Why India can’t grow as fast as China?

About 3 days ago I was sent a email by a friend about the new version of the Ant and Grasshopper fable.

Here it goes:
First the original version:
Ant & Grasshopper The Ant works hard in the withering heat all summer building its house and laying up supplies for the winter. The Grasshopper thinks the Ant is a fool and laughs & dances & plays the summer away. Come winter, the Ant is warm and well fed. The Grasshopper has no food or shelter so he dies out in the cold.

Now,
The new Indian Version:
The Ant works hard in the withering heat all summer building its house and laying up supplies for the winter. The Grasshopper thinks the Ant’s a fool and laughs & dances & plays the summer away. Come winter, the shivering Grasshopper calls a press conference and demands to know why the Ant should be allowed to be warm and well fed while others are cold and starving.

NDTV, BBC, CNN show up to provide pictures of the shivering Grasshopper next to a video of the Ant in his comfortable home with a table filled with food. The World is stunned by the sharp contrast. How can this be that this poor Grasshopper is allowed to suffer so?

Arundhati Roy (a booker prize winning author) stages a demonstration in front of the Ant’s house. Medha Patkar (an activist) goes on a fast along with other Grasshoppers demanding that Grasshoppers be relocated to warmer climates during winter. Amnesty International and Koffi Annan criticizes the Indian Government for not upholding the fundamental rights of the Grasshopper. The Internet is flooded with online petitions seeking support to the Grasshopper (many promising Heaven and Everlasting Peace for prompt support as against the wrath of God for non-compliance).

Opposition MPs stage a walkout. Left parties call for “Bharat Bandh (India Closed strike)” in West Bengal and Kerala (two states where leftist are in power) demanding a Judicial Enquiry. CPM, the party in power in Kerala, immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among Ants and Grasshoppers. Lalu Prasad Yadav (the railways minister) allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly named as the ‘Grasshopper Rath’.

Finally, the Judicial Committee drafts the ‘ Prevention of Terrorism Against Grasshoppers Act’ [POTAGA], with effect from the beginning of the winter. Arjun Singh, another cabinet minister, makes ‘Special Reservation’ for Grasshoppers in Educational Institutions & in Government Services. The Ant is fined for failing to comply with POTAGA and having nothing left to pay his retroactive taxes, it’s home is confiscated by the Government and handed over to the Grasshopper in a ceremony covered by NDTV.

Arundhati Roy calls it ‘ A Triumph of Justice ‘. Lalu calls it ‘Socialistic Justice ‘. CPM calls it the ‘Revolutionary Resurgence of the Downtrodden ‘ Koffi Annan invites the Grasshopper to address the UN General Assembly.

Many years later…
The Ant has since migrated to the US and set up a multi-billion dollar company in Silicon Valley. 100s of Grasshoppers still die of starvation despite reservation somewhere in India … As a result of loosing lot of hard working Ants and feeding the Grasshoppers,

India is still a developing country!!!
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Well, the story kind of summarizes some flaws of coalition governments, hung parliaments, multiparty regional (rather than national) politics, and above all of democracy.

Now, I don’t mean to degrade any of them as they have their own advantages and I believe in the power of democracy. For this blog though I wish to focus on a completely different aspect of Indian economy and want to argue why that has been a hindrance factor for growth.

The factor which I am talking about here is the ‘social web’. It is one of the most powerful forces which at times is said to have kept the Indians glued with each other but at the same time it has created a wall too hard to crack or break if you wish to grow.

This social web pervades almost all aspects of Indian being. For example, an entrepreneur running an SME or a larger organization has to hire first from family and relatives rather than most deserving candidates. Some would argue it is not the case anymore and might quote a few examples however, when seen from the general perspective one may be able to find large number of organizations stifled due the incompetences and ineffectiveness of their employees.

In a professional organization, these employees won’t be hired to start with and moreover, if they are able to cross that first hurdle and become employees would be fired to create space for deserving candidates.

I was talking to a very close Indian friend of mine who is a globe trotter and was visiting us for about a week in the UK and stated that the Indian system grows because of this social web. I somehow disagree. It actually hampers growth.

In a way, one can observe the positive impact of the ‘social web’ that it provides those incompetent and ineffective people a job which in turn help keep their families afloat. However, when this is done and observed over a longer period (as it is in case of India) it creates a web of ineffectiveness. It also makes those ineffective and incompetent people think that they can survive without improving much.

That fallacy has much larger an impact on growth than anything else according to me.

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