Lecture discusses India's industrialization

By: Lillianna Baczeski

Posted: 11/12/04

India's industrialization must increase in order for the country's growth rates to grow rapidly, Arvind Panagariya said Thursday in a lecture entitled "Emerging India: Threat or Opportunity" at the Dodd Center.

Panagariya is a Jagdish Bhagwati professor of India's political economy at Columbia University in New York City. An author of nine books, Panagariya writes monthly columns for the Economic Times and writes sporadically for other periodicals, such as The Wall Street Journal and The New York Times.

The lecture opened with a brief history of India from an economical perspective. Panagariya explained the increasing growth rate in India as it has developed over the past 50 years and contrasted this to the growth rate of China.

"As the country's growth rate increases, the wealth does not trickle down to the poor," Panagariya said. "Rather, I prefer to call it the 'pull-up' method. As the country industrializes itself, the poor are given more jobs and pulled up above the poverty line."

Panagariya said the cause of the increased growth rate was due chiefly to the huge liberalization of the economy previously restricted by the government. Liberalization of economy had a direct correlation to an increase in trade, which increased investment, and therefore increased the growth rate.

India today has a much more open economy, boasting a growth rate of approximately 6.1 percent per year, but Panagariya said China has an economy even more open, with a growth rate of about 10 percent per year. Although this distinction is large, Panagariya does feel that India has "turned the corner" in terms of being on its way to becoming a major industrialized nation.

Supporting this claim, Panagariya shared a story about the drastic change in telecommunications in India over the past 10 years, highlighting that cell phones are now common in the country.

Although some changes have been made, Panagariya said he felt there were obstacles still to overcome if the world was going to see an even larger jump in India's growth rate.

"The basic problem is that 60 percent of the population is still in agriculture," Panagariya said. "That is to say that 60 percent of the population still make their living by farming."

Panagariya also said there has been a slight decline in the agricultural share of the economy while industrialization has remained static. The increase was present in the services share, although this grouping does not include modern services, according to Panagariya. For the country's growth rates to grow rapidly, Panagariya stressed the industrialization share must increase.

Panagariya ended his lecture by briefly addressing outsourcing. He said an estimated 250,000 jobs were outsourced from the United States to India over the past four years. Taking this number and placing it next to the 30 million jobs that the United States creates and destroys annually, Panagariya said he felt that the "situation" of outsourcing was not really a situation at all.

"To think that one job there is one less job here is the wrong way to look at outsourcing," Panagariya said. "The number of jobs in America is not fixed, it is constantly increasing."

Panagariya also emphasized was the loss of American jobs to machines.

"I thought the talk was very general, which I guess was okay in light of this audience," said Malia Bajpai, a graduate student focusing on political science. "I think it was interesting how [Panagariya] discredited the American media and the face they put on the situation of outsourcing. I'm sure he had a different view because he is Indian, but the numbers put forth were very debatable."

The lecture was the first of a series co-sponsored by the Office of International Affairs and the newly formed India studies program headed by political science professor Betty Hanson.