Saturday, January 22, 2011

Meet The Professor

We should hire Vaidy.

He could teach international economics with the best of them. He certainly taught us a few things about Indian economic history on Friday when we visited with him. He also helped us understand the future of India better.

V. Vaidyanathan (he goes by "Vaidy") is not really a "professor" but he could be. He is actually Vice Chairman and Managing Director of Future Capital Holdings, an emerging fast growing financial conglomerate based in Mumbai. He represents the new Indian professional class, left ICICI to become a professional cum co-promoter of a finance company to take advantage to his excellent reputation in Indian financial markets to build a business of his own.

Here are a few highlights of his "class":

In 1,600, when the British arrived, India had 30 percent of the world economy. In 1947, when they left, India had 1.5 percent. Britain appropriated the difference over the years to build its own wealth.

The per capita grew by 0 percent for 300 years from 1600 to 1900. Then from 1947 to 1990, growth averaged 3 percent per year. In the early 90s, India's leaders (like China's at about 15 years ago) had an epiphany, realizing that "wealth is good." This led to the opening of both countries but China surged ahead, India started late, but now India is now closing the gap rapidly.

Up to about 2000, most educated Indians studied and went abroad at the earliest opportunity. Ironically, this ex-pat generation of Indians send back a staggering $50 BILLION home each year. Earlier this flow was to relatives, now it is for investments too. India failed in population
control, but again, it is now a demographic dividend.

The India growth projections is not just hope. India's investment as a percentage of GDP is now touching 40 percent, up from 15% in 1990. This will lead growth into 2020 and beyond. India has 35 percent plus savings of GDP on a 1.5 trillion economy, you have a big corpus for investments.

The BRIC report (Brazil, Russia, India China Goldman Sach report) is now passé. India has beaten all these projections. New research now suggest that average per capita income will increase from about $1,000 per year to $7,500 per year by 2030. This doesn't sound like much money by our standards but this will make India's economy the world's fastest growth engine.

Corruption looks like a moral issue but is actually a economic issue. As India per capita goes into 3000- 5000 dollar plus, the corruption will come down automatically. See the inverse link of prosperity with corruption index and you see the point.

Finally, his theory the only thing India has to do to reduce poverty is by encouraging more business and not by slogans. And the new India is getting more business friendly.

Professor Vaidy was just getting started with his economics class lecture when his assistant interrupted to remind him he had another meeting scheduled.

The impact of the lost 400 years will be wiped out in 40 years.," Vaidy said as he concluded. "And the new India doesn't care what caste you come from, its business, value, achievement that matters."

Though China has raced ahead, and admirably so, the last word or chapter has not yet been written. Who knows when you wake up in 50 years from now the India that failed on population control may have raced ahead".

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