Where Are We? Where Are We Going?

#1
I wanted to double-check the optimism about India's growth against reality.

Personally, I do not feel that my financial position has improved over the past 3-4 years. Salary has grown at a snail's pace while inflation varied between 8-10%. I feel the net result is that my buying power has actually decreased and I feel less financially secure.

To check how others feel, I conducted a (not very scientific) survey. I asked by neighbours and friends of what they though about their own and country's growth. The answer was unanimously negative. Everyone felt that they themselves and the country were better 3-4 years ago.

Another factor I checked was the content of Times Ascent. (Times Ascent is the jobs supplement provided with TOI every Wednesday). Around 3-4 years ago, this used to be a thick supplement filled with jobs available across a wide spectrum of industries. Specifically, top IT companies had a minimum half-page ads. Reading this supplement gave one a good feeling about India. Now the same supplement is a lot thinner. The number of available positions is a lot less in comparison. I don't feel the same optimism now.

The next factor is hiring in the IT sector. (Not sure how to extrapolate this to the economy in general)
3-4 years ago, hiring was in full swing at all levels. From campus hiring to top-levels. Now entry-level hiring is extremely low to non-existent.

In addition to these qualitative indicators, I tried to cross-check with quantitative indications. I checked the EPS growth of the BSE-500 index. BSE-500 index represents 93% of the market-capitalization of the BSE and captures 20 industries. I general I felt this could be a good barometer for the country.

[EPS data obtained from historical data for the Index. EPS calculated as (index at close) / (P/E ratio)]

The EPS of the index on 11-Nov at various years is:
2011 - Rs. 380.69
2010 - Rs. 363.82
2009 - Rs. 314.94
2008 - Rs. 297.96
2007 - Rs. 295.64
[Alchemist, please seriously consider implementing some way for presenting tabular data in posts]

The growth rates (CAGR) over the past 1,2,3 & 4 years are 4.64%, 9.94%, 8.51% & 6.53% respectively.

When you consider inflation was considerable during this period, the "real" growth may be zero to non-existent (if not negative).

Agriculture represents a significant part of the economy and work-force. However agricultural land is very fragmented and productivity is very low compared to other countries. [See this link]

Starting and running a business in India is very difficult, we rank 132/183 in overall ease of doing business and 166/183 in starting a new business.[See this link] In this scenario, how can sustained growth be possible?

The education system of the country is broken. In effect the entry level work-force is under-skilled and not employable. This applies even to graduates from prestigious institutions.

A BSc student gets general science skills but no industry skills. Even engineering graduates are taught as per outdated curricula. The head of mechanical department of a very prestigious institution in Pune told me that the entire course is very theoretical, a mechanical engineer would have trouble changing the spark-plug on a car even though the theory is covered in the course.

The same person also is in charge of the Academy-Industry connect group and says that the repeated feedback from industry is that the students need to be completely re-educated after being hired.

So in theory we have a large young population that can feed growth but in practice this is not the case.

The government is struggling just to survive and reforms have largely taken a back-seat. Nothing that will spur growth has come out in the past 5 years and the situation is likely to continue for the rest of this government's term.

I am not very optimistic about our growth and future prospects. At best we will continue to prod along, never realizing our true (theoretical) potential.
 

Alchemist

Administrator
Staff member
#2
Even engineering graduates are taught as per outdated curricula. The head of mechanical department of a very prestigious institution in Pune told me that the entire course is very theoretical, a mechanical engineer would have trouble changing the spark-plug on a car even though the theory is covered in the course.

The same person also is in charge of the Academy-Industry connect group and says that the repeated feedback from industry is that the students need to be completely re-educated after being hired.
There is nothing wrong with the curricula used in Indian engineering colleges.

The basics of engineering have not changed in the last few decades and are unlikely to change in the next few thousand years.

Students in the western world follow more or less a similar curricula.

The problem is with the teachers and the students.

Indians are good learners when taught by others, but are not so good when it comes to thinking for themself, learning by experimentation/observation and innovation.
 
#3
There is nothing wrong with the curricula used in Indian engineering colleges.

The basics of engineering have not changed in the last few decades and are unlikely to change in the next few thousand years.

Students in the western world follow more or less a similar curricula.

The problem is with the teachers and the students.

Indians are good learners when taught by others, but are not so good when it comes to thinking for themself, learning by experimentation/observation and innovation.
The Basic fundamentals theory is universal. So that part is fine.

But the curriculum tends to focus to much on fundamentals and skips "Application".

I am yet to meet an electronics engineering pass-out who could design any thing of even medium complexity using contemporary technology. [I myself fell in that category when I passed out].

I am yet to meet an electrical engineer who could even fix a switch in his house; forget motors, generators or power control.

I am yet to meet a mechanical engineer who can even try a simple oil change or spark-plug change himself.

Surely, something is wrong somewhere!

I worked in Germany for some time. Things are better there because as part of the engineering course, each student does apprenticeship sponsored by the industry. So people actually spend 100% of their time working in the industry for 1 or 2 years which prepares them to work when they actually pass out.

In my time the industry exposure was limited to one project to be submitted as part of the final year. This was a complete sham.
 
#4
I am also pessimistic about IT. There are various reasons. The cost in India has risen considerably. At this time the average salary in India is approx 40-50% of the salaries in US. And the quality is much lower when you compare with US or Russia. With the current Inflation rate, Either the relative salaries in software will reduce or cost will soon be comparable with salaries in US

There is also threat from other countries such as China.

Third the no. of experienced people are rising but the companies are not growing as fast as before. There is more demand for people with 2-5 years of experience. But if you have 10+ years of experience, it is very difficult to find a new job.

Personally, I do not feel that my financial position has improved over the past 3-4 years. Salary has grown at a snail's pace while inflation varied between 8-10%. I feel the net result is that my buying power has actually decreased and I feel less financially secure.
You are lucky that your salary has increased in past 3-4 years. There are many people (including me), who are getting less salary compared to what they were getting 3 years back.
 
#5
Education

1st year Engineering in Bombay has C++ as a subject in the first semester.

- The course deals with the state of C++ in the early 90's. C++ has radically changed in the last 20 years, but syllabus covers only the vary basics. Templates are barely touched. STL is not even mentioned. If someone who got 100 in this subject opened C++PL3Ed by Stroustrup, he wouldn't be able to even comprehend the 1st chapter.

- University doesn't specify which compiler to use. But every college uses Turbo C/C++. This is a compiler which is dead for the last 15 years or more. It's a 16 bit compiler. It doesn't even produce 32 bit code. It doesn't support most modern features of C++. The STL is not included in this compiler. Like the syllabus, the compiler is state of the art circa 1990

- Inspite of this, this subject had the most dismal passing percentage. The solution by the university was to increase the amount of theory asked in the exams & reduce the programs. i.e. you could mug up theory & pass a programming subject without knowing programming.

- In the exams, more or less the same programs get asked. So students typically mug up 15-20 programs for the exam.
 
#6
I created this thread to post a viewpoint on the Indian Economy in general.

This thread is not meant to be IT specific even tough I used some arguments that apply to IT.

This thread is certainly not meant to provide an authoritive opinion on the state of Indian education :D.

We are in danger of going off-topic.
 
#7
We see only what the media shows us. Right now everything seems very negative in media's perspective. My opinion is there is irresponsible behavior of the media contributing to some of this.

Here are the negatives

There are corruption issues which lead to transparency issues both in government and private sectors and as a result people are not knowing which companies to believe in. A good example is 2g scam which effected telecom,real estate. So many leaders and MP's are in Jail. Second one is iron ore mining scam and many companies in South India are involved in it. Then there is Everonn etc

Inflation is the next big killer, everyday we only see petrol hike,coal price hike and as a result food inflation.

Internal agitations like Telangana effecting the growth of the economy.

Moody's downgrading Indian Banking system

All said and done, Ease of doing business index rank is 134 out of 183 countries, we are below pakistan. Most of the countries below us are african countries

Terrorism causing uncertainty effecting tourism, hotel business, hurting India's image even though I personally think it hasnt done great damage to the economy there are still a lot of holes that need to be plugged

Weak global economy effecting companies, forex losses, losing business in Europe, low costs from US and weak margins, uncertain economy and occupy wall street agitations, arab spring effecting middle east etc.

Chances of India waging war against neighboring countries is low but after 26/11 US was scared that India might attack Pakistan. China is increasing its military power like no one's business and it is scary and everyone knows what China is capable of.


But there are positives also,

Corruption is there but action is being taken, Judges are being very strict and sparing no one irrespective of their position.

RBI and financial policies making India a robust economy and shielding India up to an extent from recession.

Growing economy, young population, increasing employment opportunities will contribute well to the growth.

Quality of education might be weak but the literacy rate is increasing and people are aware that quality needs to be improved. I'm hopeful that by the next generation quality will improve because you and everyone want their children to have good quality education. By the way companies like Tata Interactive, Everonn etc are getting into e-learning, coming with low cost tablets for $35 and poor children are using them..Imagine that..someone who cannot afford a proper meal is using a tablet for education.

Increasing awareness, technology innovation (not as much as US or China but nevertheless there is improvement and growing) will contribute to so many things

I feel India is going through a transitional phase and whatever the negatives are all momentary. The only problem is the duration of the transition cannot be predicted. It can be 5 years or 15 or 50 years. But because we are in technology age and people are becoming increasingly aware and becoming well connected through social media, mobile etc, the transition will shorten tremendously as opposed to the changes in the past. Look at how quickly people in the middle east were able to dethrone gaddafi, mubarak etc. Earlier all this was impossible in such a short span. People have reacted very quickly to the Anna Hazare movement through media such as facebook, twitter etc, although it another thing whether Anna has done right or wrong. We are country with so many contradictions but still living together and have been doing this since centuries.Short term there are worries definitely, but people are still doing their business, hanging on with strength and determination making India a resilient country.
 
#8
What are the systemic risks for the Indian Economy?

I can think of three big risks:

1. Outstanding debt of Realty sector exceeds Rs 1 Lakh Crore. This sector is facing a slow-down so it is possible that some loans may turn bad. See this link.
2. Outstanding debt of the power sector and SEBs in particular exceed Rs 1 Lakh Crore. CRISIL estimates that loans of around Rs 56K Crore may go bad. See this link.
3. Outstanding debt of Oil companies exceeds Rs 1.3 Lakh Crore. These companies are in no position to pay back the debt and are totally dependent on the Government. See this link.

Bad debt is a key reason for companies and Nations to go bankrupt. So these factors represent (in my opinion) a risk to our economy, especially as no solution or game-plan is in sight to manage this risk.
 
Last edited:
#9
I was trying to determine what the employment situation is for the youth (18-25 yrs) in India. I could not find any published data on this. (Can anyone provide inputs?)

Every year, lakhs of youth become of employable age. A small percentage may join family businesses or become entrepreneurs, but a vast majority would be looking for employment. The economy has grown at a reasonable rate in the past 5-6 years but has the economy grown enough to absorb these youth?

I think the core industry, services or agriculture has not been able to absorb them. By a lucky twist of faith, the past 5-6 years have been marked with a happy coincidence of additional job opportunities:

1. Growth of BPO jobs that on some accounts now employ 3,50,000 people. Mostly youth.
2. Contract jobs in manufacturing and service industries.
3. Growth of malls and related infrastructure that mostly employ youth.

These were able to absorb some of the additional flow. But how does the scenario look 5 years in to the future?

BPO jobs are under threat by competition from other countries [See this post]. Even otherwise this industry is strange. In other industries, as you work and gain experience, you become more valuable to the organization. But the BPO industry handles low value work (answering telephone calls or doing repeatable work). As you grow your cost grows and you start becoming a liability to the company. It becomes easier for the company to train and hire new people at lower salaries. So I wonder that when all the young people in the BPO industry cross 30 years of age, what happens? If they can continue, will the industry grow fast enough to keep hiring? If not, what will happen to these 'old' people? Currently the number of people in the 35+ age group in this industry is miniscule, so it will be uncharted territory.

Contract jobs have already started to become a problem. In the recent labour problems at the Maruti Suzuki plant, a key issue was that the quantum of contract labour at the plants has exceeded 30%. These people are underpaid and do not receive benefits. The Manufacturing sectors looked at contract hiring instead of employment to keep costs down. With contract labour now becoming an issue, what will happen? Will they increase "Employees"? Or will they continue to expand "contract" labour?

The jobs attached to "new-age" opportunities like malls also have an age time bomb. People working at Cinemas, shops, McDonalds, Pizza Hut, KFC etc in these malls are all young. But what happens as they age? You rarely see 30+ people in these jobs! Can they retain their jobs? If they do, will new people get opportunities?
 
#10
Can India be an Economic Power?

In my opinion, to become an economic power a nation needs one or more of the following attributes:

Innovation
This covers emphasis on R&D, focus on science and technology, creation of world beating products and ideas etc.
I would judge a nation on this parameter by the following criteria: Take a really innovative product or idea. Tell some lay person the innovation was form the country X and judge his reaction. If he is very surprised, then that country is low on Innovation. If he rather expects it to come from that country, then that country is innovative.
So if tomorrow there is news that some scientists have created a technology that will double computer processing power, then I will be extremely surprised if that technology was invented in India but not so much if the scientists were Americans or Japanese or German.

Competitiveness
Even if a country cannot innovate, it can exert influence by being competitive in producing goods and services. This requires the ability to understand new products and ideas and then operationalize them in to an ability to delivery those products and ideas in a cost effective manner. The Chinese are doing this. The Koreans and Taiwanese did this 10 years ago and have now climbed the ladder to becoming Innovative. India has some success in the IT field, but otherwise China is soundly kicking us on our behinds.

Natural Resources
A country may be plain lucky and be blessed by natural resources that can propel itself to economic growth and power. The Gulf countries and Australia are lucky here. India is not so lucky.

Business Environment
Most of a nation's economy is tied to business (Agriculture can also be loosely termed a business in this sense). Therefore indirectly we can say that the easier it is to do business in a country, the greater the probability that it is (or will soon be) an economic power. The Ratings published in this regard [link] bear this out.

Honesty
In my opinion this is the most important factor. If you consider the world of high-finance and mega bucks government contracts, almost all countries will display an element of dishonesty. However honesty here is considered as perceived by ordinary citizens in their day to day dealings. In the US if a traffic cop catches you, it is highly unlikely that a bribe transaction will take place. In India if a traffic cop catches you, it is highly unlikely that a bribe transaction will NOT take place. I have stayed for extended periods in Japan, Australia, Europe and US and have not come across even a single instance of corruption or general dishonesty. Sadly, it is not so in India.

Based on these factors, I believe that India will always be an "also ran" but never a "power" in any sense.
 
#14
Something to ponder on:

[all figure are per annum]

Per Capita income of US in 2010-2011 was around $40,000 [Source]

Average Chief Executive [CEO] pay in US in the same time frame was around $175,000 [Source]

So Ratio of average top level pay to per capita is 4.375:1. This seems quite reasonable.

Per Capita income in India is Rs 53,331. [Source]

4.375 times that is Rs 2,33,323. :rofl:

I wonder what the average Chief Executive pay is in India. I am sure that the deviation between Chief Executive pay to per capita pay is HUGE.
 
#17
While it is nobody’s case that the Government should splurge mindlessly, being austere cannot be its sole reason for existence.
Forgetting the rest of the article, the above is a remarkably stupid statement. A Govt which doesn't exist is more austere than an Austere Government which exists. So Austerity can never be the sole reason for existence. So I don't know what the hell is the point of saying it - my mind boggles on reading it.
 
#19
For many years, I was pessimistic on India's economic growth. I was not convinced of India's co-called economic emergence.

However the recent issues with India's currency and markets may prove to be a blessing in disguise. With elections around the corner and all of the populist agenda (RTE, NREGA, Food Security Bill) of the UPA done (well, almost done), the government may be forced to bring in concrete reforms.

I hope some good does materialize out of this. Maybe some reforms could result in actually making India competitive. Fingers crossed.
 
Top