Why What's Good for India Is Good for Us

Hi Group,

Here is the URL for any article in Yahoo. It's on the
first page of Yahoo Finance.

http://finance.yahoo.com/columnist/article/economist/2074

Thanks,
Sagar Yerramsetti.
PS: For the benefit of those, who might not see the
article as the link is either disabled or article is
taken away, here it is....

Why What's Good for India Is Good for Us
by Charles Wheelan, Ph.D.

Wednesday, January 4, 2006
I spent two weeks last month in India, one of the
most fascinating places on the planet. Where else can
you stroll through the gleaming high-tech Bangalore
campus of Infosys only hours after getting stuck in a
traffic jam on a major highway caused by a collision
between a tractor and an ox cart?
So far, India has attracted mainstream attention
mostly as the place where the guy booking your airline
ticket -- or transcribing your medical records or even
preparing your taxes -- happens to be sitting. That's
true enough. But India is far more than a
telemarketing curiosity, and "outsourcing" is only a
tiny piece of the economic transformation going on
there. Having grown at roughly 6 percent a year for
the past decade with the potential to do even better,
India is likely to be one of the most important
economic stories of the next decade.
America has a huge stake in that success -- even as
some jobs migrate across the Indian Ocean. Indeed,
here are four reasons we should hope that the next
decade in India is at least as good as the last decade
has been.
1. Because it's the world's largest democracy.
If we're going to promote democracy around the globe,
particularly as a solution for what ails the Middle
East, then we ought to wish success upon the world's
largest and most vibrant democracy. India has a
billion people, 22 official languages, and so many
ethnicities that everyone is a minority. If democracy
can work here, it can work anywhere.
And it is working. Indians vote in far higher numbers
than Americans, even when it means trekking for hours
to the closest polling place. India's government is
plodding, fractious, and permeated by corruption. But
it has also brought stability, the rule of law, and
respect for individual rights to a place that looks
ungovernable on the surface. And did I mention that
India has the world's third largest Muslim population?
2. Because it's where a large proportion of the
world's poor live.
If you don't care about starving people, then skip to
number three. If you do, then India matters a lot.
It's just basic math; roughly a third of the world's
poor live in India. Robust economic growth will help
these people far more than any check you might mail to
one of those places that sends you free return address
labels.
It's already started. India's growth over the past
several decades has lifted some 100 million people out
of dire poverty.
3. Because a richer India will make for a richer
America.
How can a place that "competes" with American
companies and replaces American workers make us better
off by growing wealthier?
First, a growing Indian middle class will buy our
products. The guy in Bangalore who answers questions
about your Dell computer probably drinks Coke, uses
Microsoft Word, and reads my column on Yahoo! Finance.
(Okay, I can't prove that last one, but you get the
point.) It doesn't matter what business you're in,
having 300 million new middle class consumers in India
is good for you.
Second, Indian firms will design and sell products
that make our lives better. That's what happens when
you unleash new human potential. Imagine the following
scenario: Your child has just been diagnosed with a
rare form of leukemia. The doctor sits you down and
says, "I have good news and bad news. The good news is
that the disease can now be treated successfully. The
bad news is that the treatment was discovered by an
Indian scientist, and the drugs are produced by a
leading Indian pharmaceutical company." Actually,
that's not really bad news, is it?
Third, at a minimum, Indian competition and
outsourcing by American companies will lower the cost
and improve the quality of all kinds of goods and
services. Do you remember the crap that Detroit
produced before Honda and Toyota became serious
players in the American market? (True, Detroit still
produces a shocking amount of crap, but now we don't
have to buy it, as GM shareholders and bondholders
have learned.)
Cheaper imports from places like India or China are
just like a tax cut; there is more money left in your
wallet at the end of the month. And they create
American jobs, too, which is less intuitive and
therefore often overlooked. If you save money on
cheaper cotton towels, much of that extra cash is
likely to be spent on American goods and services. A
Canadian trade minister made this point to me once
when he asked rhetorically, "Look, a DVD player used
to cost $500. Now it costs $40. What are you doing
with the other $460?"
4. Because it's not China.
China has an economy that's growing even faster than
India's. But China still has some major issues -- like
the whole autocracy and repression thing.
I speak from experience on this one. In 1989, my wife
and I were in Lhasa, Tibet, for several weeks that
coincided with the 30th anniversary of the Dalai
Lama's flight. The Tibetans held huge protests, and
the Chinese responded with a warm-up exercise for
Tiananmen Square: Encircling the city with tanks,
shooting protesters, arresting journalists -- the
whole totalitarian starter kit.
China is a geopolitical problem waiting to happen,
whether it's Tibet, Taiwan, encroachment in the South
China Sea, selling weapons to nasty regimes, or any
number of other problems that stem from being an
autocracy on the move. Which brings us back to our new
ally in that part of the world: India.
If China is the bad drunk at a party where a lot of
liquor is being served, then India is the muscular guy
in the corner quaffing mineral water. He looks like a
good person to get to know. When the U.S. Ambassador
to India David Mulford spoke in Chicago not long ago,
he predicted that the U.S.-India relationship will
become America's most important strategic partnership.
I fully understand that an ascendant India, like any
other economic change, creates problems. The first is
energy. On the fossil fuel front, the whole world is
locked in a zero-sum game. Every newly prosperous
high-tech worker in Bangalore (or Beijing or Bangkok)
wants a car or at least a "two wheeler." That new
demand for oil is a key reason prices are
skyrocketing. The only long-term answer is far more
investment in alternative energy -- but that's another
column.
The second challenge will be taking care of those who
are "outsourced." Capitalism does a great job of
rewarding those who build a better (or cheaper)
mousetrap. It's not so good at taking care of those
who produced the old mousetrap. I've pointed out in an
earlier column that technology displaces more American
workers than trade -- with India or anywhere else --
but that's a semantic point to anyone who gets a pink
slip. The long-term solution is upgrading skills.
I know that there are lots of things to hope for in
2006. Add one to your list: Continued growth for the
1-billion-plus people in the world's most vibrant
democracy. You won't regret it.

Thanks,
Sagar Yerramsetti.

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