India's development example shows the value of better policy choices.

This article first appeared in the Sunday Tribune and is republished with the permission of www.thebrenthurstfoundation.org

INDIA - I never imagined that I would find myself cross-legged among a group of Indian women farmers, the so-called poorest of the poor, in a country besotted with categorisation, learning about how financial access had transformed their lives. It's not as if banking is new to India, however. After all, these are the people who gave the world the mathematical "zero".

In My Early Life, Winston Churchill acknowledges the role that bankers played in the India of the Raj: "Native bankers... found them most agreeable; very fat, very urbane, quite honest, and mercilessly rapacious."

After years of hibernation, these "native bankers" and entrepreneurs have again been able to put their considerable skills to use.

In The World is Flat, Pulitzer Prize-winning author Tom Friedman argues how increasingly affordable telecommunications are erasing obstacles to international competition, "flattening" the world for those adaptable and skilled countries and entrepreneurs.

Friedman's book owes its title to a meeting he had with Nandan Nilekani, co-founder of India's second-largest IT company, Infosys. Nilekani, who by last year had taken a government job to roll out a national ID card, said countries like India could now compete for the global knowledge industry as never before, since the world had been levelled by the internet and market forces.

India is at once dynamic and chaotic, and quite inspirational. It shows what can be achieved if people are given half a chance by government.

Until the early 1990s India's economic development was stunted by its isolation from the world economy, and by the inefficiency of its government systems - the so-called "Licence Raj" - which sought to control the economy.

The reforms of the early 1990s, initiated by then Prime Minister PV Narasimha Rao, Finance Minister P Chidambaram, (now prime minister) Dr Manmohan Singh, and Dr Montek Singh, were based on the (partial) withdrawal of the government from interfering in the economy. The rupee was (partially) floated, state subsidies were reduced, and the economy was opened up to foreign investment, attracted by the large pool of people, talent and low incomes.

The overall results of India's liberalisation have been spectacular. More than 6% annual average (real) GDP growth since 1991 has bumped about 100m people from poverty into the middle classes.

India has moved on light years in little more than a decade. You could have a choice of cars in India in the 1980s: a white or black Hindustan Ambassador, based on a 1950s Morris Oxford. India has been continuously producing Enfield "Bullet" motorcycles, a 1931 single-cylinder design, in its Chennai factory since 1955; while Leyland's buses and trucks, once the pride of Harold Wilson's nationalised car industry, are also still in production.

Fifteen years ago, travel in India was courtesy of government services. Where Air India inefficiently dominated the skies, today the struggling national carrier has stiff competition from private airlines.

Or as Prakesh Rao, the head of the Electronics Industry Association of India, puts it: "The best thing that the government did was to get out of business. And the best example of this is in the IT sector."

India's IT industry grew from $100m in revenue in 1992 to more than $40bn in 2007. Infosys' revenue grew from $1.5m in 1992 to more than $4bn in 2008, with stock options creating more than 2 000 US dollar millionaires.

Bangalore is the epicentre of this flat world. Its software industry accounted for 98% of Karnataka state's $13bn in exports in 2007. About 1 400 hi-tech firms, as well as almost every major multinational, operate in the city. Bangalore has enjoyed economic growth averaging more than 10%, making it India's fastest-growing metropolis, home to more than 10 000 US dollar millionaires.

Bangalore's hi-tech advantages stem from its moderate climate and the long-term investment made by the government in related industries over the past five decades. The presence of government-funded space, aeronautics, machine tool and electronics firms spawned a legion of sub-contractors and necessary skills. This has leap-frogged into other sectors, notably bio-technology. Nearly half of India's 265 biotech companies have headquarters in the province.

India's ability to take up opportunities presented by globalisation and domestic liberalisation were related to its skills base. Despite high levels of illiteracy (nearly 40 percent, or 300m people), its skills base is impressive. Today India produces 2.5m graduates and 350 000 engineers each year. Its graduate pool is 1.5 times that of China's, and India produces more than five times as many engineers as the US.

The pace at which Indians made best use of these new opportunities relates also to the inducements. Whatever the Indian educational systems' drawbacks, more than a billion people striving to make a living and get ahead provides a certain competitive element.

For example, 400 000 applicants sit the preliminary Indian civil service exams each year, of which 8 000 to 10 000 are selected for the main exam comprising eight papers. Of these, about one-quarter are called for interviews for 900 posts. Only 32 officers are taken annually, for example, into the prestigious Indian foreign service.

Competition has been heightened by the slow dismantling of the caste system. "Reservation" of educational opportunities for so-called lower castes has pushed up the grade requirements for others. No student can now be guaranteed of a place in the sciences without a score of more than 90 percent.

But hi-tech is just part of the story.

Two hours west of Hyderabad, in the village of Konapur, 300 (of 366 families) judged to be poor or poorest of the poor are part of self-help groups. Numbering about teb women each, instigated by the UN in the 1960s, since 2000 these groups are part of the government's Self-Empowerment Rural Poverty Programme (SERP). Better training, voluntary enforced savings and access to banking finance have transformed lives.

The government can only do so much, and where it cannot help it is learning to leave it to the private sector to provide the technology to reduce corruption, extend health care, and improve transparency and competition.

In addition, in the past three years SERP has been integrated with the Community Managed Sustainable Agriculture scheme, an "organic revolution" focusing on the small-scale farmer using local rather than imported inputs.

Before SERP, farmers would have to borrow from lenders at exorbitant interest rates, sometimes 100 percent. Now they have scheduled repayment schemes at 12 percent interest, on which there is zero default. The women themselves keep the books, and plan to lease more land and diversify their sources of income.

Much remains to be done in India, but the results of the transition from its paltry growth rate before its liberal reforms of the early 1990s are impressive. India is now the fourth-largest economy in the world.

Its reforms encouraged entrepreneurship, the lifeblood of every economy. And the outlook of its entrepreneurs has put it in a better position to benefit from trade with the richer world outside.

For Africans and others, India's development example shows the value of better policy choices.

*Dr Greg Mills is heads the Brenthurst Foundation and is currently doing research in India.

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please send this to the ANCYL and the YCL. and the SACP & COSATU. seriously. by meetjoeblack on February 09 2010, 03:28 Find this comment inappropriate? Report it

Blinded by GREED It's unfortunate that the current government officials are still in the mode of accumulating personal [state] assets. They are so blinded by their greed that they fail to note that if the economy increases ten fold in size they stand to make a . .more hundred-fold more money for themselves. Their short-sighted anxiety to have it all NOW will kill any chance of there ever being a golden goose. We need a miracle to induce a change of mindset. . .less by denzil on February 09 2010, 04:43 Find this comment inappropriate? Report it

ANC Pay Attention Will our ANc brothers leave their parties and lavish lifestyles for a bit and pay attention to whats happening in India, China, Brazil - We are falling way behind our competition. India does not always blame British colonisation, like the Africans. . .more Nor does Brazil blame Portueguese colonisation. They are getting on with creating jobs and growth, something the ANC cannot seem to get right. . .less by BobHopes on February 09 2010, 05:14 Find this comment inappropriate? Report it

Problem is.....to replicate the Indian story in SA requires.... Integrity..hmmmm. Hard work. hmmmmm. Values....hmmmmm. Intelligent approaches....hmmmm. Acceptance of responsibility....hmmmm. Respect for others..hmmmm Anyone want to add to the list ? by Dave on February 09 2010, 05:19 Find this comment inappropriate? Report it

The posters above.......... are making the assumption that someone in the ANC is actually running this country. I look around and see a leaderless, rudderless, directionless, planless country drifting nowhere. by Cynic on February 09 2010, 05:35 Find this comment inappropriate? Report it

@ Et Al Come on guys.....2 reasons why this is not likely to happen to SA in the immediate or short term future. Our apartheid legacy which is still used as a crutch to paerdon current government inefficiencies and EDUCATION, EDUCATION, EDUCATION!!! The . .more Indian call centres are all staffed with professionals lawyers, doctors, CAs etc due to the lack of work....in our dreams. . .less by Kramer on February 09 2010, 05:40 Find this comment inappropriate? Report it

Liar 350 000 engineers per year, and only 32 officers are taken per year. How is that possible. by Dave on February 09 2010, 06:15 Find this comment inappropriate? Report it

GO FLY A KITE!!! My Greatgrandfather came from India penniless and indentured. My Grandparents were community educated and my parents bonded their home to give my siblings and I the best education academically and socially they could afford.My father imparted some . .more advice to me when I was young which has helped greatly expand our chain of businesses that employ over 80 people.Here it is (in a more eloquent format :-) ): The best way to conceptualize efficient management(including economic) is likening it kite flying...believe it or not. The aim is to get your kite very high up, but if you hold on too tightly to the strings and don't take risks with the wind,it never will. On the contrary if you allow the kite to soar with too much rope then you can't pull the rope tight when the wind suddenly dies down. It is such a mundanely simple concept with the analogy so apt that you could extend it to the depths of efficient management. I just hope that that the ANC realizes that they have become too attached to the string. They are suffocating this kite that has the ability to soar so so high in the hands of a wise handler. Sometimes I just wish a big, responsible and wise(and brave) father figure would appear and whip into shape these greedy little ill-bred kids who are fighting over this reel that doesn't belong to them. . .less by Trader666 on February 09 2010, 06:33 Find this comment inappropriate? Report it

Silence from the ANC is deafening The silence from the ANC is deafening. Their solutions to unemployment are either ludicrous or non-existant or so antiquated that they are doomed to fail, copied from Cuba and Zimbabwe and pre-liberation Russia. ANC must either hire some qualified . .more people or go back to school themselves or we are doomed to failure as a nation. . .less by Citizen Cane on February 09 2010, 06:45 Find this comment inappropriate? Report it

more @dave Honesty......mmm. Humility...........mmmm by mjs on February 09 2010, 06:45 Find this comment inappropriate? Report it

Indian cricket How the hell do they make Hashim Amla man of the match? That honour (CLEARLY) should go to Dale Steyn! Was the abjudicator smoking his socks at the time? This is a clear case of racism alive and well in India. by Rob on February 09 2010, 08:26 Find this comment inappropriate? Report it

@Rob Hey ar$ewipe get over yourself ,Amla has been on the field longer than any other player???? He made 253*, go figure and leave the racism C*** in your bedroom or F off from this website by Bo on February 09 2010, 09:52 Find this comment inappropriate? Report it

@Dave @Dave: i am in India.. The 35 officers and 350000 engineers is correct. the 35 officers are in Indian Foreign Service..The fellas who man Indias Embassies internationally. Unlike South Africa where a Director Genral is an appointee.. In India . .more all Director genrals or Secretaries as they called hgere come after passing the rigrous Indian Civil Sevices Exam. The 350000 engineers get absorbed in many Private Enterprises, Goverment Services and corporations, Indian Armed forces(2nd largest in World by Numbers) and Indian Railways(Larges in World). Others go to US or elsewhere and make Silicone Valleys or in South Africa work for Tata Africa..! . .less by Navtej S on February 09 2010, 13:30 Find this comment inappropriate? Report it

u idiot There's billions versus our millions there so the output of people is greater. by @Dave on February 10 2010, 06:01 Find this comment inappropriate? Report it

you are all silly white people to the ones always going on about ANC and COS... they would have us believe that 90% of the private sector is not run by whites. In laymans terms for the daft white blokes, if a tender is awarded to an 74.6% white company such as the gautrain . .more project and it fails or goes over budget how is it the ANCYL's fault? BEE has failed only because white companies have chosen stupid and or incapable partners and not gone broadbased within thier own companies like should have in the first place. Examples of this is SAB vs Others As far as nationalisation goes I'm in agreement Transnet in the 70's, 80's and early 90's produced the some great engineers some of which have defected because our government has given blanket amnesty to these ungreatful sons of.... to cut a long story short don't expect peace and saftey if you insist on not sharing resources. you may have worked to maintain what you were given but your farther brutally stole and effd it up for all of you and now us as well. and right now we are asking for it peacefully. When Julius makes his mark its not going to be pretty . .less by @meetjoeblack and the rest on February 10 2010, 07:17 Find this comment inappropriate? Report it

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