India Taking Center Stage

I recently embarked on a 16-day trip to India, where I, along with a colleague, visited businesses in four cities: Hyderabad, Ahmadabad, Mumbai, and Pune. I covered the business aspects–and why I believe Indian economic growth will surpass that of China–in a recent article: Opinion – This emerging market has big money-making potential in 2015. Here, I want to discuss my personal reflections instead–including what I learned as well as why I believe India will have an enormous impact on Americans in the next 20 years.

I spent many years in four of the world’s major cities: Hong Kong, Sydney, Houston, and Los Angeles. I spent the last two years living in Orange County, which is about 50 miles south of Los Angeles; in many ways, Orange County is fundamentally different to Los Angeles. Spending time in India reminds me of my childhood in Hong Kong. Even though I was there at the height of the French terrorism crisis (coming so soon after the 2008 Mumbai attacks and the 2010 Pune bombing) there remains a sense of high, infectious optimism. This optimism was backed by a flurry of real, organized activity–whether it was the sound of programmers clicking away on their computers, the roar of all-new jumbo jets taking off from the world-class Mumbai international airport, or the sights of construction cranes around all the major urban areas.

Of course, I have never lived in a developing country; but India is a fast-growing country and Hong Kong was a fast-growing region while I was growing up there in the 1980s. India needs this growth precisely because of its high poverty and income-inequality levels. India also has the world’s largest youth population, with over 350 million 10-24 year-olds. If India can develop and grow quickly through greater infrastructure and education investments, its economy would create enough high-paying jobs to form the world’s next biggest middle class–just behind that of the U.S. and China.

I believe Indian economic growth will surpass that of China as soon as 2016. It is thus not surprising to see capital and investment bankers flocking back from the U.S. to India. Indian professionals, especially those in the IT industry, are also receiving new growth opportunities. Google and Amazon are offering $200,000 a year packages in Pune where the average annual professional salary is less than $10,000 a year. That said, as someone who is living and working in one of the world’s most desirable areas (our office is in Newport Beach, CA), I am grateful for the privilege to reside in the U.S. and for the Americans who built this country before me. I am sure my fellow Americans know this too; but sometimes, we forget.

China’s 2001 entry into the World Trade Organization (WTO) transformed the world’s economy in many ways. Among many things, China has transformed the global manufacturing industry–unleashing a tsunami of deflation on the prices of consumer goods and forcing U.S.-based manufacturers to cut costs, automate, and move up the value chain. The next major step is the export of Chinese-manufactured cars to the U.S.–starting with Volvo, and then BYD later this year. India will similarly transform the world’s IT and service economy over the next 10-20 years.

China’s entry into the WTO created millions of jobs for the Chinese manufacturing industry. This was necessary to lift the living standards of millions of Chinese workers; but from the U.S. perspective (where labor has enjoyed significant pricing power over the last several hundred years, with the occasional exceptions when increased immigration levels brought down unskilled labor wages), this was tantamount to “war on the American middle class” simply because American manufacturing wages could no longer complete on a global scale, despite the geographical proximity to their end-markets.

With the massive improvements in global communications–as well as the rise of Digital India (widespread 4G networks and smartphone adoption in India by 2020)–India will finally be able to complete on a global scale in the IT and services industry. Americans will see their real wages depressed still further–but this time, real wage deflation will occur in the IT and other professional industries, including finance, law, and accounting. Living standards of millions of Indian citizens will rise as a result, of course, which will ultimately be a boon to the global economy.

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