Tuesday, February 25, 2020

Development vs Growth

In my discussions with the various market participants in last one year, I have realized that "drivers" and "domestic workers" are perhaps the most influential reference points in their analysis and forecasts of the economy.
I have heard many of them proudly alluding to stories how the life in villages has improved in recent years. All the villages have connected to highways through all weather roads. Everyone is getting free money to build pucca houses. Houses in remote villages have got electricity and LPG connections. Children are going to English medium schools. Everyone has a smart phone and internet access. All have a basic bank account. Farmers are selling their crops through nationwide electronic trading platforms. Millions have people got their Ayushman (Health Insurance) cards and can avail free medical treatment in empanelled hospitals, etc.
Many popular analysts, investment advisors and fund managers, have famously narrated on social media, and also during public presentations, how some of their most successful investment ideas and investment strategies have been inspired by the discussions they had with their Uber driver on their way to or from airport.
I fully respect the idea of having a frank conversation with the "driver" or "domestic worker". However, the thought of any such conversation resulting in investment strategy sounds mostly frivolous to me.
I have also heard stories of development in the hinterlands from the immigrants. However, I am unable to correlate their stories to their living conditions in the cities, resistance to the idea of going back to the developed and connected homes, and the conditions I witness during my visits to the so claimed fast developing communities. The stories of drivers and domestic workers sound distinctly similar to the stories narrated by Indian immigrants living in foreign lands. Whenever they return to foreign lands after visiting India for few days, they proudly narrate to their friends how the things have changed back in India - the airports, the malls, drone photography in marriages, broad highways, luxury cars, etc. But while narrating this they are hardly imagining themselves returning back to India.
From the investment strategy viewpoint, I find a stark disconnect between the concepts of economic development and economic growth.
The immigrants are mostly talking about infrastructure development from a very low base. For them, no electricity in 50km radius to an electric connection 7kms away is a huge development. Also, from having to walk 10kms to catch a bus to the nearest town to a bus coming to village once in a day is massive development.
Whereas the analysts and investors are concerned about the growth rate from tomorrow onward because whatever has happened till today, is already there in the price.
My latest visit to some villages and tribal areas in central India highlighted the following to me:
(a)   Education and medical amenities continue to remain very poor.
(b)   Economic exploitation continues to remain elevated. The "agent" is charging Rs50-70 for every transfer of money from city to village. No one gets minimum wages paid.
(c)    The roads are better but these are far from being good. Electricity condition has improved but remains far from acceptable level. Water availability remains critically poor.
(e)    The house made even from bricks are mostly Kutchha. These add noting to cement and steel demand.
(f)    Mobile phones are both boon and curse for the communities at large.
(g)    The financial security of an average farmer is no better than it was 10years ago.

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