The Indian Model: What China and Nigeria can Learn from India

Infosys Early Employees Circa 1980's [infosys.com]
Infosys Founders Circa 1980’s [infosys.com]
Infosys Founders Circa 2000's [infosys.com]
Infosys Founders Circa 2000’s [infosys.com]
I have been closely watching the developments in India recently and the more I know about the country the more excited and optimistic I get about the country’s future. China and Nigeria are two other countries which have evoked similar optimistic sentiments in me. I look at India as a weighted average of the strengths and weaknesses of both countries.

I first became intimately acquainted with the political and economic developments in India when researching the first stock I ever bought, Fairfax Financial. I then became fascinated by their technology sector while searching for billionaire philanthropists in third-world countries and coming across three future-mentors, Narayana Murthy, Azim Premji and especially Prem Watsa. Reading about these two topics makes me excited to witness how the lives of over a billion people will be transformed, how to meaningfully contribute to this change and how to apply their lessons to Nigeria.

Part of the inspiration for this article comes from Fairfax Financial and Fairfax India Chairman’s Letter to Shareholders which I recommend reading:

1. Fairfax Financial 2015 Annual Report
2. Fairfax India 2015 Annual Report

    1. My thesis can be summarized as follows:

 

  1. India’s new prime minister, Narendra Modi is pro-business and anti-corruption. Of course, all politicians say this but his actions have generally backed up his words. For example, India’s new tax bill which changes the tax system from a patchwork of national, state and local taxes to a single, unified system. The issue has been debated for over a decade, they say it is one of the most significant reforms to pass in the last 25 years, effects are expected to start materializing in 2018.
  2. The most exciting development is the Aadhaar network, which essentially provides a biometric identity for over 970 million people. A lot of developing countries have problems keeping track of their lower class population which translates into problems with universal education, healthcare, microfinance etc. this effectively solves that issue.
  3. An advantage which India might have over China is better intellectual property protection. This advantage is tentative because China has been doing very well, studying the moves of others, “borrowing” what works, omitting what doesn’t and making a lot of money. However, It is very difficult to say what the lifespan for this strategy is but history has shown us that betting against China is like betting against the house in Las Vegas.
  4. Their post-secondary education system is impressive. More importantly, their attitude towards education is inspiring. There is a huge emphasis on the sciences, and students are heavily encouraged towards STEM fields. The Indian Institutes of Technology (IITs) are absolutely phenomenal and the alumni list is impressive. Contrast this with US which graduated 82,000 cosmetology students, 35,000 advertising students last year and 32,000 mechanical engineers.
  5. India’s IT sector also gets me quite excited, more specifically Wipro and Infosys are two companies which I am quite optimistic about going forward. Though I have to temper my optimism slightly. I like the two founders on a personal level, I like their ‘story’ and I am probably letting that slightly cloud my judgement . Interning in the IT Department of a bank I was amazed by the amount of times I walked around the office and my capitalist reflex kicked in thinking “a majority of these jobs could be automated or outsourced in the near future”. The amazing thing about Indian IT is how quickly they are propagating up the value chain. Gone are the days of ‘call center in India’ eventually (if not already) entire software projects will be outsourced.
  6. The bureaucracy and cronyism is still an issue that still needs more work to be done. The best example is the resignation of the Governor of the Indian Central bank, Mr. Raghuram Rajan. Mr . Rajan publically warned against worrisome credit problems before the 2008 financial crisis in 2005 Jackson Hole Symposiom, in front of many past and present central bank governors and is one of the few central bank governors reluctant to lower interest rates too easily. He was also critical of a complacency in the Indian government and economy and by developing-country standards he was seen as outspoken and mildly controversial. Internationally, he is regarded as a prescient man of great integrity and it was very likely he was pressured to step aside by vested interests in the government. Ensuring a true meritocracy where the best person is given the job,  will be another issue the Indian government must overcome.

The Eminent Raghuram Rajan [wikipedia.org]
Indian Central Bank Governor, Raghuram Rajan [wikipedia.org]
So I am currently thinking of how I can contribute and be a part of the amazing things happening in India.
It would be very interesting to think about how Nigeria and similar countries (Ghana, Pakistan, North Korea etc.) can learn from and apply the Indian model.