Monday, August 18, 2014

India as a zone of secular stagnation

Have we ever bothered to notice one serious trend in India in last couple of decades? Whatever business stream generates profits more than the average return on FD (Fixed Deposit), suddenly finds a deluge of investments even if these investments are not legal. Think of thousands of engineering colleges, business schools, B Ed colleges, Electronics showrooms, Shopping Malls, CBSE Schools, Real Estate business, Gold jewellery, telecom business and many more. The profitable business cycle shrinks so fast that it soon turns into a negative zone where returns are less than interest earned on a FD. It is ironical wherever the money moves, a short stint of profit is followed by a long-term secular stagnation of profits. In last sixty years, the share of industry in the GDP has not drastically improved (not even doubled or increased by double digits even). The fact is that all businesses are dependent on the climate of Indian business that feeds upon the inertia of the past. Private money follows a linear pattern and not a holistic design in India. Improvisation and research are the last priorities in the Indian business. The upper middle class that holds money, is actually sitting with an education system that is non-innovative, a government system that is deeply fragmented and dysfunctional and the institutions that are outdated. Indian money men are the poorest chaps on earth these days. Think of a businessman who invested 2 crores on his Electronics showroom some three years back and today, he is running daily losses because of losing business to e-retail giants. The best of business efforts are ending up in a long-term loss making proposition which one assumes to survive through because the debt burden keeps postponing the immediate shock but keeps increasing the vulnerability. The real reason for this sustained loss of money and effort is the prevailing deluge of herd mentality. Everybody thinks short term and everybody suffers in long term. We need to build business models where human intelligence is more critical than simply the availability of money capital. What is made with earned wisdom will stay with us for years and decades. What makes Germany a world manufacturing nation despite global recession? What makes US entrepreneurial hub of the world? What makes Britain the global financial centre? These are the goals that were decided decades back (if not centuries) and pursued with rigour whatever party may rule the country.


pradip said...

I wish new government in India should focus on a new education policy which is affordable to all sections of our society.

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