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India was (and still is to a large extent) a very protectionist country. When I grew up, you can only buy between 2 or 3 car models, all built by Indian compani

by dmode 10y ago

India was (and still is to a large extent) a very protectionist country. When I grew up, you can only buy between 2 or 3 car models, all built by Indian companies and some with a government partnership. It held back the country severely and expanded poverty. Due to dire financial outlook of the country, India was forced to liberalize it's economy in the 90s. And since then there has been no looking back. But many years of protectionism meant that India continues to lag behind China in most key indicators. India lost out on the manufacturing boom and an opportunity to lift millions out of poverty. India provides a perfect example of pitfalls of a protectionist economy.

saycheese 10y ago
Why was having only a few options for cars an economic barrier to growth?
- codegeek 10y ago
  Many reasons in a country like India. Again, we are talking about India here. Huge country with terrible infrastructure but a very young population with hunger for success. If there are more car companies, it means more businesses who will need to hire more people. More jobs right there. Then, with more competition, prices stay reasonable and more people can afford a car. It means more people can get a job to commute further and perhaps be able to work at places they could not before. They will spend more money on consumption of food, fuel, insurance. It all goes to the economy. With very few choices, it almost becomes a monopoly and then you can only do so much as a consumer. With more choices, you have more consumers and more producers. Consumers spending money injects growth in the economy. Producers create jobs and indirectly create further growth in a growing economy like India's. Wait, did I just describe Capitalism ? :)
- dmode 10y ago
  Car was just an example. It was true in all facets of like - TVs, toothbrush, soap, shampoo etc. etc. Why was it a barrier ? Because these were monopolies (or duopolies) with no incentive to innovate and invest capital. They did not have exports so they had no reason to expand manufacturing. They had no way to lower prices as they had to manufacture all the parts that went on to the car due to import restrictions. Resulting in high car prices that only the very rich can afford. Which in turn resulted in a small car market without the incentive to expand their capacity. If no business is expanding, there are no jobs to be had.
  - kamaal 10y ago
    The only problem is sure you can open up your economy, get cheap spare parts, and assemble them here. But what really happens is in this context. And especially if you are just starting out you really end up being somebody who is very good at assembling things, not really that good making them. This has to some extent happened with the software industry. While the services industries have done good. Product industries have suffered and continue to. What we really have in India are largely me too products from the Bay Area. You can open up your economy as much as your want but you will only get as far as your human resources are skilled and trained. Beyond that your human resources are now slave labor to a more powerful economy. There were plenty of debates during the last election. And all economist even the ones supporting the ruling party(Surjit Bhalla) were saying that last thing we want is to build Indian economy on the back of its laborer.
- enitihas 10y ago
  Not having adequate competition was an economic barrier to growth, and was cause for few options in car. The situation was similar in other fields too. People used to wait an year or maybe more to get a telephone because of similar reasons.
- deleted 10y ago
  [deleted]
- Jtsummers 10y ago
  Barrier of entry for newcomers, motivation for innovation and profit when you get an effective monopoly or undeservedly large portion of the market share. Also, greater potential by those companies to exploit both customers and workers if those customers and workers have little other choice. The competition introduced by freer capitalist economic systems greatly reduces abuse and increases innovation by necessity. Complacency and abuse lead to failure in the market (though, obviously, imperfectly and often greatly delayed depending on various factors, which is where regulations and other things come into play).
- surfmike 10y ago
  More expensive cars. Also, competition in other markets have made cars safer and more efficient. A monopoly doesn't have those incentives.
- kamaal 10y ago
  Most comments don't give you a right perspective. Its really not protectionism, or socialism. India started out very badly after Independence. It had nothing to show for, infact very little in terms of a trained workforce, quality human resources, industries, scientific enterprise, economy or anything for that matter. By the time British left, they had looted India to the very last paisa. The first prime minister Jawaharlal Nehru had a great vision and equally good execution abilities. They faced a near impossible task of uniting a already politically, ethnically and linguistically divided nation. They federalized India on the lines of language, thereby uniting it under one union. They set institutions going for sound administration and bureaucracy. Beyond all these political problems there is problem of nation building. Or Growth as you would call it. To build quality infrastructure you need taxes, to collect taxes you need industries, to build industries you need trained human resources, to get trained human resources you need to build good universities and academic institutions. You realize you are stuck is a chicken-egg problem. The only solution most post-colonial states employed was to incrementally move upwards by building self reliance and capability. 5 year planning commissions were common. The corner stone of Nehruvian economics was: 1. Build quality educational institutions. 2. Quality educational institutions build quality human resources. 3. Establish state owned(or partially at-least) industries to develop indigenous, manufacturing, research and production capabilities, in all walks and branches of economy. 4. Use 2 and 3 to eventually build private enterprise. 5. Collect taxes using 4. 6. Build infrastructure and other things in 1. and 2. using taxes collected so far at 5. We were in the process of 'getting there'. Irrigation networks were laid, nuclear weapons were built, space programs were in motion. In fact India had indigenous presence in everything imaginable. However the politics of India was never stable. Beyond all this 'capitalism' suddenly got fashionable. Why work and build indigenously when you could just pay and import? In fact most of India's current predicaments arise out of abandonment of Nehru's path. We can't seem to build anything good. No good roads, no planned cities, no safe drinking water, frequent power cuts... the list just goes endless. Sure you now have cheap mobile phones and internet. But a city like Bangalore was a heaven to live in during the times of Nehruvian economics. Today you reach home from office with a lot of dust in the mouth. Ironically the same people who admire freeways, dams and social security in the US, which are the outcomes socialist policies. Hate the same in India. In fact most people in India have barely a clue what socialism or capitalism actually mean. Except that they know if they hate something that automatically gets classified as socialist or communist. EDIT: Looks like anything positive about Nehru is a magnet for downvotes.
brightball 10y ago
The crazy thing about protectionist policies is that they've been favored in the US by manufacturing interests for over 200 years while being opposed by just about everybody else. Free trade has actually been one of the long standing tenants of the Republican party in my lifetime, which is why having Trump come along as the nominee while promising protectionist policies...and subsequently landing the entire rust belt...was such a crazy thing politically. I'm only mentioning this because you said India was forced to "liberalize" it's economy, which is a definition I'd have associated with the protectionist policies. Not really arguing anything here, just making an observation on language.
- pvelagal 10y ago
  The then prime minister of India, PV Narasimha Rao, along with his minister of Finance, Manmohan Singh, forcefully liberalized India's economy and "saved" India. I grew up watching India making tremendous progress under his leadership. http://bit.ly/2kam9x7 http://bit.ly/2kam9x7
deleted 10y ago
[deleted]
sfifs 10y ago
Actually we're still protectionist about cars and it has worked to our phenomenal advantage. As the wages started rising, foreign car companies have sensed the market potential and invested in localization of supply chain..... because we still have 100% duty on imports, a high duty on kit imports and ban import of pre owned cars. Now they export from India to smaller markets which do not have as much bargaining power due to smaller markets. Moral of the story - if you have leverage in terms of market potential, by all means use it to get jobs into your country and develop industrial capabilities.
- yummyfajitas 10y ago
  Has it worked to our advantage? Anyone with enough money to burn drives an import. As far as I know, the only Indian brand that people overseas drive voluntarily is Royal Enfield. This might be good for a few people lucky enough to get automotive jobs, but it really sucks for people stuck driving inferior domestic vehicles.
  - sfifs 10y ago
    The total automobile sector is actually quite massive - it was 8% of the GDP back in 2013 and 7-8% of employment.[1] Almost all "imports" below 2 million rupees are actually manufactured 70-80% in India from scratch (for instance Toyota and Honda mainly import engine blocks and engine electronics from Thailand) and the more expensive Mercs, Audis and BMWs are imported as kits and assembled in India. It's only the Porches and Ferraris that are fully imported. Most of the market anyway is below 1 million Rupees and anyway is mostly owned by Suzuki, Hyundai and Toyota brands who manufacture almost 100% locally. [1] https://www.google.co.in/amp/wap.business-standard.com/article-amp/news-cd/the-indian-automobile-industry-on-a-whole-and-contribution-to-gdp-115022701276_1.html?client=ms-android-samsung https://www.google.co.in/amp/wap.business-standard.com/artic...

by dmode 10y ago

saycheese 10y ago

Why was having only a few options for cars an economic barrier to growth?

codegeek 10y ago
Many reasons in a country like India. Again, we are talking about India here. Huge country with terrible infrastructure but a very young population with hunger for success. If there are more car companies, it means more businesses who will need to hire more people. More jobs right there. Then, with more competition, prices stay reasonable and more people can afford a car. It means more people can get a job to commute further and perhaps be able to work at places they could not before. They will spend more money on consumption of food, fuel, insurance. It all goes to the economy. With very few choices, it almost becomes a monopoly and then you can only do so much as a consumer. With more choices, you have more consumers and more producers. Consumers spending money injects growth in the economy. Producers create jobs and indirectly create further growth in a growing economy like India's. Wait, did I just describe Capitalism ? :)
dmode 10y ago
Car was just an example. It was true in all facets of like - TVs, toothbrush, soap, shampoo etc. etc. Why was it a barrier ? Because these were monopolies (or duopolies) with no incentive to innovate and invest capital. They did not have exports so they had no reason to expand manufacturing. They had no way to lower prices as they had to manufacture all the parts that went on to the car due to import restrictions. Resulting in high car prices that only the very rich can afford. Which in turn resulted in a small car market without the incentive to expand their capacity. If no business is expanding, there are no jobs to be had.
- kamaal 10y ago
  The only problem is sure you can open up your economy, get cheap spare parts, and assemble them here. But what really happens is in this context. And especially if you are just starting out you really end up being somebody who is very good at assembling things, not really that good making them. This has to some extent happened with the software industry. While the services industries have done good. Product industries have suffered and continue to. What we really have in India are largely me too products from the Bay Area. You can open up your economy as much as your want but you will only get as far as your human resources are skilled and trained. Beyond that your human resources are now slave labor to a more powerful economy. There were plenty of debates during the last election. And all economist even the ones supporting the ruling party(Surjit Bhalla) were saying that last thing we want is to build Indian economy on the back of its laborer.
enitihas 10y ago
Not having adequate competition was an economic barrier to growth, and was cause for few options in car. The situation was similar in other fields too. People used to wait an year or maybe more to get a telephone because of similar reasons.
deleted 10y ago
[deleted]
Jtsummers 10y ago
Barrier of entry for newcomers, motivation for innovation and profit when you get an effective monopoly or undeservedly large portion of the market share. Also, greater potential by those companies to exploit both customers and workers if those customers and workers have little other choice. The competition introduced by freer capitalist economic systems greatly reduces abuse and increases innovation by necessity. Complacency and abuse lead to failure in the market (though, obviously, imperfectly and often greatly delayed depending on various factors, which is where regulations and other things come into play).
surfmike 10y ago
More expensive cars. Also, competition in other markets have made cars safer and more efficient. A monopoly doesn't have those incentives.
kamaal 10y ago
Most comments don't give you a right perspective. Its really not protectionism, or socialism. India started out very badly after Independence. It had nothing to show for, infact very little in terms of a trained workforce, quality human resources, industries, scientific enterprise, economy or anything for that matter. By the time British left, they had looted India to the very last paisa. The first prime minister Jawaharlal Nehru had a great vision and equally good execution abilities. They faced a near impossible task of uniting a already politically, ethnically and linguistically divided nation. They federalized India on the lines of language, thereby uniting it under one union. They set institutions going for sound administration and bureaucracy. Beyond all these political problems there is problem of nation building. Or Growth as you would call it. To build quality infrastructure you need taxes, to collect taxes you need industries, to build industries you need trained human resources, to get trained human resources you need to build good universities and academic institutions. You realize you are stuck is a chicken-egg problem. The only solution most post-colonial states employed was to incrementally move upwards by building self reliance and capability. 5 year planning commissions were common. The corner stone of Nehruvian economics was: 1. Build quality educational institutions. 2. Quality educational institutions build quality human resources. 3. Establish state owned(or partially at-least) industries to develop indigenous, manufacturing, research and production capabilities, in all walks and branches of economy. 4. Use 2 and 3 to eventually build private enterprise. 5. Collect taxes using 4. 6. Build infrastructure and other things in 1. and 2. using taxes collected so far at 5. We were in the process of 'getting there'. Irrigation networks were laid, nuclear weapons were built, space programs were in motion. In fact India had indigenous presence in everything imaginable. However the politics of India was never stable. Beyond all this 'capitalism' suddenly got fashionable. Why work and build indigenously when you could just pay and import? In fact most of India's current predicaments arise out of abandonment of Nehru's path. We can't seem to build anything good. No good roads, no planned cities, no safe drinking water, frequent power cuts... the list just goes endless. Sure you now have cheap mobile phones and internet. But a city like Bangalore was a heaven to live in during the times of Nehruvian economics. Today you reach home from office with a lot of dust in the mouth. Ironically the same people who admire freeways, dams and social security in the US, which are the outcomes socialist policies. Hate the same in India. In fact most people in India have barely a clue what socialism or capitalism actually mean. Except that they know if they hate something that automatically gets classified as socialist or communist. EDIT: Looks like anything positive about Nehru is a magnet for downvotes.

brightball 10y ago

The crazy thing about protectionist policies is that they've been favored in the US by manufacturing interests for over 200 years while being opposed by just about everybody else. Free trade has actually been one of the long standing tenants of the Republican party in my lifetime, which is why having Trump come along as the nominee while promising protectionist policies...and subsequently landing the entire rust belt...was such a crazy thing politically. I'm only mentioning this because you said India was forced to "liberalize" it's economy, which is a definition I'd have associated with the protectionist policies. Not really arguing anything here, just making an observation on language.

pvelagal 10y ago
The then prime minister of India, PV Narasimha Rao, along with his minister of Finance, Manmohan Singh, forcefully liberalized India's economy and "saved" India. I grew up watching India making tremendous progress under his leadership. http://bit.ly/2kam9x7 http://bit.ly/2kam9x7

deleted 10y ago

[deleted]

sfifs 10y ago

Actually we're still protectionist about cars and it has worked to our phenomenal advantage. As the wages started rising, foreign car companies have sensed the market potential and invested in localization of supply chain..... because we still have 100% duty on imports, a high duty on kit imports and ban import of pre owned cars. Now they export from India to smaller markets which do not have as much bargaining power due to smaller markets. Moral of the story - if you have leverage in terms of market potential, by all means use it to get jobs into your country and develop industrial capabilities.

yummyfajitas 10y ago
Has it worked to our advantage? Anyone with enough money to burn drives an import. As far as I know, the only Indian brand that people overseas drive voluntarily is Royal Enfield. This might be good for a few people lucky enough to get automotive jobs, but it really sucks for people stuck driving inferior domestic vehicles.
- sfifs 10y ago
  The total automobile sector is actually quite massive - it was 8% of the GDP back in 2013 and 7-8% of employment.[1] Almost all "imports" below 2 million rupees are actually manufactured 70-80% in India from scratch (for instance Toyota and Honda mainly import engine blocks and engine electronics from Thailand) and the more expensive Mercs, Audis and BMWs are imported as kits and assembled in India. It's only the Porches and Ferraris that are fully imported. Most of the market anyway is below 1 million Rupees and anyway is mostly owned by Suzuki, Hyundai and Toyota brands who manufacture almost 100% locally. [1] https://www.google.co.in/amp/wap.business-standard.com/article-amp/news-cd/the-indian-automobile-industry-on-a-whole-and-contribution-to-gdp-115022701276_1.html?client=ms-android-samsung https://www.google.co.in/amp/wap.business-standard.com/artic...