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Optimistic on India - Views on News from Equitymaster
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  • Aug 1, 1998

    Optimistic on India

    No, this is not a suggestion to buy into the Indian stock market. With a budget that is changing every day, the accounting books of the wise government in Delhi must be in shambles. Add to this minor inconvenience of not knowing the macro economic framework, the major irritant of not knowing which finance minister or which government will present the next budget, and there is very little reason to buy shares in a hurry. But this is supposed to be an optimistic article. And it is an article triggered by some responses to previous columns: is India really a write-off? Do I have anything good to say on India?

    Yes, there are a lot of good things about India to make one optimistic. But one has to step back a bit and figure out the meaning of life, what one wants in life, and then how does one go about getting there. Most of our policy makers and economists (in keeping with their passion for all things foreign: news channels, technology, capital, accents, and conferences) have become obsessed with the (western) measurement of GDP as a measurement of happiness. Higher GDP, we have been brainwashed into believing, is more happiness and a better life. But that need not be true. The United States may be the largest GDP nation in the world, but the sickness of much of its society is immeasurable though visible in many forms. School children shoot other children, deranged men with an ability to buy guns roam the streets, and the elderly have to be sent to homes. The late Mahbub al Haq, a Pakistani economist, had created the Human Development Index that sought to measure the true wealth of citizens: the level of education they achieved, their life expectancy, and even their material wealth. Though this Index has gone a long way in measuring how countries compare in non-monetary aspects (India is somewhere in the bottom), even this Index falls short in determining the quality of life or quality of education. The US may look pretty good on GDP and even on the Human Development Index but fairly low in the Gross Happiness Product, a concept introduced to me by Professor Behrman, my mentor at University of North Carolina at Chapel Hill.

    Over the years, the US has built its entire economic model on one factor: consumption. The more you consume, the better it is for the companies. And if you cannot afford it, buy the next better product on credit. This solution gives the consumer his next dose of instant happiness from purchasing the newest car, keeps the factories humming as they produce more not-really-required goods, and keeps the consumption model in place. This consumption also ensures that in most homes in the US, both parents have to work to pay down their debt, spend less time with their children, and send their aging parents off to retirement homes. So the children get a good education (plus points on the Human Development Index) but are probably low on “family values” (negative points on the Happiness side). Meanwhile, the elderly live longer in retirement homes (plus points for the Human Development Index) but are socially dead (negatives for the Happiness factor).

    With probably 500 cars to choose from, I doubt if a US consumer is “happier” than an Indian consumer is. The US may have sacrificed much of its richness of a family life and of family values for higher GDP. India is low on the GDP list - and getting lower thanks to the policy of weakening our own currency! -  and even lower on the Human Development Index (that is what happens when you spend money on guns and nuclear bombs rather than on sanitation and education) but should be still high up on the Happiness list. Yes, there has probably been an erosion in values as we in India chase the capitalist ideal of acquiring more goods, but the family as a unit is still coherent. And that is what makes me optimistic. We have travelled just a little down the consumption road, so our path is reversible. Don’t get me wrong. I am all for goods and products as a way to make our lives easier but feel that many countries have adopted an economic model that is based on the production of such goods as an end in itself. The attempts for “globalisation” are largely a way to expand potential markets for products to ensure that factories keep humming - not necessarily a step towards increasing the Gross Happiness Product of any country.

    And here is a prediction for the sattawallas out there: If you missed out on the big export boom of the textile, leather, and software sectors that caused their share prices to rocket, don’t worry. And if you got caught (like I did) in the bust of the textile and leather exporters, and fear being trapped in the software collapse, then buy shares of Indian godmen. The next big export from India will be Canned Spiritual Happiness for US$ 2 per can. With zero raw material costs and an insatiable thirst, it could be the next Coke – except Happiness is The Real Thing.



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