Wednesday, October 15, 2008

Indian Economy Shall Continue To Lag Until ...

This is in response to a question asked of me by a fellow Xinger!

We cannot compare the economy / markets out of context. The markets in the west evolved. The markets in India are playing catch up. Somebody, correct me if I am wrong, but India has not invented a single instrument that is used in the Indian economy / markets. It is all copied from the west.

There are advantages and disadvantages in doing so.

First the advantages:

1) India gets to pick up only the successful experiements.
2) India avoids the pitfalls that the western economies go through.

An example: Indian markets never saw anything like junk bonds. The phenomenon started and finished before India could make up its mind (or was not in a state to implement it).

Now, is it a good thing to play catch up? So, the disadvantages:

1) India is forever playing catchup.
2) Borrowed ideas may not always be optimum. Plug and play does not always work - sometimes you need to fall and get up stronger.

So the advice is ... stop aping.

And I am not sure about the strong, vibrant industrial base. It is better than what it was but I am a little sceptic. No country can prosper without a solid foundation. The solid foundation for material prosperity lies in strong fundamental research in sciences. That sadly is missing. In the initial years after independence there was an emphasis on fundamental research. That has now gone for a toss. Too much emphasis on Information technology(IT) and IT enabled Services (ITeS).

The fact India is launching a moon mission is not because of our strength of current scientific base. Most of the ISRO (Indian Space Research Organisation) scientists are a generation old (and my hats off to them). I know this because a substantial population of our ex-ISRO scientists are in software.

Note: The picture used here belongs to Lies Meirlaen. To see more of her photographs visit her gallery here.

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