now driving the growth of India’s most vibrant service companies -- not just call centers and data processing facilities at the low end of the value chain but also software programming, engineering, design, and a broad array of professional services (such as lawyers, accountants, actuaries, medical workers and doctors, consultants, and financial analysts) at the upper end of the value chain.  Labor-saving productivity enhancement means that a manufacturing-led employment strategy requires huge scale for success. That appears to be working reasonably well in China. But given India’s deficiencies in infrastructure, saving, and FDI, such scale looks extremely problematic for the foreseeable future, in my view.  By contrast, labor-intensive services need less scale to drive job creation.  The trick for India, of course, is to create enough job opportunities at the low end of the occupational hierarchy to avoid a situation of worsening income disparities between the haves and the have-nots. That’s no easy feat for a services or for a manufacturing-based economy.
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.
But courtesy of last May’s election shocker, a new India also has a new government. That was another important reason why I made such a quick return trip -- to assess the potential impact this political surprise might have on the Indian economy. India’s stunning successes over the past decade are largely a by-product of impressive government-led reforms. A political reversal raises understandable questions as to the commitment to reform. On the surface, there appears little to worry about. The two leaders of the new governing coalition -- Prime Minister Manmohan Singh and Finance Minister P. Chidambaram -- were, in fact, leading architects of the reforms of the early 1990s.  And there are no signs that these leaders are about to reverse course on the reform front.
That’s the good news. The bad news is that I also detected a worrisome under-current of concern over the lack of new government-sponsored reform initiatives. The view inside of India is that the politics of “coalition management” -- namely, pandering to what the insiders call a “noisy Left” -- are diverting energy away from the heavy lifting of new reforms. This view came through loud and clear in my discussions with the government and the private sector. One of India’s captains of industry put it best: “The new government is focused more on staying afloat rather than on moving forward. They must confront the Left once and for all -- or risk losing momentum on the economy.” There is little doubt as to the sincerity and competence of the new leadership.  But there is a growing sense that political considerations are neutralizing that competence.  In one of my meetings with a senior government official, I must confess I walked away with a similar feeling.  The discussions were focused more on politics than on action.  I detected a real frustration in several of my meetings with leading Indian businessmen.  In their words, they were looking for the new government “to grasp the moment and light a fire.”  India has come so far over the past decade that there is a palpable sense of urgency not to lose any momentum.  There is growing fear that could be happening.
I pushed India’s senior government leadership to respond to this critique.  The response was straight-forward: “Give us time.”  How much?  “Watch the next 4-6 months,” was the response.  And what should I look for to judge the economic success of the new government?  Four action items were on the checklist: Infrastructure, removal of public-private partnership constraints, FDI incentives, and agricultural reforms.  I was told to watch for progress (or lack thereof) in four industries, in particular -- insurance, airports, finance, and energy.  One thing came through loud and clear: Infrastructure was at the top of the list.  There is clear recognition in the government and in the private sector that India’s further progress could well be stymied if the infrastructure constraint is not tackled immediately. My own limited experience in getting around India says it’s hard to argue with that.
I left India with a gnawing sense of concern.  For the time being, the Indian economy is performing very well.  Real GDP was just reported to have increased by an above-consensus 7.4% in 2Q04 following three quarters of gains averaging 9%.  Notwithstanding a possible blow from an oil shock, growth momentum in the 6-7% range should remain intact for the next few years.  That gives India time to ponder the next step.  But that next step is a big one, with enormous strategic implications.  Largely for that reason, the manufacturing fixation disturbs me.  Don’t get me wrong.  I am not arguing that India should turn away from industry.  But this approach needs a reality check -- especially given the serious constraints on the infrastructure, FDI and saving fronts.  Paradoxically, while India is very proud of its services-led progress, most seem to trivialize the potential macro implications of this trend.  Quite frankly, that astonishes me.
Ultimately, India -- like China -- is a reform story.  But reforms always require political will -- never a problem in China but long a constraint in India.  For a nation with a legacy of bureaucratic interference and a government that has a knack for “getting in the way,” the immediate challenge is all the more important for India’s new ruling coalition.  It is equally important, however, not to lose sight of the longer-term issues.  Yes, the Chinese growth miracle seems to have left India far behind.  But India has over a dozen world-class companies, fully functioning capital markets, a solid banking system, and a thriving entrepreneurial culture -- all of which China is lacking. China’s strength is resource mobilization.  India’s strength is a well-developed institutional framework.  Success is an all too fickle commodity in the long history of economic development and prosperity.  Who’s to say which approach works best in the end?
For India, the last decade has seen extraordinary progress on many counts.  Any backsliding on the pace of reforms would be especially painful in the aftermath of such impressive momentum.  Like the trek from Mumbai to Pune, the road to economic development is a long and arduous journey.  India is now at a key fork in that road.