A Look at Ontario's Debt

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The India Series: Look Both Ways

Tacitus was a senator and historian of Rome which spent most of his career under the Emperor Domitian. Often, Tacitus would write his histories with a distinct distaste for politics due to his exposure to corruption, and is quoted "The more corrupt the state, the more numerous the laws".

If one can associate numerous laws with a rather baffling large bureaucracy that has been ranked the worst in Asia, then according to Mark Twain India has a corruption issue. Indians seem to agree, as 75% of Indians has said that corruption has increased in the last two years in a report by Transparency International. Additionally, 47% of Indians felt corruption was a serious problem while 75% stated that the police were affected by corruption.

To turn the statistic into harsh reality, an anecdote is needed. Bihar,a state in northern India with five billion dollars to be invested in the power sector, has come under scrutiny for their mid day meal program. Basically, a program provides 1.2 million students in government run schools with a hot meal everyday. Twenty three children have died eating contaminated food from the program, which is a result of corruption according to the convenor of Right to Education forum Ambrish Rai - which is one of the NGO's working in the area. Rai stated that the southern states do a far better job at administering the program, but in the north the situation is "pathetic":

"Children are getting low quality and insufficient food; hence there is lack of nutrition. Corruption is involved in the delivery system. Fake enrolments are being done to embezzle money. These rackets are killing this very important scheme, and the main reason is lack of guidelines and institutionalisation,"

Indian scandals are not a rarity. One article lists 25 major corruption scandals from 1948 till the present in India. Seven have occurred in the last two years alone. The Lokayukta, which is an anti corruption agency in India, had 11,153 allegations of corruption from 1981 till 2006 finding only 57 offences which were of consequence. Although recently the Lokayukta caught a clerk accepting a $120 bribe, the Lokayukta has a rather dismal record of slowing corruption. In fact, there is an entire site devoted to corruption in India, called Corruption in India, which lists stories everyday showing less than upstanding conduct portrayed by Indians. 

An article in the Time of India gave some recommendations to fix bureaucracy such as linking
compensation to competence, subjectivity in appraisal process, and fixed terms for bureaucrats.

The analogy of comparing India to a one way street that is necessary to look both ways is solidified by the economic system. Although foreign investment is stalled in the one way rules and regulations of Indian bureaucracy; should one look the other way and offer a bribe, business can operate a fair bit more efficiently. An interview by NPR in 2010 of Mr. Singh stated the depravity of the situation. Mr. Singh began a telphone/internet business hiring four people, and stated he had to bribe 10 - 15 people to gain possession of the proper licenses to begin his company. The case is not held to just small business', but to large corporations such as Walmart. 

Rema Hanna an Economist at Harvard, stated that in India it takes 30 days to begin a business, as opposed to 6 in the United States, while mere minutes in Estonia. Additionally, Hanna stated that bribery may be the only recipe for growth in India, as it may be the only method to speed along business to counter the large amount of paperwork. To counter corruption, the OECD will hold a seminar in India, although succeeding in slowing the rise of corrupt bureaucrats will take commitment and be no easy task as India has already not just accepted corruption, but institutionalized it. 

There may be a street to cross in India that states traffic is only coming from one direction, but it is wise to look the other way. Most likely, there is someone going the wrong way. 

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The India Series: A One Way Street

This blog began the India Series with the saying  India can best be described as the place where you need to look both ways before crossing a one way street. This post looking at the broad economy of India will continue with this theme. 

Economically, India belongs to a group of nations known by the acronym BRIC. The acronym stands for Brazil, Russia, India and China; four nations that are emerging on the international scene as global economic powers. A one way street economy has emerged, as Indian foreign investment is slowly drying up due to political wrangling resulting in deteriorating infrastructure. Definitionally, this blog will state a one way street in terms of foreign investment means following the long bureaucratic rules of Indian government without anyway around.

Retail and Agriculture still leads to Indian economy in terms of percentage of GDP. Overall, 2013 has been a rough year for the Indian economy as growth has fallen in the banking, oil/gas, and auto sector and unexpectedly, the property sector. The Indian economy is predicted to hit a decade low of 5% GDP growth , as the 2011/2012 Industrial Sector saw a growth of only 2.9% opposed to 8.2% in 2010/2011.  According to the Indian Central Statistics Office (CSO), agricultural, manufacturing industries will both drop in terms of growth. In addition, the services sector including finance, insurance, real estate and business services are expected to grow 8.6% as opposed to 11.7% the previous year. 

Per Capita Income is set to be $1163 in 2012/2013, a nine percentage points above last years $1042. Coal, crude and oil production are all supposed to fall during the 2012/2013 year in comparison to the previous year . India has a trade deficit that is deepening as exports have fallen while imports have grown with the need for more petroleum becoming ever more present. Inflation is around 6-7% as per numbers from January 2013. Additionally, as this blog has stated before Indian foreign investment has declined. 

Problematically, India has not improved its infrastructure to foster continual economic growth. This was explained by G P Hinduja, owner of truck maker Ashok Leyland, stating that India could have capitalized on its advantage over China being a relatively large English speaking country, but the infrastructure has failed to foster proper growth conditions. India is now ranked lower than all the BRIC nations in terms of foreign investment. 

Infrastructure is failing as India already had a few blackouts that had grabbed international media attention. More than half the population of India suffers from unreliable power sources, something that Nobel Prize winning Amartya Sen has stated is detrimental to economical development:

Unlike India, China did not miss the huge lesson of Asian economic development, about the economic returns that come from bettering human lives, especially at the bottom of the socioeconomic pyramid.

Sen is not mistaken, as improving the plight of the bottom of India's population will need to be done to spur development. For foreign investors, it is a one way street as they must comply with the elite and political rules to conduct business in the country. 

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Video Blog St. Petersburg

Alexonomic's first video blog in St. Petersburg. The India Series is on hold until a proper internet connection can be found.

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Entrepreneurial Estonia

Tallinn is not exactly on the list of major cities in the world, yet it is a word being repeated in the technological startup community. As the capital of Estonia, Tallinn continues to offer entrepreneurs quick and easy access to beginning their business with an easy to use online bureaucracy. For example, it takes only about five minutes to register one's company.

Skype is probably the greatest example of Tallinn technological success, and some reports have stated that Estonia has the most start-ups per person not only in Europe, but the world. This is quite the bold statement for a country of 1.3 million people. Other companies in the region are Zerply (a professsional networking service for creative minds), ZeroTurnaround (tools for Java programmers) or GrabCAD (a service meant for mechanical engineers). Start-up competitions such as Garage48 offer hackathons to encourage continual development.

This information was inspired by Forbes.

Estonia has constantly been invaded since the Middle Ages. Geographically, it is a gateway between the West and Eastern countries and acts as an important port. Once the property of the Germanic order of Teutonic Knights who bought the property from the Danish, the country declared freedom in the 1920s, only to be invaded by the Soviet empire, then the Nazi's, and then the Soviets again. Unfortunately, the Soviet occupation resulted in thousands of Estonians being sent to Gulags, or leaving their own country because of the occupation. However, in 1988 the country declared independence.

As a result, the Estonian government had to reinvent their bureaucracy cheaply and decided to us information technology. The decision along with support for free higher education has resulted in a more educated technology savvy society. With tax existing for corporations only on their dividends, and the governmental fee to corporate can be paid at a later date, more start-ups are attracted to the country. In additional, a strong community of start-up organizations such as the Estonian Development Fund offer to support to entrepreneurs. At Tallinn University a start-up hub entitled Technopol houses 150 companies while accelerator programs like Gamefounders exist.

Unfortunately, size does matter for companies, as the population of 1.3 million means companies must immediately think international when looking for customers. Additionally, once companies grow they usually have to look abroad for new talent.

However, Estonia is a healthy example of a country that once was under the Iron Curtain in to a capitalistic success story. The international community should take notice of the more efficient utilizing of IT by the bureaucracy of Estonia, and apply the example. As the last Russian troops left in 1994, Estonia has quickly created a strong unique technological niche that hopefully will continue to remain successful.  

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An Introduction to the India Series

India has been classified as a BRIC nation, a term coined by Goldman Sachs. This term puts India at a similar industrialization pace as China, Brazil and Russia. However, India has many hurdles to jump over before it can convince this writer that the relatively rosy economic predictions concerning India will occur.

While this writer was in India, four cities were visited. These are Mumbai, Delhi, Chennai and Bangalore. As a result, do not be surprised if this series mentions these cities a few times more than others.

India has crumbling infrastructure, massive corruption, and badly seeks some sort of unity. For example, Chennai speaks more Tamil while Mumbai speaks Hindi. If one utters a word of Hindi in Chennai the locals might not even respond even if they know the language, they just prefer and expect fellow Indians to know Tamil. This cannot continue for the country to achieve the growth prophesied. Additionally, infrastructure of cities is in dire shape. While in Bangalore, one often has to hop over open sewer drains while they walk along the sidewalks. Lastly, corruption in the country is not just witnessed in the political system, but also in other areas such as the IPL. India’s cricket league had a major scandal involving match fixing.

Lastly, should one wish to see true capitalism in force, India is the place to go. The country needs more social security nets, which admittedly is very difficult to administer with such a large population.

Although many negatives have been mentioned, India has far more positives that reveals why investment banks such as Goldman Sachs see such potential. Citizens of India are hardworking individuals, and fairly accepting of new ideas. With strong family systems in place to train the next generation, India should ignore some Western ideals which are constantly portrayed by Indian media.

A friend of this writer once stated “India can best be described as the place where you need to look both ways before crossing a one way street”. The statement is quite true, as readers will see as the India Series begins. 

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