Party Pooper

There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact.
Mark Twain (1835 - 1910)

Although I am not an economist, I think that much of the debate in blogosphere regarding Indian Economy can be summarized in the above quote. I am afraid that much of acrimony regarding prediction of Indian Economy and it's comparison with China while not exactly tarot card reading, is nevertheless an exercise in speculation based on overstretched assumption resulting in expectation which can only be termed as irrational exuberance.

Why do I feel like this? Consider the problem that Indian growth is sustainable or just flash in the pan? Now not being an expert on it, I do not know.

What I do know is that there are significant roadblocks; one is dismal condition of infrastructure. Another is less than flattering education standards, yet another is dysfunctional administrative structures, controlled market and restrictive labor laws.

Sure they are mentioned as a footnote in any essay, but I have yet to see their detailed analysis in either media or blogosphere.

I am afraid that either people have become overconfident or worse assuming that all things will remain constant. And that is what I am afraid of; our competitors are catching up all the time.

Reforms have been stalled at least till 2009, Indian industries are still pygmies compared to global giants and it is not clear to me whether they will be able to scale up or not.

Further the opportunity cost is steadily increasing, for example toys manufacturing. India is suitable placed to leverage as it is possible to acquire technical know how as well as there is a robust domestic demand, however since it is reserved for small scale industry, there is a situation where market is inundated with Chinese imports.

Another example is shipbuilding and ports, both of these industries are labor intensive and as such Indian and them are made for each other and yet there is hardly any movement. These issues are important and in my view serious enough to spoil the party.

That is the reason I remain skeptical of rosy analysis.