India Will Never Be the Next China, Morgan Stanley’s Ruchir Sharma Says
As a child, Ruchir Sharma spent his summers in his maternal grandparents’ small town in Uttar Pradesh, one of India’s poorest and most populous states. Although the town was about four hours from New Delhi, it was a world away from his otherwise urban life. Distractions were few so he spent his summers studying adults—and watching them “hurl their choicest insults at the TV” as they took part in India’s leading spectator sport: politics.
It was an early glimpse into how the world’s largest democracy works.
Sharma, chief global strategist at Morgan Stanley Investment Management, has refined his insights over the ensuing years, frequently making personal trips to India to track at least one Indian state or national election a year alongside a growing caravan of Indian writers and editors. His new memoir, D-cy on the Road: A 25-year Journey Through India, details his travels to 15 of the country’s 29 states, including meetings with Indian politicians in the privacy of their homes and conversations with voters at political rallies in the small towns between the country’s megacities. These byways often play an outsize role in deciding election results.
India’s benchmark S&P BSE Sensex market index hit a record high of 39056.65 on Tuesday. Rising optimism that Prime Minister Narendra Modi’s pro-business coalition will stay in power in national elections beginning April 11 could be partly responsible for the index’s advance. A month ago, India was one of this year’s worst-performing markets. Election season ends at the end of May.
He recently spoke with Barron’s about what drives Indian voters; why investors might want to lower their expectations for Indian stocks even if Modi beats rival Rahul Gandhi, Indira Gandhi’s grandson, at the polls; and why investors need to stop comparing India with China.
Barron’s: In your book, you talk about how elections are determined in India’s “mofussils”—a colonial term Indians now use to describe rural places where old ways run deep. What do people miss by not spending time in these towns?
Ruchir Sharma: How the thinking is so different. For example, the national media in India is focused on pollution and the quality of air in Delhi. Yet, as you go outside of Delhi, the smog may be as bad, but nobody talks about it. For the people in these villages, just getting by is more important. The other thing is how deep the caste system runs in India, especially in the rural areas where two-thirds of the people live. Also, Modi’s nationalist message resonates far less outside the northern parts and people underestimate the diversity of the country. It is more like a continent with 29 states than one country.
So local issues trump national ones. What will you be looking for when you head back to India next month?
How much Modi is able to convert his personal popularity into votes for the BJP [Bharatiya Janata Party] and how well the opposition alliances are working together. Whenever the opposition come together, they always pose a threat.
What brings them together?
Often it is to -. In India there has always been populist sentiment against the incumbent politician. Two-thirds of incumbent governments in India have typically lost an election. In the U.S., 80% of incumbents typically get re-elected. Now, though, I’m seeing the anti-incumbency trend go global. Last year, only 40% of governments across the world got re-elected—that is a big change compared with roughly a decade ago.
What is driving that? Rising inequality?
In India, the view is that the state is broken and never delivers so they are always angry at the incumbent. But now across the world there is a growing frustration with what the establishment is able to do for you. It has also been partly stoked by social media, which makes it easy to bring people down now.
What does that mean for investors?
It creates more volatility.
If India always roots for the underdog, that can’t be good for Modi.
That is the risk he faces. The business people in India are feeling listless. They haven’t gotten from the government what they wanted, but they are scared of change. Their default is to favor stability.
That diversity also makes economic reform hard. Over the past 20 years, you have had the chance to talk to the Gandhis, Modi, and other leaders and have lowered your expectations for reform. Why?
I’ve become more of a realist, realizing this country will change at its own pace. This isn’t a country where you can go and tell them to be like [Ronald] Reagan or be like [Margaret] Thatcher. It isn’t going to work that way. All the leaders tend to be statist—they believe too much in the state. Whatever reforms or focus on development there is, I tend to see much more of it with the state governments. It is very hard to get top-down change in India.
The last time Modi won, investors were excited about the prospects for economic reform and the reduction of bureaucracy. The market has been rising on similar optimism lately. Should investors temper expectations?
It is good to keep expectations low. The reform and change [Modi brought] is different than what was anticipated. He wants to fix things here and there, but it isn’t free-market reform or liberalization—or the kind of change that, for example, is expected from Brazil today, under [President Jair] Bolsonaro.
What is one big thing investors should know about India?
Forget the India/China comparisons. Apart from the large populations, these two great nations of Asia have nothing in common. Nothing. Everything you say about China, the opposite is basically true of India. Where China is more homogenous, India is as heterogeneous as they come.
During the reform of the state-owned enterprises in the 1990s, they let go of 70 million employees. That is what kept China ahead of the curve. In the past few years, China is showing some signs of reverting, but that doesn’t’ take away from the big picture. China gave its people much more economic freedom than India did. And that is ironic.
Give us an example of India’s failure in this regard.
Look at demonetization [Modi’s government voided 85% of the currency overnight in November 2016]. India wanted to move to a cashless society, but China has moved to a cashless society much quicker with the private sector. In Beijing or Shanghai today in the middle classes, cash is nonexistent. It happened organically through the tech revolution and the development of some great payment solutions, and not through some massive state intervention or something as draconian as demonetization. India’s not going to become the next China.
来源：三泰虎 http://www.santaihu.com/47350.html 译者：Joyceliu
Two simple reasons India will not surpass China: 1) India's culture is deeply tied to ancient ways and 2)Tenacious adherence to to Religion. Both aspects will hold India back. Other Asian counties with old cultures and religions such as Japan, China and Korean successfully bridged these gaps.
Don't see how. India's nowhere *near* as coordinated, calculating and planing as China.
Well, at least Ruchir has more courage than most to tell the truth!
I suspect that to to the globalization of capitalism that the world is rapidly running out of cheap labor markets.
India looks at China as their bar to beat. China looks at the US. That's why China will always be ahead.
Ruchir seems to be a guy to really care about India and dares to say something politically incorrect. He traveled to India for so many times to observe because he deeply cares. A lot of people have empty and big talks while not really knowing anything about the subject they are talking about.
Two things: caste system and religion. Religion itself is not bad, but will act as the break for development if they insert it into politics and government.
India has perfected the culture of being happy with nothing. If you are happy with nothing why would you try to improve yourself?
Never say never. In WWII no one would have believed that in the future both Germany and Japan would be allies of the USA.
When I was in school teachers always told me if a statement has "always" or "never" in it, it was always wrong.
India's political system has entrapped the country with a two-step forward one step backward mentality as India's politicians will utilize all available means to advance their own self interests.
Corruption, political lies, support to become India as a Hindu country. As far as Modi is there India will go back in all the direction. Other parties are not capable to make India as a economic tiger of Asia. Sorry but this is fact.
There are good and bad consequences for whatever route a society takes. Not everything can be measured in terms GDP.
Pakistan has recently adopted a policy of reconciliation towards India by opening a corridor for Sikh pilgrims to their holy places. This is the right thing to do. People of every faith should have a fundamental right to practice their faith and every one should provide facilities. That will promote tolerance and love between people. The founder of Sikh faith promoted love for humanity.
Why do we need another China? We do need a better India... so don't see much point in this article. As far as investment potential goes, India is a good investment opportunity for those who know the country (just like pretty much any investment!), don't need Morgan Stanley for that
But China will be the next USA, for sure.
At last some one is stating the obvious. India is built on lies and fake news. When it can create 20 million jobs per month and alleviate the suffering of 80% of its masses, then maybe - until then don't hold you breath
I think most Pakistanis and Indian intellectuals recognize that they both were victims of colonialism with the latters' "divide and rule" policy. Now it is wise for the 2 countries to reconcile and make their countries tolerant people.
I just spent 10 days in India. The internet speed in my hotel was well over 100Mbps. No reason to worry about India: like China, it will be leaving the US behind in the dust, while the US wastes all its taxpayers' borrowed money on the military-industrial complex and religious strife in the Middle East.
Most Indians, and certainly their current leader PM Modi, are fiercely independent, and the country has immense talent. Consequently, they'll always be unique in their own ways, and any comparisons to other nations are irrelevant.
Duh! Look at the Philippines and countries south of the Rio Grande. Religion destroys a country and Hinduism is a religion just like Catholicism, but is still in control. The founders of the U.S. knew this and tried to keep religion out of our government.
YES, different groups of people in large numbers will make a China-Like transformation very difficult. However, there are many possibilities and opportunities that are very unique to India. PM Modi's second term is absolutely essential to take full advantage of the existing possibilities.
Western countries don't understand China is on a plan for world domination. The plan involves not decades but a time frame even longer than that.
I often used to says, Indians are educated but not civilized. There is a great difference in thinking of both people. Have seen a lot of Chinese while working. Really hard working
A great book to read on this very issue is "Why Nations Fail".
We can thank our CIA for keeping India from ever being a super power. We have used the h1B program to steal half of their best minds, and they cant use most of the other half as they are of the wrong caste. Our cia is brilliant
Biggest Democracy in the world, and also Caste base religion in the world. In order to know what going to happen to India ,one needs to visit India and stay at least 2 weeks to understand how Savages the Hindu religions are.
India has something in common with china...over population..it has lots of well trained IT professionals. It should be way ahead of its growth track and needs to address its poverty and infrastructure to grow
Never heard of India? Heard of Indiana.
Voice of Reason
The Silicon Valley and San Francisco Bay Area. Will the next China or India.
If you live in the area you see so much high density housing and disparity between the rich tech people and the poor average worker. The city governments love it because more taxes and higher pay for the top government officials.
Here's a fact! The West never assimilated the Chinese because the Chinese always fought. India was colonized to where the West was on control of generations thereafter which means the West taught India to be a subordinate to the West.
I look at the map India is small and located in a remote area of Indian Ocean plus Chinese are also a lot smarter than Indians, these are the disadvantages for India
India is and has been horribly over-populated throughout its history. It isn't the best and brightest who have the most children. It is the rural, backward poor who can least afford such large families. Backward beliefs and religion need to be brought into the 21st century as well as strong incentives for massive birth control are needed. China had its one child policy which was controversial but did help alleviate some of the population pressure. The countries with the lowest birth rates seem to have the highest standard of living, the cleanest air and the most modern societies.