BRING BACK THE GOLDEN BIRD

THE YEAR 2022, OR THEREABOUTS, WILL SEE A MOMENTOUS statistical turning point for the world. For every year of known history before, China has been the most populous country on the planet. From that year on, say demographers, India will be the world’s largest. Nearly 1.3 billion strong as of this writing in 2016, India’s population is likely to keep on growing throughout much of this century, and will peak at about 1.7 billion. Talk of India as number one in a more general sense will also pick up. Those who call demography destiny have points to make. If a country’s population is huge and growing, each year adding 16 million or so, all sorts of other things become possible. Additional warm bodies are potential future workers and consumers. Some might turn out to be brilliant inventors or philosophers, brave soldiers or inspiring artists, clever entrepreneurs, successful athletes. Plus, having lots of young people will be increasingly valuable. Given aging populations in much of Asia, Europe, and beyond, more people will be dependent on shrinking labor forces in most countries. Along with some African countries, India will be an exception, keeping a youthful advantage for decades to come.

This great potential bounty is only theoretical, because it depends on getting those extra people to be productive and useful. Already in the 2010s an estimated 1 million extra workers, every month, had to be absorbed into India’s economy. Yet India failed not only to create formal jobs at anything remotely close to that rate but also to create conditions that would allow entrepreneurs to thrive. Youngsters certainly yearned to escape the dust, broken roads, and brainless farm work associated with village life. The overwhelming demand for salaried jobs was extraordinary. Take an example from 2015 in Chhattisgarh, a poor and landlocked central Indian state. Its government advertised for applicants to be peons, the lowliest office staff who are bossed about by others, sent to open doors, bring tea, or carry files. Peons are badly paid and hardly enjoy glittering career prospects. But they do get job security, a pension, and perks. For just 368 available posts, a stunning 2.3 million people applied, including postgraduates and engineers.

That story was just one sign of a wobbly, partially reformed economy that had to travel an enormous distance to catch up with middle-income countries elsewhere in Asia. India was better off than some of its neighbors: the people of Pakistan, for example, would have loved to experience similar economic progress. India’s middle class was growing, but it remained small. By 2016 only 25 million or so people had credit cards, and roughly 30 million had formal jobs. Average incomes were far below those in China, and earnings and wealth were shared unequally. Extreme poverty had declined, but the lifestyles of only a tiny minority would have counted as middle class elsewhere. A ten-year boom in sales of “fast-moving consumer goods,” such as tiny sachets of shampoo or packets of biscuits, reflected the fact that low incomes had been rising a bit in villages. But gains were modest.

Rich corners of India were still small. Billionaires and millionaires thrived in pockets. Capgemini, a consultancy, estimated that 200,000 Indians had investible assets worth more than $1 million in 2015, up from 127,000 Indians in 2009. The consultancy suggested that India’s wealthy held assets worth nearly $1 trillion. But their wealth did not trickle far. By one estimate Delhi, the huge capital, had fewer restaurants than Lisbon, Portugal, a city one-twentieth its size. An Indian academic once mentioned to me that Shanghai alone had more hotel rooms than all of India. In 2016, Apple said that it would open its first iPhone store in India a full eight years after setting up in China. IKEA, the Swedish flat-pack furniture seller, said it would finally open a store in India in 2017, many years after first announcing it would come there. Such firms had long been deterred by oppressive regulations and surprisingly small markets. The Swedes, who had hired anthropologists to try to understand Indian shoppers, talked of having twenty-five huge shops by 2025. But a consumer boom was starting late in India, and growing relatively slowly, compared with many other countries in Asia.

If you ask the brightest minds in government, universities, or think-tanks how to get the economy into fine fettle and how to spread the benefits of growth much more widely, they usually recommend the same medicine: get more workers into factories. After all, much of East Asia’s growth late in the previous century can be attributed to its having been the world’s workshop. Manufacturing counted for about a quarter of the value of the average economy across much of Asia. In India, by contrast, it added up to just 17 percent. That had a human cost: India missed out on many millions—probably tens of millions—of formal jobs. If it could only get its manufacturing sector to resemble that of other Asian countries, many people would be much better off.

Of course, India’s policymakers did not intend to wreck large parts of its manufacturing sector, though in retrospect one might question that. During the late twentieth century, the country cut itself off from trade, did a poor job of building infrastructure, and failed to get people educated, to improve public health, to encourage entrepreneurs, or to generate jobs for the population beyond working on small farms. India did try to protect its industry from foreign competition, ordering that some goods—such as boxes of matches, small hinges, and pencils—could not be imported and had to be made locally by small producers. The unfortunate result, however, was rotten production and mostly awful standards. Try to strike an Indian match and the flimsy stick would almost always snap in your fingers. Hinges and even pencils tended to be wobbly. India failed even to trade with its closest neighbors, so South Asia remained the world’s worst integrated region.

Once India began to open up to more trade, in the 1990s, many manufacturers were ill-prepared. Makers of pharmaceuticals did extremely well, thanks to India’s bold decision to ignore patents on many medicines, so its generics industry flourished. But other manufacturers were clobbered by far more competitive foreigners. Imports, especially plastics, flooded into India from China. Local manufacturing was so inadequate that producers found it paid to export plastic granules to China, make them into buckets there, and bring them back to India. By 2016 only some 50 million Indians—11 percent of workers—had factory jobs, and most of these were informal, in tiny firms with few staff. Amazingly, most Indian factories did not even operate with electricity.

The economy instead owed its rise to services, as India tried to be the world’s “back-office” by providing business processors, phone operators, and software engineers. Service firms thrived with new technology, outsourcing, call centers, information technology (IT), and programing, boosted by lots of engineering graduates who spoke English and learned to write code. Southern India, where education levels were high, did best—especially in cities like Bangalore and Hyderabad (which also drew clever graduates from good universities in cities like Kolkata). What especially helped is that many people of Indian descent—about 3 million by 2016—lived in America, creating ties between the countries. Gradually, higher-skilled service jobs—that is, for designers, accountants, and lawyers, among others—were also outsourced to India. An American friend in Delhi recounted how he managed more than one thousand Indian lawyers who reviewed documents for legal teams in America in 2015. Business was exploding, he said, as American firms learned to trust even sensitive and technical work to skilled Indians, at a fraction of the cost of paying legal assistants at home.

Some did well betting on growth in such services. In Hyderabad, an attractive city with a less oppressive climate than most in India, Chandrababu Naidu, chief minister of the southern state of Andhra Pradesh, recalled how he became a darling of global business. A slender man with a trim white beard and a natty dress sense, Naidu was most responsible for getting outsourcing and business processing firms to thrive in Hyderabad from the mid-1990s on. He had bet on creating a “knowledge economy,” he said, encouraging hundreds of new colleges to open in his state. In 1995 it had just 32 engineering colleges, which turned out 8,000 graduates a year. A decade on, it had 230, producing 75,000 graduates. “We in Andhra have a track record. We started colleges, then we built hi-tech city, Cyber city, campuses for businesses. Microsoft and others came to Hyderabad,” he explained.

Naidu talked of “a very inspiring time for India” and recalled that “we started economic reforms in 1991; before that there was single-party domination for decades, the growth rate was very nominal, people used to heckle and talk of the Hindu growth rate.” He praised liberal reforms by the previous BJP-led government under Atal Behari Vajpayee, prior to 2004. The deregulation of telecoms allowed the mobile industry to take off early in this century. The power industry improved. The sale of some state-run power companies brought gains. Naidu said that reforms stalled under Singh, and that there was only “tremendous hype about India and India added to the hype.”

By 2015 Naidu again saw a “clear cut mandate” for rapid change: “All the world is forecasting the bright future for India, there is no uncertainty. People expect that this decade, this century, belongs to India. China’s economy is slowing down, Europe is in stagnation, Japan has a problem. America is a stabilized, advanced economy. In India there is untapped potential. In the future, India and China will be the two countries that count.” Naidu was an articulate optimist, saying that “India is a sleeping giant, with a lot of untapped potential. It has a population size, demographic advantage. The average age by 2022 will be twenty-nine years. We have abundant natural resources, a big market, rule of law; the judiciary is very strong; our people do well all over the world. Then there is our use of English. In ten years there will be more English-speaking people here than in America. We will be the number-one country for English speakers. Everyone has the aspiration to do more.”

Naidu was a rare politician who proposed that India’s place in the world would be strongest if it competed among high-skilled industries, which required, especially, a massive investment in higher education. Rather than follow Naidu’s path of services and knowledge, however, India’s national government was more anxious to try an East Asian–style path to lower-skilled production, getting more people into factories.

One way to begin that process was to provide much more power: bringing more lightbulbs, machinery, and computers into the most basic workshops would lift production fast. New sources of power, thankfully, were already blossoming. Construction of massive solar plants occurred in southern India especially, and big hydropower plants built by Indian firms in the Himalayas, including Nepal, allowed electricity generation on a huge scale. Visiting one of these plants in Nepal meant hiking for hours along the upper reaches of the Marsyangdi River, in a beautiful valley near the border with China. Crickets screeched at night and the river roared. It was a magical place: wooden homes had yellow maize cobs hanging from balconies in the sunshine; small red-and-green birds flitted by; beehives clung to mountainsides. At times the track was literally bored high into a cliff, leaving a sheer drop hundreds of feet to a glacial river below. Engineers from an Indian firm, GMR, explained how they would blast a 7-mile-long tunnel, 18 feet wide, into the mountain, sending the river through a steel-lined pipe to spin underground turbines. This operation would one day generate 600 megawatts of electricity, just one of several hydro schemes nearby. Nepal could in theory produce 40 gigawatts (GW) of electricity from its rivers (up from less than 1 GW in 2015)—enough to light all of north India and beyond. Across the Himalayas there was potential for about 200 GW of such hydropower.

A liberal reform early in the 2000s had freed India’s power sector, letting firms trade electricity first domestically and then with neighboring countries. That sort of change brought big, long-term effects, encouraging investments in production and the grid. Governments had to find similar reformist efforts to give private actors incentives to do more. Modi called for factories to produce textiles and cellphones and to assemble cars. He lined up tycoons to promise to do more manufacturing, launching a big PR campaign called “Make in India,” which was part of his oft-repeated promise of “good times.” He admitted that he was “not a big economist” but set grand targets for manufacturing jobs to double to 100 million by 2022. He had a deft turn of phrase, saying pre-industrial India was known as a Golden Bird, and should now be known as a golden opportunity, because “here is a government that is dedicated to development… it is an article of faith.” He also promised that an implausibly large number of Indians, half a billion, would somehow get vocational training by 2022. “It pains my heart,” he said, that investors preferred to leave India rather than set up factories at home. “You may not feel it is a big vision,” he said, promising to make India an easier place to do business.

Some companies, such as those assembling cars, did bet on India becoming an industrial hub—at least for small, basic models, including for export. By 2016 the country had produced 3.4 million vehicles a year. General Motors started exporting from India to Central and South America. Daimler Chrysler invested to export cars from Chennai. Hyundai, Toyota, Honda, Ford, and others had similar plants. Around a quarter of Chinese households owned cars by 2016, compared with only 5 percent of Indian ones. That suggested growth ahead. The manager of the French carmaker Renault called India a big hub for carmaking and praised its long industrial history, though he grumbled about its rotten infrastructure. Renault’s factory in Tamil Nadu was just 25 miles from the port, he said, yet it typically took many hours to get vehicles to their ships.

India needed better roads, and to be rid of awful rules that prevented businesses from growing. The new government won lots of praise in 2015 for scrapping 125 outdated laws, as Modi called for an end to “archaic rules” and promised to eradicate a “maze” of 3,000 “useless laws,” deleting one for every day that passed. There were plenty to target. India saw its last telegram sent in 2013, but it had long kept a law forbidding private possession of telegraph wires of a specific thickness. A “treasure trove” act, from 1878, ordered anything more valuable than 10 rupees (a few US cents today) found in the ground to be handed to the government for the benefit of “Her Majesty,” a reference to Queen Victoria. A law from 1923—the “Indian boilers act”—required that inspectors regularly check the safety of boilers in factories, but in actuality let those officials gather bribes from companies. States had many laws and rules that should have been killed off decades before. Babies born to foreigners in Delhi immediately accumulated fines for being present without visas. In Andhra Pradesh, a thirty-nine-page document listed eighty-nine different electricity rates for consumers: people farming rabbits or mushrooms were charged differently from other farmers, or from those who put up advertising billboards.

Some specialist manufacturers flourished. Over dinner in Delhi, Vivek Gambhir, who worked for a conglomerate, Godrej, related a quirky example to me, saying his company had a profitable sideline in exporting human hair. Dark, lustrous locks were snipped during religious ceremonies and, woven into wigs and hair-extensions for women in Africa, were supplied into a market worth $400 million in 2015. By one estimate a single temple in Tirumala, in Andhra Pradesh, earned nearly 2 billion rupees (some $40 million) by selling more than five hundred metric tons of hair that had been snipped from devotees’ heads. Other niche manufacturers succeeded as well. One was in Puducherry, a tiny coastal territory in the south, an ex–French colony with well-tended streets, brightly painted houses and police in red kepis. There Dilip Kapur, a man with an open face and wide eyes, had founded Hidesign, a maker of fancy leather bags and belts sold around the world. He was bullish about India rising. “You are going to see a very sophisticated consumer class, with more confidence, the first generation without an inferiority complex,” he predicted. “There are no doubts. They know something great can come from here.” Hidesign did well. Staff were loyal, on average remaining for more than fifteen years. Kapur showed off studios and workshops where seven hundred women, mostly in sky-blue saris, each wielding an Italian steel knife, sliced and stitched. But he worried that it would grow harder to find skilled workers, as younger recruits preferred jobs in banks or offices.

Getting reliable employees was paradoxically a problem, even if many millions were hunting for jobs. An Indian tycoon who produced chino trousers on a massive scale from factories in Hong Kong, China, and Bangladesh explained that he would never set up in his native India. He called the “work culture” unhelpful, describing how Indian workers would quit tedious jobs in factories to seek more interesting or easier work, or just to have a break, unwilling to be drones. Many workers, understandably, grew fed up with mind-numbing toil: “Eight to ten hours of intense work on a sewing machine is not much fun, and we need very high-efficiency models,” he said. His fellow Indians, he suggested, were not inclined to endure prolonged drudgery: “I compare notes with competitors who work in India and I find Indian factories very inefficient. When I recruit managers from Indian firms, they confirm that we are right.”

In Puducherry, Kapur did well by producing high-quality goods on a small scale. He sold to wealthier consumers, emphasizing craftsmanship over cost, so he did not have to squeeze out every rupee possible. He said it took thirteen hours to cut and stitch a single Hidesign bag, whereas workers in China churned out a synthetic one, mostly glued, in less than an hour. But Kapur did not dream of scaling up. “We have two to three thousand people, but does anyone want five thousand? Who wants to employ five thousand people? In India it’s extremely difficult. It’s like a noose around your neck and not just because of the government, the laws. If I closed this factory they would all come and stand outside my house and make me miserable,” he said.

India’s government, however, really wanted large-scale manufacturing. That happened in relatively few places. One was a big factory in Rajasthan called Kajaria Ceramics, the country’s biggest tile-maker. Dr. Rajveer Chaudhary, its boss, said proudly that his plant produced 54 million square meters of them a year, enough to tile Manhattan, should the need arise. India had previously imported shiploads of tiles from Italy, Spain, and China, but became an exporter instead. Over small cups of green tea, Chaudhary said that “every year we add capacity, in Andhra Pradesh, also in West Bengal. We have a plan to open a plant in the United States, in Tennessee.” His company aimed for $1 billion in annual turnover by 2022. “We can do it because we expand everywhere,” he said.

Kajaria Ceramics did well. It put up wind-turbines and a solar park to sell energy into the grid, and it had neat lawns, tidy warehouses, and great stacks of tiles loaded into colorful lorries. Yet the firm had relatively few workers. Driverless carts shifted tiles from kilns to conveyor belts, and digital printers automatically added designs. Much machinery was controlled remotely. Dr. Chaudhary called his huge factory “mostly automatic.” It ran nonstop, all year, with nine hundred employees spread over three shifts (plus some casual labor). That total was likely to fall, despite expansion. Managers had bought machines from China to pack tiles, eliminating wages and saving a princely 4 rupees per box. Dr. Chaudhary said the problem with human workers was not just arcane and contradictory labor laws (though even officials in India admitted that these laws were “worst in the world”). You could avoid those, he said, by hiring temporary staff. But like the Indian trouser maker, or Dilip Kapur in Puducherry, he also worried about culture. “We employ a mix of local people and distant ones, but the locals are mostly illiterate and don’t want to work hard,” he said. A machine from China would not disappear for a week, drinking in its village after getting its monthly wage.

Those awful labor laws did help to keep Indian firms small: seven in ten manufacturing jobs were in companies with fewer than fifty workers. Few firms would risk getting much bigger. Employing over one hundred workers meant the application of a law, dating from 1947, obliging them to get permission from government before laying anyone off, let alone closing an unprofitable business. Formal jobs come with mind-numbing levels of bureaucracy, such as baffling definitions of what counts as wages or what category of worker an employee belongs to. All seemed designed to create lucrative chances for corrupt labor inspectors to extract bribes. Complicated duties and taxes were detested by many workers and employers alike. Nearly half of wages, even for the low-paid, were supposed to be deducted by employers and paid into official schemes and funds to pay for various state-sanctioned benefits. A shrewd commentator on Indian labor laws, Manish Sabharwal, pointed out that a draconian law on apprentices, from 1961, was routinely (and necessarily) flouted. In theory, he said, some 15 million apprentices, or 5,000 company bosses, should have been jailed long ago for breaking its provisions.

Finding skilled laborers could be especially difficult, and growing manufacturers competed for these. Apollo Tyres was a hopeful case, with four big plants that served a surging domestic market and exported a handy 1 million tires a year. Tamil Nadu in the south became India’s “knitwear capital” as textile factories expanded there. America’s GE made low-cost electrocardiographs in India. Tetrapak churned out packaging from a hi-tech forty-five-acre factory in Maharashtra. “India is joining the global supply chain,” an excited official in government said. But much of this was capital-heavy manufacturing. It seemed unlikely that such new factories would really create tens of millions of jobs.

Some big foreign manufacturers said they would bet on India, if only to get access to its growing consumer market. For example, Foxconn, which made smartphones, said in 2015 that it would spend $5 billion on an Indian factory. The man in charge of attracting investors like Foxconn was an energetic figure called Amitabh Kant, who had a gift for slick marketing. He spoke of nearly 100 mini-reforms under way, mostly to cut mind-numbing paperwork, saying that “within three or four years, we will reach up to the top thirty” in a World Bank index measuring the “ease of doing business.” India did improve a bit by 2016 from a low level of 142nd, reaching 130th by 2016. That modest gain hopefully presaged much more dramatic improvements. “We have become far more market friendly,” Kant said. “For many years India talked the language of socialism, but that is changing.”

Kant also wanted a tourism boom. In 2015 India was getting just 8 million foreign visitors a year, compared to France’s 84 million, despite an amazing array of forts, palaces, beaches, tea estates, temples, tombs, ancient cities, and other treats. A goal was set to attract 11 million foreign tourists by 2018, and many people could be tempted by luxury train travel across the deserts of Rajasthan, dare-devil skiing in Kashmir, white-water rafting elsewhere, and lion safaris in Gujarat—as well as the usual visits to see tigers and the other treats mentioned above. Despite a big effort to promote tourism, many astounding sites simply remained unknown to many foreigners. Favorites of mine were two extraordinary spots, the Ajanta and the Ellora caves in Maharashtra, western India. The UNESCO world heritage sites were popular with Indians, but might have attracted many more foreign visitors were it not for the pot-holed and congested roads and lack of hotels at such sites. Those who did go were rewarded with several dozen majestic structures, including Hindu, Buddhist, and Jain temples, exquisitely carved deep inside cliffs and hillsides. Each had taken generations to construct. Inscriptions and other evidence suggest that work on the elaborate sites dates as far back as to the second century, BCE.

India, perhaps because it developed more slowly and chaotically than China, left much of its great heritage relatively undisturbed. It is exciting to witness what lives on from its ancient cultures. It is awe-inspiring to see Hindu devotees assemble, in their largest numbers every twelve years, to celebrate the Kumbh Mela, near Allahabad in Uttar Pradesh. At the festival in 2013, over the course of two months, some 120 million pilgrims attended, many taking freezing dips in the River Ganges. Reportedly 30 million gathered on a single day, with experts in organization marveling at the efficiency in providing temporary housing, transport, food, and water, as well as ensuring safety at the occasion. Inevitably observers would ask how it was possible for the Kumbh Mela to get its infrastructure so well organized, when India more generally struggles to do so. The best answer: Indians are brilliant at organizing at the last minute, as with elaborate and prolonged weddings. Huge events, like the Kumbh Mela, appear to be an extension of that approach.

Other delights exist, from spice markets in Old Delhi to houseboat tours in the backwaters of Kerala. Stumbling on attractions created by eccentric individuals is the best of the lot. In Chandigarh, a Punjabi town designed by Le Corbusier, one can lose absorbing hours in a once-secret, illegally built rock garden created by a former official of the public-works department, Nek Chand Saini. Over the course of decades Chand used rubble from demolished houses, shards of crockery, bottle tops, broken tiles, glass beads, mounds of rags, and old coal-tar drums to create a sprawling and beautiful series of palaces and gardens. His creations eventually covered twenty-five acres and included waterfalls, ponds, statues both huge and tiny, hidden tunnels, and shady pathways through forests. (Chand’s statues have also been exhibited in galleries in New York and Liverpool.) Millions of visitors have seen his gardens, a tribute to his individuality and good humor.

But for tourism to really thrive in India, many basic problems must yet be solved. Safety for women is a big concern: it hardly helped the country’s image when a minister, in 2016, advised female tourists that they should not wear skirts. Unless rickety infrastructure improves, foreign tourists will also remain hesitant. India has also done a poor job of selling its attractions. A telling example is the ruined city of Hampi, a spectacular fifteenth-century collection of great buildings in a beautiful southern spot. Stretched across a valley scattered with mighty volcanic boulders are splendid temples and mosques, stone stables for elephants, an intricately decorated bathing house for a princess, plus a giant granite chariot. Hampi’s walls are adorned with statues depicting explicit and entertaining scenes from the Kama Sutra. The ruins are as glorious as those at Angkor Wat, and worth exploring for days. It is hugely rewarding when you get there. But whereas the Cambodian attraction draws 2.3 million foreign visitors a year, the Indian one gets a paltry 47,000. It is simply too hard a slog to reach Hampi, assuming you’ve even heard of it. For all of India’s aspirations to be Superfast, travel in the country can be slow and difficult.

Making the most of manufacturing or of tourism, therefore, will be a slow march. An added problem is that the rest of the world is changing and will not simply wait for India to catch up. Rising wages in China did encourage firms to seek new sites for their factories, with Bangladesh and Vietnam winning investment. But global supply chains are also becoming far more complicated. Lower energy and labor costs in America, the phenomenon of “near-shoring” (finding manufacturing sites close to the biggest markets in Europe and America), and new sorts of production such as 3D printing all threaten to change the twentieth-century model used by East Asia—including, notably, China. India has failed to join regional trade deals, designed to lock countries into logistics chains and to set minimum standards and regulations. One risk for India is that, by the time it is ready to set up lots of factories to export goods, many industries will have changed.

India’s infrastructure did improve a bit. The new government had a goal of building 19 miles of properly surfaced roads every day by 2017—a rate three times faster than the Singh government had aimed to achieve. The country was unlikely to meet this goal, but new roads did appear. Over 600,000 villages were also supposed to have broadband Internet by 2017, but this scheme fell far behind schedule. As for future goals, the River Ganges is to be clean by 2019; measles and tuberculosis are to be eradicated from the country by 2020; one hundred “smart” cities are to be built by 2020; by 2022 there are supposed to be long-distance, high-speed trains whizzing on a “diamond quadrilateral” of tracks linking big cities, plus twenty-four-hour-a-day electricity for every household; thirty river-linking schemes are to be put in place by 2024; and a huge defense production as well as the creation of a $650-billion-strong textiles industry are planned for 2025. We may question whether such goals are realistic, but they do signal grand ambitions.

What is missing, however, is a much-needed push to develop more high-quality schools and colleges of the sort that flourished to such great effect under Naidu in Andhra Pradesh. One can’t be sure exactly what jobs tens of thousands of graduates will end up doing, but at least highly educated and entrepreneurial graduates will be well placed to adapt to uncertainty. The trouble with Modi’s visions of building factories is the risk of opting for low-margin industries where human workers will come to compete with machines, robots, and artificial intelligence as industrial processes become increasingly automated. Little in this scenario would benefit jobless Indians, especially as designers and those who own the highest forms of technology usually end up grabbing the most value from industrial production. In short, India needs to be more future-oriented. For example, it can do a lot more with new technology. Luckily, it has made a good start at that.