New Delhi: In their latest book, 'Behold the Leviathan: The Unusual Rise of Modern India', Saurabh Mukherjea, founder and Chief Investment Officer at Marcellus Investment Managers, and Nandita Rajhansa, an economist at the firm, provide a fascinating look at how 1.5 billion Indians are coming together in ways that are producing social and economic outcomes unlike anything seen in other emerging economies.
Published by Penguin, the book reveals how peninsular India has emerged as the world’s fastest-growing region. This success is driven by a unique combination of knowledge-based manufacturing— such as the iPhone's latest version, which was made in India—and the growth of over 1,600 Global Capability Centres. These centres go beyond IT services, offering everything from sales and marketing to HR, finance, and accounting, and supporting the diverse needs of major Western companies.
Over the course of two years, the authors travelled extensively across India, interviewing over fifty of the country’s leading figures in business, government, media, and academia. The result is a book that experts are calling "a firecracker of a read," one that will force policymakers, business leaders, and opinion-makers to rethink their long-standing assumptions about India's development.
ETV Bharat: You mentioned that India feels safer and more secure now than in the past. What do you think has brought about this change, and who do you believe deserves the most credit for it?
Authors: In the opening chapter of 'Behold the Leviathan: the Unusual Rise of Modern India' we have shown that the number of innocent Indians killed by terrorists and insurgents each year has dropped from 2000 at the turn of the century to less than 200 today. We believe three factors have contributed to this life-affirming trend. Firstly, over the last 50 years the Indian state has shown remarkable resolve in fighting back against separatist elements. Be it the Naxals, the Khalistanis or the pro-Pakistan elements in J&K, the Indian state has thrown cops, soldiers and bullets at them at such a scale that few people in their right mind now aspire to rise against the Republic of India.
Secondly, Pakistan – arguably the biggest sponsor of terror in India – has seen its economy disintegrate over the past 20 years and that has meant a dramatic reduction in terror funding. And thirdly, post-liberalisation in 1991, as the Indian economy has blossomed, hundreds of millions of Indians have been lifted out of poverty. As these people have realised that the future will be better than the past, the temptation to do stupid things has dramatically reduced.
ETV Bharat: How did India begin its journey towards economic reforms? From what you've researched, how did India’s then-Prime Minister and Finance Minister turn a major crisis into a big opportunity for the country?
Authors: In our book, we have described the events leading up to the unforgettable summer of 1991. Basically, the Indian economy had a good run in the mid-1980s but then got overheated and consumption ran ahead of India's modest savings in that era. This in turn triggered a balance of payments problem which thanks to the oil price surge triggered by the Gulf War of 1990 became a full-blown balance of payments crisis. This crisis meant that India ran out of foreign exchange reserves and effectively was about to go bankrupt when (then) Prime Minister PV Narasimha Rao and (then) Finance Minister Manmohan Singh intervened to turn the crisis into an opportunity to rollback the 'License Raj'.
Out went four decades of stifling rules and regulations which little other than encourage rent-seeking by babus. In came a new free market regime which incentivised hard work and enterprise. Within a couple of years, economic growth took off, foreign exchange reserves started burgeoning. From being one of the poorest, slowest growing countries in the world, we started rising. Today, India has the world’s fourth-largest stock market, has the world’s fourth-largest reserves and is the world’s fifth-largest economy. We wish our political leaders sold this narrative more so that voters can understand how essential further economic liberalisation is.
ETV Bharat: If we look back a century, how do you see India’s development path taking shape over the years? And how do you think the foundations laid back then are still helping the country today?
Authors: A century ago India was exceptionally fortunate to have outstanding thinkers on the Indian economy. These four thinkers – Dadabhai Naoroji, Gopalkrishna Gokhale, Justice (Mahadev Govind) Ranade and Mahatma Gandhi – laid the intellectual foundations of the four central questions which still underpin policymaking in India. Dadabhai Naoroji asked whether India can 'gain' from global trade or will trade with the world 'drain' India. Justice Ranade posed the question should India pursue free-market driven economic development or state-driven development? Gokhale asked should the Government focus on ‘hard’ infrastructure or ‘soft’ infrastructure? And, finally that the most original of economic thinkers, Mahatma Gandhi asked should India be ‘atmanirbhar’ or should it focus on Ricardian comparative advantage? We owe a massive intellectual debt to these giants whose clarity of thought was a generation ahead of what anybody else in Asia was thinking. Modern economic policymaking in India is centred almost entirely around these four pivotal issues.
ETV Bharat: In today's growing economy, how have Indian women contributed to the workforce and overall economy? What were the top reforms or changes made by the governments that you think have really helped women rise in the workforce?
Authors: It was roughly a decade ago that India had more girls in primary school than boys. To get to that critical juncture, state governments across India had worked tirelessly to encourage parents to put their kids, especially their girls, into government schools. Today at every level of the Indian education system we have more girls studying than boys and the pass rates for girls is much higher than that of boys. Again, government schemes that incentivise parents to put their girls into school rather than make them do chores at home deserve a lot of credit.
Secondly, as the structure of the Indian economy post the 1991 reforms became more oriented to Services rather than Manufacturing or Agriculture, that helped women because in the Services sector physical muscle plays little or no role. Based on data from the RBI, we have shown that going by bank accounts, in urban areas women now have more money than men.
Thirdly, the Jandhan-Aadhar Mobile revolution along with UPI and social media has been enormously liberating for women as it has allowed them to set up small businesses whilst staying within the confines of the construct that conservative patriarchal families impose on Indian women. There is growing amounts of data that women run small businesses do better than those run by Indian men.
ETV Bharat: India is increasingly becoming a hub for entrepreneurs. From your observations, what kinds of entrepreneurs are thriving today, and how are they contributing to economic growth compared to earlier years?
Authors: In chapter 5 of the book we have shown that the composition of the business elite has changed significantly over the past 20 years. The dominant business elite no longer flaunt their IIT, IIM and Ivy Leave degrees. In fact, such people are increasingly a minority in India's boardroom. The dominant species in the boardroom is the local desi graduate who has business smarts, an understanding of how tech works and who can manage diverse teams. Roughly a million such individuals now run the country and their ascendancy can be seen in both the Income Tax data and in the Corporate Tax data.
ETV Bharat: With global dependence on China decreasing, it seems India is benefiting from this shift. But recently, China has altered its policies, and investments are once again moving back in that direction. How do you think this impacts India? What advantages and challenges do you foresee for India over the next 10 years with China still being a key player?
Authors: China's central challenge is not its economy. China’s central challenge is that its political leadership has decided to take on America in a geopolitical contest for world domination. That in turn has meant that the West is now looking for alternative sources of supplies for phones, medical devices and critical Pharma ingredients. In these industries and in many others, China is 10x India’s size. As a result, even if India takes 10% of China’s global market, these industries will double in India over the next few years.
ETV Bharat: India has long been a leader in IT services and business outsourcing. Looking ahead, how do you see the future of outsourcing jobs from India? What do you think India needs to do to keep up with global demand, especially in terms of skill development?
Authors: The penultimate chapter of the book focuses on the rapid increase in Global Capability Centres (GCCs) where not just IT Services but all white-collar office work – accounts, HR, sales, marketing, etc – is being shipped to India by giant European and American companies who cannot find people in their home countries who are willing & able to do this work. Even more encouragingly for India, the burgeoning of good roads and airports in small towns now means that these massive GCCs no longer have to come up in overcrowded cities like Bengaluru and the National Capital Region but can now be set up in smaller cities like Indore and Tirunulveli.
