m India controlled 2.

5 percent of world trade

m Problem was agriculture, which remained stagnant
m Jawaharlal Nehru & his planners attempted to
industrialize the country through the state
m India also put political freedom before economic
freedom
m Indians traditionally had a Brahminical contempt
for manual labor
m Indian entrepreneurs, who come mainly from the
higher merchant caste have shied away from
manual labor and technology
m As a result, India did not produce innovation and
failed to create an industrial revolution.
m India will be well placed to compete in the
knowledge society.
m it adopted an inward-looking, import-substituting
path, rather than an outward-looking, export
promoting route.
m it set up a massive, inefficient, public sector to
which it denied operational autonomy, resulting in
heavy unproductive investments.
m it over regulated private enterprise with the worst
controls in the world, leading to diminished
competition.
m it discouraged foreign capital, denying itself the
benefits of technology and world-class
competition.
m it pampered organized labor to the point where the
country had extremely low productivity.
m perhaps most important, it ignored the education
of children.
m two competing visions at the time of
independence:

m Mahatma Gandhi opposed modern urban industry

m Nehru had a modern scientific mind, was much
impressed by the economic gains of the Soviet
revolution
m Nehru taught Indians to be liberal and tolerant.
m He inculcated in Indians a respect for democracy
and a distaste for feudal behavior.
m He infected us with his idealism.
m But he also reinforced our prejudice against
businessmen and profit.
m India primarily focused on how to raise savings
and thereby increase investment
m Their innocent faith in state companies turned out
to be altogether misplaced
m lack of training, autonomy, and accountability of
the senior managers in the public enterprises
m The British Raj was the most important event in
the making of modern India
m They gave India modern values and institutions,
but did not interfere with the country¶s ancient
traditions and religion
m Britain also divided India into two nations-the 10
percent elite who learned English and shut out the
90 percent who did not
m Äas argues that the Indian colony was not terribly
profitable to Britain
m Äas argues that there was no British conspiracy to
deliberately under invest in India, or to sabotage
Indian business interests
m Äas admits that in the eighteenth century, the
British plundered and looted India's wealth
m India also had an experienced merchant class to
take full advantage of the circumstances.
m it is more important to consider economic factors that
motivate an entrepreneur to invest in a business
m The key lies in reducing regulation and providing
incentives.
m Americans are positive and optimistic.
m India pursued faulty policies guided by a misguided
sense of socialism
m The key is to try to ensure that everyone has an equal
start in life and can hope to rise to the top.
m Alleviating poverty is more important than achieving
equality
m the much aligned cast system tends to promote
trust.
m Traditionally, Indian merchants engaged in trade,
cover vast distances
m it was important to have members of one¶s caste
and kin in sensitive positions.
m With liberalization in the 1990s, competition has
become fierce and survival is at stake.
m Caste loyalties seem now to be diminishing
m Äas argues that there has never been a significant
³caste barrier´ to entry in modern jobs
m He believes that being endowed with commercial
castes is a source of advantage in the global
economy
m the caste system is also responsible for at least
some of our industrial failings
m worlds of knowledge and labor remained separate
and inhibited technological innovations
m In other countries, the entrepreneur¶s battle is with
competitors but in India, the main enemy is the
government bureaucracy
m Indira Gandhi¶s government became even more
rigid
m In the past ten years, the government has been
trying to undo the mistakes of the past
m The new middle class is confident, full of energy
and drive and is making things happen.
m It has had to fight to rise from the bottom, and it
has learnt to maneuver the system
m The chief difference is that there is less hypocrisy
and more self-confidence.
m the most powerful and immediate reform for the
poor is more and better primary schools and
primary health centers
m Indian companies are still small in size by global
standards
m managerial capitalism depends partly on the
Indian society¶s ability to build ³social capital.´
m Trust and cooperation are necessary for a well
functioning market
m High trust can dramatically lower transaction
costs, corruption and bureaucracy.
m The bigger failing of Indian companies, is that they
venture into unrelated business in an opportunistic
fashion
m To be globally competitive, Indian companies must
focus on a single area of competence
m They must not ignore quality even when they are
pursuing a low-cost strategy
m the country needs are good economic policies
m The Far East countries emphasized labor-
intensive manufacturing for export
m It made scarce capital cheap, labor expensive,
overvalued our exchange rates, and reduced
competitive pressures.
m India has not yet begun a serious reform of the
educational system
m capitalism's success in India is threatened not so
much by the leftists or protectionists as by the
timidity of its defenders
m The new India is increasingly one of competition
and decentralization
m the country must seize the moment and improve
governance and accelerate the reforms
m The reform process will evolve through a daily
dialogue between the conservative forces of
caste, religion, and the village
°