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Professor Anthony D’Costa is an experienced scholar of contemporary India. After more than 18 years with the University of Washington, Copenhagen Business School can now benefit from his competences. He is expected to play a very significant role in the upcoming Indian Studies programme due in 2010.

In this second part of the intervew Professor D’Costa elaborates on India’s competive strengths and weakness, the state of India’s democracy and whether India is a part of asia at all (for the first part of the interview, click here).

Some people do not perceive India as a part of Southeast Asia on the line with China and Japan, do you think this assumption is wrong and why?

I think there is a lot of disagreement in terms of how the world should be grouped, and certainly how the Asian part should be groped. Conventionally, India has never been considered part of Southeast Asia, generally speaking. Although there will be some people who might consider that if you take, let’s say the northeastern part of India. The northeastern part of India has a common border with Tibet on the north side, but also down south with Myanmar. And if Myanmar is part of Southeast Asia then why shouldn’t that part of India be part of Southeast Asia? In fact, historically one can see that that there have been tribal affiliations and commonalties and common history in that region.However, India is considered more centrally as part of south Asia. That of course includes the countries of the subcontinent, which are Pakistan, India, Nepal, Bangladesh, Sri Lanka and then Bhutan which is small little place; these are the countries of south Asia. In that point of view India is considered to be part of South Asia, so I think don’t that would be a very significant issue if it was not considered part of Southeast Asia. But that said, if we look at it in the historical point of view India has had very strong influences on Southeast Asia. If we look at the spread of Buddhism to Thailand it is clearly a product coming out of India, although it came via Sri Lanka.

More recently, in the colonial period, the British also created certain links between Southeast Asia and India. So for example, if we look at Malaysia and Singapore there is a visible presence of Indians or Indian Singaporeans and Indian Malays. They were brought in as workers, contract workers or indentured workers. They worked in the plantations; they served in the British army and those people are still there. Of course they are Singaporean citizens and they are Malay citizens, but they have Indian origins, so in that sense also India is very direct connected to Southeast Asia. And today of course if you look on the economic front, even the geopolitical front, you will see that India has been invited, at least as an observer, in the ASEAN group. It is again recognition that India is very important player, India is very big and some of the Southeast Asian nations are not very comfortable with the rise of China in the way it is. They want a balanced approach to this and so they are inviting India. In that sense it can be also that India is very strongly linked to Southeast Asia as well although it is conventionally, if we go by categories, not a part of Southeast Asia.

What India’s competitive strengths over China

That’s of course a very broad question, but let me put it this way. When you look at completive strengths, we do know that China is the world workshop in manufacturing. They are very good at manufacturing, very good at producing cheap goods very efficiently. One of the economic reasons is of course that they produce in volume so it keeps the costs very low, but, it also has to do with the regimentation of work.

The regimentation of work basically means that workers are organized in large numbers, they live in dormitories, they have a very tight schedule and that basically creates more output. In India that could be a little difficult, Indians are not very favorably disposed to authority. They don’t like authority, they like to do things on their own and they are very independent in that sense. They don’t trust authority very much, so from that point of view, what we call industrial discipline, might be somewhat weak in India. It is not that Indians are not disciplined and they don’t work in factories – they do. It is just that China has that advantage.

Furthermore China has the advantage in manufacturing in part because they also opened up their economy much earlier, almost by 12 years ahead. So China has a lead of 12 years in terms just deregulating their economy, allowing foreign investments to come in. In that sense they have the advantage. But having said that, I think there are two things in which India’s advantages lie. One, of course, is that India has become as very strong player in services and is in fact a major exporter of software services. India probably has the number one position in software outsourcing actives. That’s very interesting development, and in some ways India is posing a very interesting intellectual challenge, because, no country has gone through almost skipping the manufacturing stage into the services. Obviously that means that there are some advantages in terms of why, in India, services are important. So in that sense India has a competetive advantage in services. The Chinese are always puzzled as to why India is so good at software services and they are trying very hard to do the same.

India is also very very good in financial services and accounting and any other business services you can think of. That is partly because, traditionally, there have been very strong commercial activities in India, historically speaking, there are caste groupings that are essentially merchants by social background. So they know how to do accounting, keep books, do numbers and also they are good in financial manipulation. The other I think most important advantage in the long term, although some people might see it as more of bottleneck, that is India is a very democratic and open society. When we have an open and democratic society it is easier to exchange ideas and share information as opposed to in a closed society where certain people or certain parities or certain organizations may have a monopoly over information. When information is not shared, then the right decisions may not be made. In the open system the idea there is more debate and more discussion and then the decisions are made. So they may not be made very quickly, unlike say in China, but decisions are made after debate which is almost always a better decision in the end because at least you are trying to meet the interests of most groups that are involved in this process. Decision-making for predictability purposes, I think, India stands a better chance. Same with the judicial system, it is much more predictable. In that sense, India has essentially western laws, and so having the western legal frameworks means that things are more transparent than in China where they are still trying to fine-tune their legal system.We know that the Chinese Communist party is still in power so there are the party considerations and the social considerations and it is always that the party considerations come first in the Chinese case. So I think that is the other advantage in the long term that India will have.

What do you think India’s weaknesses are then?

India, like many other developing countries, have their weaknesses. I think one of the weaknesses is that because India is such a multinational society it has to find a solution to a problem by talking to each and everyone – then obviously decision making is slow. Sometimes crucial decisions may take a long time. Other would be that to some extent the government has not been very forceful in introducing certain kinds of social programmes. Take for example primary education, primary education in India was never mandatory. But I think there are good reasons for it. When you are poor and you have children then the parents, the poor parents, who are basically trying to live from one meal to another, to them, work is very important and children are often send out to work. Therefore the issue of school does not come in, but, they could easily have come up with creative solutions. For example by giving free lunches at school, which would make the children to go school, get not only a nutritious meal but also get their education. I think from a primary education point of view and from some social services, I think India obviously has some real challenges.

Then there is the other one, which is also common to China. That is the way that the Chinese economy and the Indian economy have been opening up. Opening up too fast, sometimes without thinking very carefully and as a result, the degree of inequality has become really bad – in both societies. Now, the thing is that both governments are aware of this problem. They both know that this is a very serious problem, but how to address this is something that they have not been able to come up with. Of course both countries need to have growth, but growth should not be the ultimate goal. I think it is very important to understand and to figure out how to distribute that growth more evenly. Only then will there be social stability, otherwise you will have very unstable societies which could create really big problems. Not only for China and India -but also for the world as a whole.

Some commentators say that China has been better at exploiting their population surplus for their own advantage, do you agree with this?

Yes, I think to some extent there is truth in that statement.China’s economy have been depending on manufactured exports and labor-intensive manufactured exports, which means that they are utilizing their human resources. India is doing the same thing, but, as I mentioned before, one of the problems with India is that India started in this sort of export type of approach much later. Secondly, India has not been able to do very well in manufacturing so the employment on the manufacturing side in India is still very, very low. In that sense India is not using its’ resources very well because labor-intensive manufacturing would have been one really good way to provide employment to people who don’t have as much skills or education. Yet that opportunity does not seem to exist.

There are obviously labor-intensive sectors in India such as textiles and garments. In jewelry, polishing stones and diamonds, those all are very labor-intensive activities. Which are then exported to the world market. But I think India could have done much better if they had had both the policy but also in terms of foresight to think labor-intensive manufacturing, which of course they did not.

One last question. India’s is often referred to as the largest democracy in the world, but is it really a democracy?

Good question, is it really a democracy? I think if you go by any benchmark of democracies such as the ability to elect a government and the ability to reject a government and to have peaceful transitions – India fits the description. In fact, it has never ever been a discussion about having some kind of authoritarian government, that is absolutely out of the question. And never has the Indian military even shown any interest in taking over power. Although on both sides of India’s borders, in the north of India of course but also in the east and west, Pakistan and Bangladesh, you have military governments. So India has avoided that. In that sense India is definitely a democracy. It has very predictable elections; this year there will be elections in May. For all practical purposes I expect the transition to be smooth as it has largely been every election year.

However, the actual way it works in India is different of course. It’s not like the US or somewhere. In India, just like in many Asian societies, they still operate on the basis of group identities, so when you have group identities and people vote in groups, you can influence group voting that way. There is also the element of political corruption, which I am sure exists in many other places. In India it has become very pervasive in part because elections are so important to these politicians; there is money to be made. Once you become a politician you get kickbacks, you give licenses out to companies and companies will have to bribe you to get those licenses and so on. Tthere is a lot of money that is changing hands as well. So politics in India has been corroded in some way. Now you do not have the true genuine leaders that would talk about the future the country and how they would like the country advance in certain way. The politicians today are professional politicians; they come to win the elections so that they can fill their pockets, become rich, influential and so on.

Generally speaking Indians tend to not reelect the same government. Thatmeans that no matter how corrupt they become, they will have to give something to the people if they want to be reelected. So in that sense, democracy also works. I think are a lot of problems with Indian politicians and the political system in part because of this corruption and the public is kind of fed up. On the other hand, politicians are still in some ways answerable to the people because they have to be reelected, which means that they have to do certain things that they promised to the people at the time of the election campaign. We have plenty of evidence of this. For example the current administration, when it came to power four years ago, it came on a platform on that it will try to redistribute growth to the poor. That it will implement certain employment programmes, rural employment programmes. Well, it did! It did provide rural employment programmes. You have to understand that it is a very very complicated political system. Covering more than one billion people and covering 500.000 villages. So to have elections, to organize elections, to have political leaders – it is extremely complicated. Obviously there is a going to a lot of money hands, politicians changing parties opportunistically. All that kind of corruption is definitely there in India but overall I would say that India is definite a democracy and certainly very very democratic when you compare it to China.