Will the migration of manufacturing jobs from China to India help our vast mass of agricultural laborers move up the economic ladder? Historically, industrialized Western and East Asian countries used low-cost manufacturing to increase the wages of their agrarian workforce. Can India actually follow the same path for enriching its mass population?

The United States is often presented as the archetype of a country becoming prosperous by large scale industrialization. However, it’s important to put this path to prosperity in the context of the modern services-based economy. Figure 1(a) shows that from 1840 to 1930, the contribution of agriculture to American GDP decreased from nearly 50% to 10%, while industry increased its share from 20% to 45%. However, from the 1950s, the share of industry in US GDP has fallen rapidly with the rapid expansion of the services sector. Today, it is the services sector that commands the overwhelming share of economic output in the US.


Figure 1(a) (Source: https://tinyurl.com/y7uny37k)


Figure 1(b) (Source: https://tinyurl.com/y7uny37k)


Concurrently, as seen in Figure 1(b), in the 1840-1950 time period, American workers shifted to manufacturing jobs. Thus, when American workers were engaged in manufacturing jobs, these were high value addition activities and relatively lucrative jobs. In other words, Americans building a television in the 1930s were not engaged in ‘low cost manufacturing’. And as America’s service economy expanded, the children of America’s manufacturing workers found employment in the services sector, which have offered the highest wages since the 1950s.

In stark contrast, China’s manufacturing boom since the 1990s did not lead to substantially improved economic lives for workers precisely because such jobs were now low-paying. From 1995 to 2018, the Chinese economy expanded by a factor of 5. While China as a whole has become wealthier using low cost manufacturing exports, this wealth has been captured by a small fraction of businessmen and party officials. Indeed, the consumption expenditure of the average Chinese citizen (Figure 2) increased only 1.3 times between 1995 and 2018. Chinese workers have actually become poorer compared to the rest of the world, even as their country has grown rich. China’s Gini index (46.5) is similar to that of resource dependent industrial economies such as Brazil (47.5), Mexico (48.3) and Russia (42). China’s economic model effectively treats its mass workers as a natural resource to be exploited by a local elite to supply cheap goods to a global middle class. Such a model is unsustainable in a democratic polity.


Figure 2, Household Final Consumption Expenditure by year for China and World average

Like China, in India manufacturing jobs are already amongst the lowest paying vocations. Salaries for even low-level service workers (Rs 251) are at similar levels as those for manufacturing workers (Rs 254) in India. We see this clearly in the table below, which shows average wages earned by workers in the various sectors of our economy.


Table 1 (Source: https://tinyurl.com/tygjkj6)

As a concrete example, consider workers in Foxconn’s iPhone assembly plant in Andhra, who were profiled in a recent Forbes magazine article. The pay of Foxconn’s Indian workers (around Rs. 9000) was nearly half the average salary of a maid in Delhi (Rs. 14462). The workers also don’t see the factory jobs as a long-term vocation, with the job not providing any job security or patronage benefits.

The question remains as to what can drive wage growth for our mass work force. We contend that a further expansion of the service economy, both at the level of exports and internal consumption can better drive such growth. One source of continued service export growth can be serving America’s healthcare sector. As Rajkamal Rao points out in the The Hindu Businessline, “If India Inc can innovate just like Nasscom did in the 1990s, India’s health services sector can grab a portion of the American market by offering world class medical tourism services to American patients. Even a 5 per cent slice can result in a $175 billion export industry, much larger than our IT services sector today.” There are also opportunities in the areas of nursing and school education for India’s English-speaking workforce. India also needs to press for a migrant worker agreement with Japan. Japan has preferential migrant worker agreements with a host of Asian economies, including China, Nepal and Myanmar, but has excluded India for now. Our government must press for Indian access to the Japanese labor market, in exchange for Japanese access to our market for electronics and other high-tech goods.

New jobs in the service and manpower export economy will not be immediately accessible to agricultural laborers. However, an expanded population chunk connected to global markets via service and manpower exports will spur internal consumption of goods and services. Our mass agrarian workforce can find better paying employment in the construction and service jobs created by this internal consumption.

The Indian Republic began its innings with prescient words from Dr. Ambedkar regarding what he called ‘Constitutional morality’, the individuals understanding of right and wrong, as informed by the core constitutional values of justice, liberty and equality. In his speech on November 4, 1948 while introducing the draft constitution for debate, Dr. Ambedkar said,

“Constitutional morality is not a natural sentiment. It has to be cultivated. We must realise that our people have yet to learn it. Democracy in India is only top dressing on an Indian soil, which is essentially undemocratic.”

I have an anecdote from my childhood to share which typifies the absence of constitutional morality in India. Those were the days during which personal computers had only recently been introduced in India, and people were setting up air conditioned ‘computer rooms’ as businesses. A friend of my uncle had also ventured into the computer room business, and had invited him for a tour. Now, ask any 90s Indian kid, and they will tell you that a cardinal rule for entering a computer room was to first take off footwear, mandir style, before one ventured in. A few minutes into the tour, my uncle reminded his friend that he had perhaps forgotten to remove his sandals. The friend replied, “Bhaisahab, agar main chappal nikal dunga, to in sab ko pata kaise chalega, ki yahan per boss kaun hain.” (If I remove my footwear like the others, how will everyone here know who the boss is.)

It is not that this friend was a generally immoral or unpleasant person. In fact, it is entirely likely that he deeply respected his parents and elders, never forgeting to touch their feet when the occasion demanded so. It is also probable that this person spent a portion of the day in pooja, seeking transcendence from the temporal world of computer room businesses. Indeed, while Indians have continued to imbibe age-old socio-religious values, and abide by the moral framework bequeathed by an evolving civilization with a long history, we have not managed to blend this framework with the moral vision of our Constitution, especially the values of equality and liberty.

For too many Indians, the Constitution has remained a laborious set of rules that governments and officials should abide by, in theory. It remains at a distance from our homes and individual selves. Indian parents conscientiously teach their children that disrespecting elders is unacceptable. But the same parents do not indicate to their children that treating others as inferiors or stopping others from speaking their own mind is equally unacceptable. At home, the Indian child sees a clear hierarchy, with father or some other elder male figure as boss, who usually calls the shots. ‘House rules’, which are ubiquitous in the US, with all members of a family, including the father, obeying certain rules are rarely heard of in India. The sidelining of constitutional morality begins at home.

The absence of constitutional values is also rooted in the informal reality of our economy. The lack of formal employment options implies that being apprehended for various kinds of criminal behavior doesnt really affect an individual’s chances of landing a stable job. This makes it easier for our youth to justify engaging in ‘street power’ criminality and garner favor with unscrupulous political elements. Formal employment opportunities would not only mitigate any ideas of law-breaking, but would also introduce our youth to new forms of socio-political identification via membership in professional organizations. Such organizations engage with the state, not to demand special privileges or treatment for a specific ethnic/cultural group, but to ensure that the legal and professional environment in which their members operate is fair and enabling. Dealing with the state from the perspective of professional regulation rather than ethnic identity will be a key step in graduating from a functional democracy to a successful democracy.

India has had 70 years of constitutional democracy, scores of free and fair elections, and robust culture of political participation. But the paradigm of such participation has remained trapped in a Darwinian logic, with politics seen as a competition between various ethnic groups to control the state and the bounty of tax-payer revenue that sustains it. At a personal level, despite the acknowledgements of the value of democracy in public, experiences and examples at home condition the individual to think of inequality as natural, and free speech as threat to tradition and stability. The biggest contribution we can make to our Republic is use our talents to create formal employment, and imbibe constitutional values, not just religious ones at home.

Posted by: Vikram | September 7, 2017

The Cantonment Class

Summary: Instead of seeing cantonment towns for what they were; segregated zones which excluded the locals, and included only for those loyal/useful to the Raj. Elite Indians came to see these areas as spaces which integrated ‘deserving Indians’ into the Anglo imperial world, and excluded ‘undeserving Indians’, who according to them lacked intelligence, honesty and other qualities which Europeans automatically possessed.

Lets take a trip down the Indo-Gangetic plain and India’s memory lane, courtesy Google Maps. We start at Amritsar.


From the sky, the usual treeless, busy sprawl of Indian cities is clearly visible, but notice the stark difference with the region enclosed in black. This area seems to be greener, more organized and spaced out than the rest of the city. It is called Amritsar cantonment.

We move down the road a little bit, to the city of Jalandhar.


Again, we have a stone coloured spread, which seems to contrast with the green area tucked away in one corner of the city. The green area is Jalandhar cantonment.


Separated by an air force base from Ambala proper, Ambala cantonment is virtually its own city.


Moving into UP, we see the Bareilly cantonment. Bareilly’s limited economic development means that the cantonment seems nearly as large as the city itself.


The famous Meerut cantonment.


Lucknow cantonment, with the city on both sides of it. It seems large enough for its residents to have to never leave it, and access the Lucknow outside it.

And, as we keep sailing down the Ganges, we see further cantonments in Allahabad, Danapur, and Howrah (Kolkata). These are however smaller than the ones in the upper Indo-Gangetic plain.

For a major part of India, cantonments have come to define modern urban geography. And more profoundly, they have come to shape the English speaking Indian’s psychology.

The English word canton, derived from French, stands for a military garrison or camp. The cantonment towns spread across the Indo-Gangetic plain were the first firm outposts of British colonial rule in interior India. They differed significantly from the trade and commerce oriented European outposts on coastal India, and the rest of the colonized world. Sequestered from the provincial Indian towns that the colonizers wanted to access, but not inhabit, they offered the colonizers an opportunity to imprint an urban, European aesthetic sense in the heart of India. At first, Indians had extremely limited access to these cantonments. Later, things changed for the worse.

The British made a bargain with elite Indians which would wreak long term effects on the psychology of Indians. Elite Indians would be permitted to work, educate their children and even stay in the cantonments, but there was a condition. They had to show that they would be useful to the colonial Raj. Entry to the cantonments for natives, which was to become highly competitive, relied on them clearing civil service exams which would demonstrate their ability to serve the British colonial project in India.

Therefore, for a critical section of the Indian population (the yeast of the dough in a sense), the inclusion-exclusion paradigm of such spaces was completely inverted. Instead of seeing these cantonment towns for what they were; segregated zones which excluded the locals, and included only for those loyal/useful to the Raj. Elite Indians came to see these areas as spaces which integrated ‘deserving Indians’ into the Anglo imperial world, and excluded ‘undeserving Indians’, who according to them lacked intelligence, honesty and other qualities which Europeans automatically possessed.

Since it was the exclusion of other Indians that provided cantonment Indians with a sense of their own self-worth, they came to see other Indians, rather than the colonizers, as the inhibitors of their possibilities for personal growth, and a secure, civilized life.  Since then, each Indian ethic group tried to create more space for its constituents inside the cantonments via political mobilizations. Such a mentality persists to this day in the form of various caste based political parties, which demand government jobs and patronage for their constituent caste groups.

Today, many young, urban Indians aspire to enter the Silicon Valley cantonment. Americans would hardly imagine the San Fransisco Bay area as an exclusionary, triumphalist area of their country. But in a sense, this is what the Bay area means to many of the current generation of elite Indians who work and live there. The Bay area is special to them because residence there is an automatic proof of their self worth.

The economic, social and political consequences of our cantonment mentality have been damaging. Elite Indians in urban areas continue to be mentally and physically sequestered in ‘colonies’ or ‘model towns’. They have completely ceded urban political space to other actors. But this class of people still tries to control and influence policy through non democratic channels, further reducing the quality and legitimacy of democracy in Indian urban areas.

Posted by: Vikram | July 10, 2017

Of Kashmir and Switzerland

Folks from the subcontinent often say that the valley of Kashmir is ‘like Switzerland’. A recent manifestation of this thought process was in the Hindi movie ‘Bajrangi Bhaijaan’. A mute girl from Pakistan-controlled Kashmir, gets lost in India, and tries to inform her benefactors of her origin; by pointing to a picture of Switzerland.

I wonder if those who claim to care deeply about Kashmir, have ever wondered what makes Switzerland, Switzerland.

After all, spectacular as it may be, there is no dearth of scenery amid tall, snowy mountains around the world, or indeed, even in the subcontinent. Have those who claim to worry about Kashmir, tried to ascertain what makes Switzerland so appealing to people around the world ?

Let me put forward a rather matter-of-fact perspective. What makes Switzerland so enticing basically comes down to this:


Largest Swiss corporations. Includes Nestle, Novartis, Roche and Swatch

A moutainous, landlocked country of 8 million people. But having some of the best known companies in the world. The mountains and snow dont define Switzerland’s appeal, they merely make it improbable. And it is this improbability, which is at the heart of Switzerland’s romantic pull.

There is no shortage of beautiful, landlocked places that are utterly poor, isolated and on the throes of complete depopulation. Tajikistan, Kyrgyzstan, Armenia, Laos, Bulgaria …. being beautiful, and landlocked is almost a guarantee of poverty and neglect. And this is precisely what makes Switzerland so alluring, it is rich, and also happens to be beautiful and landlocked.

Those who claim to worry about Kashmir should ask themselves, how did Switzerland manage to become so implausibly rich ? Where did these multi-billion dollar enterprises, this spirited, sophisticated economy come from ? Why does Zurich airport handle nearly 30 million passengers every year ?

Thinking down this path, a realization has to set in. Your youth of today is your country of tomorrow. If you tell your youth, go out, acquire skills, build businesses, seek opportunities, markets and develop networks, you are going down the Switzerland path, regardless of geographical conditions. Wealth is ultimately about connections.

Ask yourselves. Are we giving this message to our youth ? If not, do we have a good reason for not doing so ? Are the stakes really that high ? That instead of telling our kids to build Nestles, and Roches we are goading them into Hizbuls and Lashkars ?

Posted by: Vikram | June 14, 2017

Thinking about the university and courses

The Mahabharata can be seen as an expansive repository of moving episodes that can leave a deep imprint on the inquisitive mind. A relevant one for those who have the privilege of going to college, is when Krishna, along with the Pandavas, meets Bhishma during his last moments on Earth.

Bhishma wants to leave after his last darshan of Krishna, but Krishna requests him to wait and give the Pandavas a final lesson on dharma. Bhishma wonders what the need for his lesson is, since the Pandavas already have all-knowing Krishna by their side. Krishna responds, ‘I have knowledge but not experience’. The value of experiences is thus so great, that even the gods cannot provide an alternative to them.

College represents the possibility of dramatically increasing the range of one’s experience. A good college offers its students ample opportunity to build and share experiences during their education. Students get opportunities to form groups and associations based on interest/identity/feelings, organize events and even travel abroad. It is thought that college courses exist mainly to transfer knowledge or skills, and it is the experiences gained outside course work that really makes college worth it. However, such opinions reflect a very limited view of courses and the faculty that organize them.

Many experiences are mainly conversations, that we have with others or our own selves. If one thinks of courses, not as a data transfer, but a conversation or dialogue with an expert in an area, each course can become a new experience.

Variants of the thinking process, learnt during different courses can profoundly alter our view of the world. Take for example, a beginner statistics course. More than mathematical definitions and techniques, such a course make us confront uncertainty in a concrete way. It leads us to reflect on how limited, misleading or even fatal anecdotal accounts or incomplete information can be. Deeper into the course, we think about even more formidable questions. How can we meaningfully compare huge sets of people, or even the same set of people at different times ? How do we distinguish variations from trends ? How do we attribute changes among a set of competing factors ? Imagine how much the quality of our public discourse would improve, if the majority of the population could reason statistically.

But such payoffs are not limited to statistics courses. Nearly every field of study has a way of thinking it can introduce us to. I list below just some that I encountered during my own four years in college:

  • Pure Mathematics: Proof based/logical thinking. While writing down a rigorous proof, we have to constantly ask ourselves, does this really make sense, is there a gap in my thinking, am I kidding myself ? This is an attitude that is important far beyond the abstract mathematical world.
  • Engineering: Quantitative/Process oriented thinking. How can I quantitatively reason about this complicated machine/process/phenomena ? Which variables or values really matter for the decision I want to make ? What approximations can I make so that I can reason about it without compromising on what it actually is, or represents ?
  • Philosophy/History/Anthropology: Subjective/discussion thinking. How do we engage with the intangible human world that surrounds us ? Our family, our friends and our society. How do we engage with those whose opinions and experiences seem so radically different from our own ? Why might they differ in the first place ?
  • Physics: The search for Invariance. What relationships exist in the natural world which do not change with space, time or other conditions ? How can we employ our mathematical/linguistic vocabulary to express these relationships ? How do we discover them ? Conjecture about their possibility ? Confirm their existence ?

Course topics become a foil to access new ways of thinking and reasoning. It is apparent that every type of thought process alluded to above will leave us better poised to understand and navigate the world around us.

Absence of even one of these types of thinking abilities, even in a basic sense can lead to sub-par outcomes. Examples abound. Well educated, highly trained people without a stats course make basic errors in understanding the world. This was seen in the lung cancer epidemic, where people kept ‘believing’ anecdotes of smokers who lived to 90, to continue their own march to death. As an another example, without logical thinking, we become prone to convenient (but false) justifications for our beliefs/decisions because we dont have enough practice in evaluating whether we are wrong. Without humanities thinking, we fail to understand the intangible forces and structures that govern other people’s or even our own behavior, and start attributing every disagreement to bad intentions/faith.

A corollary of the above discussion is that diversity in courses is not a luxury but a priority. Each type of course taken reflects a new challenge to be confronted, a new way of thinking to be encountered. Once a few different ways of thinking/reasoning are encountered, one can make a better decision of which area to commit to for deeper study. Few higher education establishments in India give students the opportunity to think about their four years in college in this way. But those that do (Ashoka University, Flame University, IIT Gandhinagar among others) should be commended.

Posted by: Vikram | December 15, 2016

Is it right to let economists judge demonetisation ?

Imagine one comes and tells some Indian economists of a radical move by the US government. The US government will remain shut for three days in the middle of the week, and only skeleton crew of police and emergency medical personnel will be required to report for duty. How would our economists respond ? As economists, they would be aghast. They would point out that since 40 out of every 100 dollars spent in the US is tied to the government, a government holiday for 3 days will pretty much mean that no private businesses operate either. And crafty workers will simply take two more days of sanctioned leave to enjoy a complete week’s break. The economic loss would run into billions of dollars, projects would get delayed and even medical procedures might have to be postponed. Column after column would be produced on how this would be a horrific move.

Of course, next week is Christmas or winter break in the US, and these holidays are traditional in the Christian world. People expect to not have to work on these days, and enjoy the holiday spirit. And knowing the reality of these holidays, not a few economists will wax eloquent about how they rejuvenate the workforce, build and reinforce family and social bonds, and so forth. Why this lack of consistency ? It is because there are questions that economics can answer easily, and those it cant answer very well at all. Look at everything in short term monetary terms, and economics becomes simple. Try bringing in politics, society and other intangibles over the long term, and economics starts looking extremely limited in its ability to predict.

Demonetisation is a terrible move in terms of short term monetary policy, it is akin to depriving a body of a very large percentage of its blood supply in one go. Any doctor would be horrified if a healthy person did such a thing to themselves. But what if this blood, in addition to nourishing our organs, was also feeding cancerous tumours and other unwanted growths. What if the choice was between cutting off the supply to these tumours now, putting the rest of the body through some pain, versus expensive, risky and potentially fatal surgery down the line ?  A smart patient and a good doctor would agree that its better to suffer the pain today rather than risk death later.

Economists cannot be good doctors because they have extremely limited tools for prediction. So the default position is to rely on the past, and stick to conservative policies. They are brilliant people to lean on when we want to understand the world we live in, but not so much when we want to change it. Narendra Modi was elected on a platform of change. One hopes that he will continue to try and change the disastrous monetary and cleanliness habits of Indians, and stop trying to change their dietary preferences.

Posted by: Vikram | May 19, 2016

Why Indian cricket needs to move beyond nationalism

Cricket fans often point out that it is unique among popular sports, in that its top players spend most of the year playing for their national teams. This is in marked contrast to football, which on a day to day basis, is dominated by club teams, and American sports which are centered around local franchises. The idea of ‘playing for one’s country’ holds deep appeal for many, brought up in a world organized politically into nation states. Commentators and sports writers frequently hold up playing in a national team as the ultimate honour for a sportsman/woman, and among countries with deep political rivalries, sports matches acquire a subtext of war.

However, labour and economic statistics point to a different reality. The US Bureau of Labor’s publishes detailed stats regarding employment in America, including the number of actual professional athletes in the US. About 12,000 people make a living playing sports in the US. This only counts actual athletes, and excludes coaches and supporting staff. Is the US, with its three ‘major’ sports leagues, an outlier among rich countries ? To do a cross-Atlantic comparison, I checked to see how many professional athletes there are in the UK. The number is 17,500, surprisingly higher than the US, which has 6 times as many people. Investigating further, I found that there are 4000 professional football players in the UK, an amazing statistic.

How does British football support so many athletes ? Is it because of the Premier League, with its global reach ? Undoubtedly the Premier League helps, but less than a thousand players are employed by it. What about the rest ? This is where some interesting numbers come in. Even the lowest division of professional football in England, ‘League 2’, supports nearly a thousand players. 5000 English people attend an average League 2 football game, ensuring that the average League 2 football player gets paid nearly 50,000 pounds, a great salary in the UK.

Thus to see how deeply a society supports a sport, we have to check whether it puts its money where its mouth is. In other words, how many people actually make a living playing a sport in that country ? For cricket in India, the number is abysmally low, even accounting for the low per capita gdp. Crowds flock to support the 20 players in the Indian cricket team in the name of nationalism, and TV sponsors pump in money because it is a supreme vehicle through which to appeal to the urban/semi-urban middle classes. But until the introduction of sports leagues like the IPL, interest in any sport, even cricket, beyond the ‘national team’ has been almost non-existent.

Cricketers in the Ranji trophy, the premier cricket tournament (and in some sense the real equivalent to the EPL in India, rather than the IPL) play in front of empty stadia, with minimal sponsor and TV interest. These players do not generate any revenue on their own, they are effectively reliant on the 20 odd ‘national team’ players for their living. Needless to say, it is an utterly demoralizing reality for professional grade athletes to know that there is no spectator interest in watching their skills, and their daily bread is earned by crumbs trickling down from someone else.

For truly becoming a cricketing nation, India should aim to support at least 10,000 cricketers by watching their skills live and on TV. Unfortunately, we only support 20, that too in the name of nationalism, not sport. We need many more cricket leagues and much better viewership for Ranji games.

Language has been a contentious issue in the subcontinent since the establishment of European colonial rule. The question of which language should be used for administration and instruction in schools has led to intense political mobilization at various points of time.

As a step towards resolving linguistic conflicts in independent India, a three language formula for primary school instruction was adopted. Schools in Hindi-promoting states were to include ‘a modern Indian language, preferably from South India’ as a third language, in addition to English and Hindi. Non Hindi states were still compelled to teach Hindi, meaning that true linguistic equality remained elusive. Fast forward 50 years and North Indians have subverted this legislation, offering a prominent example of their adherence to a homogenized national identity centred around the Delhi region.

In the name of the three language formula, Sanskrit has been adopted by most Hindi belt schools as a third language. Sanskrit has far fewer speakers than Bengali, Punjabi, Tamil, Marathi and any other non-Hindi modern language. A claim is often made that Sanskrit is easier to get good marks in. But there is far more new media (movies, songs) and actual speakers of the Bengali, Tamil, and the other modern languages to learn the other languages from. Therefore these arguments seem suspect. So, why then has Sanskrit been chosen as the third language by so many schools in North India ?

There are two parts to the answer:

  • The widely propagated myth that Hindi is India’s ‘national language’, and therefore has to be spoken in some form by the non-Hindi language speakers.
  • The belief that North India is the centre of Hinduism, and therefore is also the home of Sanskrit, an important language of Hindu liturgy.


A circular typifying third language attitudes: German, French, Sanskrit, Spanish, Japanese, Russian and Chinese are all offered as options. But there is no space for a non Hindi/Sanskrit Indic language like Bengali or Tamil.


We now elaborate on these reasons. A natural question to ask is, wont the potential economic benefits of learning Marathi, Punjabi and Bengali lead to a positive outlook towards learning those languages ? After all, the North Indian elite are very keen to have their children learn languages like German and French. But here, the myth that ‘Hindi is our national language’ comes into play. So pervasive is this myth that even many non-Hindi speakers fall for it. In the minds of most North Indians, every Indian citizen must somehow speak Hindi, or they are deviant from the ‘mainstream’. This makes non-Hindi languages inferior and not worth learning, even if the opportunity presents itself.

We move onto the second reason. Many North Indians believe that Hinduism first developed there, and then ‘spread’ to other regions through Sanskrit epics. However, these epics themselves developed over a long period of time, with no clear point of origin. The importance of these texts in Hindu traditions, and indeed their very content, differs across regions. Also, Sanskrit as a language, was not native to any part of the subcontinent. But the desire to be ‘central’ in the modern Indian state, has led to a strong tendency among North Indians to appropriate Sanskrit. Due to such false and politically expedient beliefs regarding Sanskrit and North India, people, especially the elites there, have come to equate the two.

Thus, non-Hindi Indian languages are not worth learning, and Sanskrit, with a false association to North India takes their place as the third language. Thus, it is the belief in the centrality of North India and its traditions, and the resultant aversion to linguistic equality, that are the real reasons behind the widespread adoption of Sanskrit as a third language in schools there.

Posted by: Vikram | May 1, 2016

Who pays income tax in India ?

In 2014, 5 crore Indians (50 million) paid income tax. Many media outlets simply divide this number by India’s total population to make claims like only 4% of Indians pay income tax and so on. Then this number is compared to the same statistic for industrialized countries to show how non tax-compliant India is.

But a little more probing reveals that non tax-compliance of salaried professionals is a myth, at least as far as the matter of filing taxes is concerned. To really compute a meaningful number from the data about the total number of tax filers, we have to divide it by the possible pool of tax payers, not the population of the entire country.

So who can pay tax in India ?

There are three simple steps to arrive at this number. First, to be able to pay tax, you should be able to work, i.e. be in the potential labour force. The potential labour force is defined as the proportion of the total population which is above the age of 15 and below the age of 64. This is because one doesnt usually expect children below the age of 16 to be working, and people above 64 are usually retired or depend on their children. So what is the number of people in the 15-64 band for India, the world bank says its 65% of the total population, which amounts to:

0.65 * 123.6 = 80.34.

So 80 crore (803 million).

But of course, not all of these 80 crore are working. Many are students, some stay at home as housewives and so forth. So we have to further sharpen things to the number of actual participants in the workforce from these 80 crore. Again, the World Bank’s data tells us that only 56.5% of India’s possible workforce actually engages in economic activity, which gives us,

0.565*80.34 = 45.40.

i.e. 45 crore (450 million).

So is 5/45 the number we are looking for ? Not quite, there is one more step. In India, agricultural income is not taxed. Therefore, we need to subtract agricultural workers from the actual workforce. 50% of Indian workers are either farmers or farm labourers, so the pool to be subtracted from the 45 crore number is,

0.5*45.4 = 22.70.

So we are left with 45.4 – 22.7 = 22.7 crore possible tax payers.

The actual rate of tax payers then is, 5/22.7 = 22 %. So 22% of our possible pool of tax payers actually pays tax. A large component of the non-tax compliant population might be petty shop keepers, and low skilled workers like drivers and domestic workers.

But the point of this calculation is to drive home the message that the real problem is not tax-compliance, as much as it is employment. India’s private sector is incredibly small. Most of our workforce either sits at home or is trapped in low skilled farm work.

The world economy entered a period of globalization in the early 1990s. This phenomenon was driven by rapid improvements in computer and information technology, the opening of new markets and tighter economic integration across international borders. Compared to preceding decades, labor and capital became less regulated and much more mobile. However, there is increasing consensus among economists that this period of globalization is coming to an end, and that we are entering into a period of stricter trade and labor restrictions.

India has had deep and long-lasting foreign trade relationships since ancient times. All these trading relationships were accompanied by both, the diffusion of Indian technologies abroad, and the adoption of foreign technologies in India. We highlight some prominent exchanges of this kind, across the ancient, medieval and colonial eras, and discuss their enduring impacts. We then attempt to place the current era of globalization in this historical context. Doing so will allow us to think about how we can make the globalization era have a long-lasting, positive impact on the Indian economy and society. Failure to do this will result in the globalization era passing by as merely a temporary phase in India’s economic history, with no long lasting legacy.

We start with Indo-Roman and Indo-Arab trade in metals, where technology flowed from the east to the west. Techniques for the making high quality ‘Wootz steel’ were developed in ancient South India, before the start of the Common era. This steel was traded over ancient Europe, China, the Arab world and the Middle East, and was renowned as the ‘finest steel in the world’.  The Indian techniques were then adopted and improved upon in these areas with time. A notable example in this regard is ‘Damascus steel’, which was developed in the ancient Middle East, and was known for its strength and durability till the 17th century.

A Nataraj from the Chola dyasty. 1000 CE. An important symbol of achievement in Indian art and metallurgy.

A modern day recreation of a Damascus Steel knife.











Moving forward into the Common Era, an important technology was introduced into India from the East. By 140 CE, Indians acquired techniques for silk production from the Chinese, where the use of silk originated. Over time, silk became an important fabric in India, and a wide variety of silks evolved across the country for various purposes. These ranged from mekhela chadors in Assam, Banarasi sarees in UP to the famed Kanchipuram silk. Today India, along with China is the largest producer of silk, with the two countries accounting for around 60% of global silk output. And India is even today, the world’s largest consumer of silk.

Silk Mekhela Chador from Assam

Banarasi Saree








Next, a bit further into the common era, we have examples of technological interchange from the textile industry. In textiles, technology mostly flowed out of the Indian subcontinent to the rest of the world. For nearly two thousand years, India produced and exported cotton fabrics of great quantity and variety to Central Asia, East Asia and Europe. Not surprisingly then, a number of innovations in textile manufacturing ranging from the cotton gin to the spindle to spinning wheels were made in India. In particular, the spinning wheel, invented between 500 and 1000 CE, gained acceptance in both Eastern and Western directions, as the illustrations below show.

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Early illustration of a spinning wheel, Baghdad. Around 1200 CE

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Spinning wheel illustration from China – Around 1300 CE










Subsequent centuries saw Central Asian Turks establish kingdoms in India. The Mughal dynasty (1550 – 1707 CE) established a major trading relationship between India and Central Asia.  And it is to these contacts that we can attribute two more technology adoptions in India. The first was carpet making. Coming from Central Asia, a region with a strong tradition in making carpets, the Mughals duly introduced carpet making to India. Like silk, carpet making spread rapidly throughout the subcontinent, with Varanasi, Jaipur, Srinagar and Amritsar emerging as the most important centres of production. Today, India is the largest exporter of rugs in the world. Indeed, rug making has become thoroughly Indianized, and India is the home of companies like Jaipur Rugs, a global leader in the hand-made rugs category.


After the collapse of Mughal authority in the 1700s, trade with Central Asia lessened. However, Rajasthani kings utilized the Central Asian contacts they had made via the Mughals, to bring in another new technology to India. Expert ceramic artisans were brought to Rajasthan and a new school of pottery was established there. Indian pottery had a long tradition, but ceramic materials and glazing techniques, had not been used much so far. The Jaipur Blue pottery tradition combined these techniques with Indian pottery, and continues to create stunning works of artistry to this day.

Blue Pottery from Jaipur – Modern day

With the establishment of British colonial rule, previous trade networks were eliminated and India entered into two centuries of exploitative trading arrangements, exporting raw material to Britain while importing manufactured goods from there. Despite the lack of institutional support, individual initiative for technology transfer was still present. Perhaps the most famous example of such a transfer is motion picture technology, which was almost single handedly popularized in India through the efforts of Dadasaheb Phalke. Although cinema had been introduced in India soon after its introduction in Europe, it was Phalke who travelled to England to learn about the new medium. Starting with Phalke’s ‘Raja Harishchandra’, Indian cinema has gone on to become a defining feature of modern India through our varied film industries.


Dadasaheb Phalke – Introduced motion pictures in India

Cinematic products from India, in Tamil, Bengali, Marathi and Hindi languages (clockwise). Themes in the set range from scifi, historical musical to Sergio Leone style Westerns.












After independence, scarred by two centuries of colonialism, India followed an economic policy that emphasized self-sufficiency over foreign trade. This allowed the growth of indigenous automobile, pharmaceutical and space industries, but also inhibited the acquisition of latest technologies, and access to foreign capital and markets. But beginning in the late 1980s, India opened its borders to foreign capital and entered into an especially deep trade and labor relationship with the USA, as it had done in previous eras with Central Asia, East Asia and Europe.

In the context of urban India, this contact with the USA has had two major impacts. The first is the inflow of foreign investment and tighter integration with the global economy, especially in cities like Bengaluru, Hyderabad and Mumbai. The second is the movement of skilled, English educated Indian labor abroad, specifically to Anglo countries like USA, UK and Australia. Indian professionals are now widespread throughout the world, as India has become a leading exporter of skilled labour to richer countries. As an example, the Indian population in the US was 815,000 in 1990, but nearly quadrupled in two decades to 2,850,000 in 2010.

At an individual level, the act of migration for skilled Indians represents a chance for professional growth, and a shot at the American/Australian/European dream. Institutionally, this migration has been supported by the widespread English language technical institutes in India, America’s H-1 visa program and the amiable diplomatic relationship between the two countries. But with the winding down of globalized labor, money and technology flows, institutional support will wane. Also, as wages in India rise, many American companies will move their offices and businesses out of India.

In such a scenario, it is imperative that we focus efforts into building complex computer products like operating systems, microprocessors and search engines in India. One might question the need for doing so, since American alternatives are ubiquitous and easily available. But had this been the attitude in previous eras, we would not have had indigenous silk and carpet industries, with India’s own deep, and diverse imprints on them today. We have to learn and introduce difficult, cutting edge skills, not just for economic benefit, but for the chance to bring our civilizational ethos to bear on these human endeavours.

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