Giant Ships and the Importance of Frequent Updates

Giant ships do not change directions quickly hence very frequent updates make little sense. But this is as important a moment as any to undertake such an exercise.

The Three Overlapping Buckets of the India Story

There are many ways to slice and dice, but I divide the India story into three overlapping buckets that together create a virtuous cycle:

• Scale: Scale leads to innovation as more talent stays/comes back (unlike for smaller EMs).
• Innovation: Innovation leads to more economic growth and tax revenues, which in turn strengthens a market democracy and the social contract.
• Democracy: Democracy ensures that scale is maintained thanks to unity in diversity, while making progress easier.

A place where they all three converge in the form of a concrete example to begin with is how many top engineers and equivalent young Indian talent are either staying back in, or returning to, India.

The Brain Drain and Gain in India

Sandipan Deb recently wrote a piece titled “Bullish on India – Why more IIT and MBA grads are returning to work in India”. Another piece says about a third of India’s top engineering talent returns to the country, which is much lower than earlier. A report from 2017 said that an astonishing 84% of IIT Bombay alumni (who graduated after 2000) have stayed back in the country.

Now brain drain and gain are slightly overused concepts – circulation is relevant, so are misunderstood opportunities, and a strong diaspora can be a huge asset – nonetheless, net or final emigration of top talent is indeed a relevant issue for many emerging markets or economies.

India at a per-capita income of $2,500, which is about 20% of the world average at market exchange rates and about 40-50% on a cost adjusted basis. However, its scale has reached a point where, as the above links show, the best and brightest are increasingly choosing to stay in India – never mind the ups and downs of startup funding cycles – and even if a substantial fraction emigrates, in absolute numbers there are enough who stay back. India probably overtook China as the world’s biggest polity this year.

Decades of Expanding Investments

This stage is the result of decades of expanding, though imperfect, investments within the world’s largest democracy – see below four charts below (source: World Bank.) Some leading indicators for growth are below:

• India’s gross secondary school enrolment ratio has just about surpassed the global average. Quality concerns still very much exist, but that is a global phenomenon as well.