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In the first few decades after WW2 India was actually more developed than China. This changed in the early 1980’s when China revved up the largest growth miracle in world history.Now India would have to hit 6% growth for the next 25 years to match current Chinese per capita income.Is this likely?I’m going to try to answer by looking at two broader questions:(1) Why did India not have a “growth miracle” like China?(2) Is India likely to have one in the future?TLDR: India did not experience a growth miracle in the late 20th and early 21st century because internal structural factors made it impossible. India is not going to experience a growth miracle in the future because these factors (as well as novel ones) persist and the external conditions necessary for strong Indian growth are disappearing.(Get ready because this is honest rather than a typical feel-good answer. It’s around 12k words and goes through Indian geography, demography, agriculture, development, infrastructure, investment, and future prospects. Enjoy!)An Incomplete GeographyWe are going to start with pure geography.For the moment forget the cultural, ethnic, religious, political, and historical divides that characterize the region.No Territorial Integrity: The first thing to know about India as a country is that it does not map directly onto the whole of the Indian subcontinent. From a physiographic perspective the Indian subcontinent has three states where one would be optimal. It is similar to what might have happened if the United States did not control the full Mississippi Basin and adjacent regions or if China did not (at the moment) control the entirety of the Yangtze and Yellow River Basins. This lack of full territorial integration across the Indian subcontinent creates enduring development challenges. It is also promotes conflicts similar to the state of affairs in northern Europe.Two river basins share one large agricultural plain. The subcontinent’s northern (and largest) agricultural plain is split between three political states.[1]The Indo-Gangetic Plain: The Indian subcontinent is carved up along South Asia’s equivalent to these core regions of North America, Europe, and East Asia. The Indo-Gangetic plain is split between the three nations of India, Pakistan, and Bangladesh. Pakistan has the Indus River, India the main part of the Ganges, and Bangladesh the Ganges Delta. Together these three regions are as far from peripheral territory as it gets: the Indo-Gangetic Plain is the core geographic, economic, political, military, and demographic region on the subcontinent. Dividing this region up ensures numerous fault lines, insecurities, and instabilities between these nations. Without control over the full length of the Indo-Gangetic plain, ocean access to the river, or Tibetan headwaters, India lacks full control over the resources, inputs, key transit nodes, and other important factors that sustain and stabilize its portion of the subcontinent’s most essential region.India’s population is centered on this northern plain. Note that this population merges into the densest populations centers of both Pakistan and Bangladesh as well.Tension Not Unity: Most of India’s territorial, political, and military objectives are an attempt to better buffer and secure its precarious position in this fractious region. Both of its border conflicts with China could be easily resolved by aligning political boundaries with watershed ridge lines. Instead India prefers its northernmost extension (Kashmir) to push as far into the Himalayas and upper regions of the Indus River as possible. Conflicts in the east are also related to a desire (whether practical or not) to push as far into the Himalayas and to control as much of the territory that drains water into the Ganges Delta as possible. As the political borders on the subcontinent are based on expediency, it is little surprise that from an economic development and security perspective they are incoherent and produce inherent insecurity. They push the Indian subcontinent towards conflict and creates very high local security expenses. Whether this is better than self-contained conflicts (or if that is even possible) is another question.Some bends in the upper reaches of the Ganges River are vulnerable to military attack. The idea is a bit sensationalist/apocalyptic but it illustrates the widespread fears that accompany the systemic vulnerability felt by the vast population of the region.Conflict or Subordination: The demographic core of India is coextensive with the demographic cores of two other nations. On the subcontinent this piles on tensions that essentially guarantee one of two outcomes: conflict between the neighboring states or subordination to the largest one. Bangladesh shares the same river basin as India and has no choice but subordination. For various reasons, it does not get the luxury of being like the Netherlands. Pakistan has a ‘choice’ between conflict and subordination since it inhabits a separate river basin. Nonetheless, the Indus is an adjacent, more resource constrained, militarily vulnerable, and significantly smaller river basin than the Ganges. Absent a doomsday scenario Pakistan inevitably loses any actual conflict with India. Nonetheless the mere threat of conflict creates enormous security costs for India.Don’t underestimate how bad conflicts over the control and security of valuable river systems, fertile food production areas, water resources, or port access can get. They are the origins of many wars and recurring regional conflicts.It is About Costs Not Missed Opportunities: The political division of the subcontinent produces economic inefficiencies as well as obvious political-military costs and conflicts. For the purposes of this answer we are mainly going to focus on the economic side of the equation. While these political divisions impose significant, structural economic development constraints and costs on India even if the whole subcontinent were unified it would still have problems. Greater political consolidation is no panacea. Based on the heterogenous make up of the region’s population it would mean a shift in security costs, in essence a transformation of external security matters to internal ones, and an indeterminate do-over of the decisions of partition. Adding over 350 million people with major ethnic and religious divisions would not make India’s development situation any better. Questions like these mirror those faced by countries such as Israel only on a much larger scale.India’s development situation is negatively influenced by the particulars of partition but not defined by them. In general, the primary consequence of partition are not missed opportunities so much as a reconfiguration of a structural set of costs.The Eternal Problem of Absent CapitalThe Land’s Greatest Misfortune: The reason why comes down to the level of aggregate economic opportunities on the subcontinent. The hard truth is that aggregate economic opportunities on the Indian subcontinent are limited regardless of whether the territory is unified or not. It has nothing to do with politics. It would be the same whether it was one state or twenty, whether the political system was changed or if different parties were in power. While a bigger, more efficient state allows the country to better pool together the available capital of the region, larger state can do little if there is simply not much capital in the first place. Today it can seem like many, many factors from labor force participation by gender, to literacy, to governance structures, to legal systems, to linguistic variation, to cultural mores all help influence capital generation and availability. Go back far enough, however, and the primary explanation for the hierarchical distribution of global capital (and its absence in India) becomes clear.This is an oddly beautiful drainage basin map of the US. The US’ twelve navigable rivers, as well its lakes and barrier islands, are the largest inland waterway system in the world. Together they are 70x greater than India’s.Capital and Its Discontents: A high level of capital is, like credit, originally a byproduct of agriculture. High sustainable stocks of capital emerge from the labor and productivity benefits of marrying high quality farmland to navigable waterways. It accumulates as a result of efficient, consistent food production, trade, taxes, and associated market and skill development, differentiation, and transformation. The highly unequal distribution of these essential natural features, and the even greater disparity between them, produces a power law distribution in the wealth, power, and potential of nations. If a nation lacks these basic geographic features (as well as a number of others) its economic problems stack up, whereas countries that have these features accumulate growing benefits and efficiencies across every dimension of society. The (regionally) rich do indeed grow richer.Non-Navigable India: As a result the single most important geographic fact influencing Indian economic and political history is the fact that none of the major rivers of the Indian subcontinent are navigable.[2]This enormous problem is not one that can be overcome through technology diffusion, infrastructure engineering, education, industrialization, or any of the other marvels of modernity. It is possible to expand the navigability of already navigable rivers, but turning a non-navigable river into a navigable one is usually impossible. Hydrological, climatic, and geographic realities just make it too difficult. No country has tried harder to engineer its rivers than China and while it has had some success expanding the Yangtze, it has had zero success with the Yellow River. That river remains a catastrophe.[3]Lack of river navigability is reflected in low freight transportation numbers. This is a symptom of a major underlying development limitation.[4]Life on the Ganges: India’s primary navigability challenge comes from the monsoon system. A monsoon is a seasonal change in the direction of sea breezes. It appears as a result of a shift in the temperature differential between the sea and the land. This seasonal change may include heavy rain. In India, the prototypical monsoon region, it means an enormous amount of rain. The southwest summer monsoon concentrates 80% of the total yearly flow volumes of Indian rivers into just four months.[5]This turns the rivers into rainy, unnavigable torrents for a third of the year and historically made coastal navigation seasonal as well. It also leaves large sections of rivers like the Ganges wide, flat, and shallow during the dry months and frequently fills them up with shifting sand banks. Unfortunately, hundreds of years of ecological degradation and neglect conspire to make all this even worse.[6]Above is a region in Southwest India before the monsoon. Below it is the same region three months later during the monsoon. The monsoon is, and has always been, the difference between life and death on the subcontinent.No Engineering A Way Out: This extreme variance in flow rates is not the sort of thing that encourages reliable, year-round river transportation and commerce. It is also a major reason why major ancient hydraulic engineering systems such as canal infrastructure, floodworks, and irrigation systems are not as extensive in India as they have been in China.[7]India has sought reliable river navigability for thousands of years. It is just very, very hard to design systems that can deal with the complex, ferocious, volatile, and often unpredictable Indian monsoon.[8]India’s erratic hydrology was more than old school bouyage, bandalling, and other tactics could handle and modern solutions are no better. Current efforts to engineer the Ganges into a more navigable river are very expensive (and dubious). India’s great river is really only navigable for the 250 mile stretch from Farakka to Haldia.The great tragedy of economic development is its Catch-22 nature: The serious money and engineering required to generate developmentally significant and self-reinforcing transportation efficiencies is almost always something only capital rich countries (which already have navigable rivers) can indulge in over the long term.[9]Splintered Identities and Limited Capital - Make no mistake that navigable rivers are the major source of natural economic efficiency in a developing nation. As we’ll go over later, countries that don’t have them require the resources of those that do. These rivers produce benefits whether they are called the Rio de La Plata, the Yangtze, the Mississippi, the Rhine, or the Elbe. Economic reality without cheap river navigation is a world where everyone does the same thing (farming) and all output is consumed. Production is also often volatile and vulnerable to disruption. River navigation lowers transportation costs by orders of magnitude, making possible the sophisticated labor differentiation of a population. Without this natural transportation infrastructure regional linkages and interdependencies remain limited, brief, or nonexistent. Over time this tends to produce significant cultural, ethnic, linguistic, and political differentiation. No navigable river means no money and a lot of people with different identities, beliefs, and behaviors.Don’t Confuse Population or Output With Wealth: The permanent challenge of low local capital generation in India needs to be separated from India’s high population and high agricultural output. “Historical” measures of GDP like the one below seriously confuse these. Production, output, and income in large agricultural societies was a function of population and food production. “Wealth” in anything like the modern sense is a result of labor differentiation, productivity improvements, and the efficient provision of a wide variety of goods and services. Yet India lacked the natural features that generate economic efficiencies and open up capital and labor resources. This is part of the reason why India had to impose a rigid, artificial labor classification scheme on its enormous population. Using GDP as a measure for the wealth of ancient agrarian civilizations is absurd.Ignore measurements like these.[10] ‘GDP’ before modern agricultural efficiencies was based almost entirely on population and agricultural output. It was a time when ‘wealth’ meant poverty.A Pre-Industrial Demography: In fact the large population needed for that high agricultural output combines with limited capital to virtually guarantee poverty. Historic and current lack of capital is actually made much worse by the huge Indian population. Indian demography is typical of countries that have not experienced industrialization. It reflects how children (and people more generally) were seen prior to the Industrial Revolution. At the individual or familial level Indians saw, as in China, more children as more labor to help increase agricultural output while at the aggregate, government-bureaucratic level the population was often seen as a problem to be managed rather than a resource to develop or cherish. Since India is not even close to being fully industrialized it retains a pre-industrial demography. It is pyramidal in structure with lots of youth, many young adults, fewer mature workers, and few old people. This demography has always further limited capital generation in India. There are always too few mature (capital-rich) workers for the massive scale of the population. New citizens can add some extra food output but they also require food and many more expensive things if they are to reach high levels of productivity.If China[11] is rapidly becoming too old, then India is still too young. This makes money tight and hard to come by.A Complex Disunity: The twin issues of limited capital plus an enormous population have forever stymied economic differentiation, political consolidation, and cultural convergence in India. Over time this has produced an extremely diverse demography in terms of ethnicity, language, religion, and culture. India has more than 2000 ethnic groups and 780 languages. It is the birthplace of four major world religions. The lack of navigable rivers, and the mountainous geography characteristic of most of India south of the Ganges region, encourages cultural, linguistic, ethnic, and even political fragmentation. It also opens up the subcontinent to foreign powers, peoples, products, markets, and ideas. When fragmentation happens from the inside-out, consolidation often happens from the outside-in. This grants non-Indian elements a large historical (and contemporary) influence and in fact changes what ‘Indian’ actually means in the process.All this makes India a very complex disunity at almost every level of analysis.The Primacy of the Primary SectorNow we’re going to build up our understanding of India from the bottom up.Huge Ag Output Means A Huge Population: Lets start with why India has an enormous population in the first place since people often throw out a lot of inaccurate reasons. The fundamental reason why India has a large population is the region’s astronomical agricultural potential. This potential is concentrated in the 1 million sq km Ganges River Basin that stretches in a horizontal band east from New Delhi to its delta in the Bay of Bengal. No other alluvial basin in the world can compare to it in terms of size, fertility, acreage, and topography.[12] It has extremely long growing seasons and basically no winter. It is filled with rich alluvial soils pulled down from the Himalayas over thousands of years. It is constantly rejuvenated by the waters, floods, and runoff that accompany the monsoon. This has allowed for reliable, large scale food production for thousands of years. Reliable, large scale food production is the factor underlaying all others.The Ganges is the ancient and modern core of India because it is a flat, well-watered region with the highest agricultural potential in the world.India Has Had A Large Population For A Long Time: Other factors such as the early domestication of certain crops and animals and improved agricultural tools and techniques helped give India a high population baseline over 2000 years ago. A large ‘starting’ population combined with a very fertile region placed India on an upward population growth trajectory. The basket of factors that contribute to India’s high recent population growth rates generally bunch together into the category of “pre-industrial family formation patterns”. Add in modern industrial agriculture methods to these patterns and this results in an explosion in food production and population size. India, like China, had a high enough agricultural potential to support large populations before industrialization revolutionized agriculture. Today with industrial methods the combined population of India and China is larger than the world population of 1950. This is why, as we’ll see later, the agricultural system in both countries is in such dire straights.India is Defined by Its Agriculture: People sometimes talk about ‘agriculture’ like it means the same thing everywhere. It does not. Indian agriculture defines India. The specifics of a region’s agriculture are determined by cultural, technological, and geographic factors particular to the region. For example, India’s very high agricultural potential and its very low capital generation potential exist together because of the factors mentioned earlier. Other regions have different combinations along these and other dimensions. How these systems interact with population, trade, and other economic factors complex. The next section will describe some of the particulars of modern Indian agriculture but first we have to talk about some principles and elements of agriculture that are essential to developing a modern society.Agriculture is the core technical, cultural, and economic behavior that links a country to its past and to its potential futures.Agricultural Efficiency Is Everything: In general, the first place to look to when analyzing a country’s economy and development prospects is its agricultural system. The basic concepts to keep in mind are agricultural productivity, efficiency, and competitiveness. The most important of these three is agricultural efficiency. There are three types of efficiency but the most important one to keep in mind is technical efficiency.[13] Think of it as the quality of the farming production context. It is the ability of a farm to either decrease or hold inputs constant while also growing or at least keeping output stable. High or improving technical efficiency in agriculture is the basic ingredient to an efficient farm sector. It is necessary for large-scale industrial modernization.While modernizing Indian agriculture is essential to development not every agricultural region benefits equally from modern agricultural technologies.Free The People: The most important agricultural input to stabilize and then decrease is labor. All the various forms of agricultural productivity improvements like mechanization, high yield seeds, or fertilizers are most important (especially early on) for their ability to free people up to do other things besides farming. In the modern world the result of decreased farm labor and sustained or growing output is mass urban life. Giant urban cities only form when people can leave the fields. This happens when the output of those who remain in the fields is sufficient to feed themselves as well as all the new urban residents. Therefore any possibility of true urban life, industrial production, and a varied service economy depends on efficient agriculture. This cannot be overstated nor can an inefficient farm sector be ignored, faked, or covered up.Developing countries are often described as having a ‘rural economy’. This emerges from the sometimes useful but more often unhelpful binary set up between rural and urban life. Especially in a place like India this “binary” is really a continuum and the major shift along the distribution is a function of improvements in agriculture. Most urbanization is messy and China’s development has brought way too much of an emphasis on urban and mega-urban areas. Even ancient walled cities were more dependent on peasants in the fields than anyone within the walls.Agriculture Comes First: It is smart to think of agriculture (more broadly “resource extraction” but basically agriculture) as the primary sector. Agriculture is the primary sector because it comes first:It comes first temporally as the natural first stage in the development of a country.It comes first conceptually when attempting to induce development in a country.It comes first physically because a failing agricultural system inevitably leads to population decline and a (negative) transfiguration of the economy.The primary sector is the foundation for the rest of the economy. Neglect the primary sector and your country will devolve into a subsistence economy.What it Means to Be Primary: The phrase primary sector comes from the three-sector (or four or five, soon probably six sector) model. This model usefully describes major stage shifts in economies based on the distribution of workers in the primary, secondary (industrial), and tertiary (service) use sectors for labor. It presents economies as walking through a stage transition where the percentage of labor participation shifts alongside economic development. This isn’t wrong but it ignores how underlying agricultural factors impact the nature and extent of the transitions. It implies economic development is a movement away from agriculture when the possibility of the other sectors emerging at all in fact depends on improvements within the primary sector. Development is about an internal transformation of agriculture rather than a transition away from it. A lot of freed up labor is a consequence of this transformation. As a result, the agricultural sector always remains primary.This Is Often Forgotten: Go back to any time in the last 12,000 years and anyone you spoke to could quickly tell you that a major disruption or impairment of agricultural production meant his or her people were about to get savaged. A lot of the motivation for time keeping, calendars, and astronomical (or astrological) systems was to avoid the famine and disaster attending crop failures. The basic task of early states was to insure the security and stability of agricultural inputs and outputs. A good part of modern meteorology is a result of British efforts to predict the Indian monsoon. There is still some background understanding of this reality, that nothing is more important than the reliability, stability, and security of food production, but it is far hazier than it has ever been, especially in places like the US.Less than 7% of the average American’s labor hours go to procuring food for him or herself. Elsewhere in the world 100% effort might still result in malnourishment or even starvation. US agriculture is singular and assuming it is the same other places is major impediment to understanding how other countries might or might not develop.US industrial agriculture is so efficient, with so much agricultural efficiency and abundance, that the permanent functional primacy of the primary sector is forgotten. Vast, efficient agricultural production is taken for granted. From a pure calorie output perspective this is actually pretty reasonable. The continental US has never experienced a famine. It can produce substantially more food than its population requires. As a result people in the US have the freedom to care about things like sustainable, farm-to-table, ethical food production instead of more prosaic aspects of food production, such as: will we starve next year?The Way Out of Subsistence: Meanwhile in places like India this remains crystal clear for all but the ideologically possessed. India has engaged in mass agriculture with a large population for thousands of years and experienced recurring famines for just as long. Parts of the subcontinent were often one bad monsoon or extended drought away from widespread undernourishment or famine. The transition away from this awful reality demands increased agricultural efficiency (as well as resilience). However, to not result in tragedy, this transition must maintain a careful balance between attempting to increase agricultural efficiency and maintain ongoing agricultural stability. Every Indian governments wants to increase agricultural efficiency, free up the labor force, and enhance the complexity and sophistication of its economy. At the same time all sane governments avoid deliberately introducing instability into the primary sector.People are not the same when there is not enough food to eat. Few things are as sobering as reading first-hand accounts of famines and their effects on human psychology and behavior.[14]Agricultural Stability Is A Matter of Life or Death: If something destabilizes the primary sector (at any point in a country’s development) then the entire socio-economic structure of a country will be reconfigured. National demography is necessarily altered until there is a match between calorie output and calorie intake. This can mean cities depopulate and people move back to the fields. It can mean that the population shrinks through starvation, emigration, or interpersonal violence. Somehow the scales of food and people get re-balanced. To make matters worse instability is already built into agriculture because it relies on so many natural inputs and demands precise geographic and climatic conditions. There are innumerable sources of potential instability such as water shortages, changing in seasonal winds, diseases, climatic shifts, labor shortages, input shortages, or any number of other events. Any of these by itself could easily result in disastrous problems for a country.But Wealth, Power, and Growth is Enticing: Countries are nonetheless always demanding changes from their primary sector (whether this is explicit or not) since there can be no industrial development if everyone is in the fields. Sometimes disaster is avoided such as occurred in Britain. Britain’s industrial revolution would not have happened if it had had to provide for its new industrial workforce on its own agricultural surpluses. 17th and 18th century agricultural improvement lead to a population boom that by the 19th century required grain imports from the American Midwest to make it a reality. Other countries like China and the Soviet Union enacted tragic agricultural ‘grand strategy’ policies that left millions dead. Even if it is incredibly inefficient, cumbersome, and limiting to industrial development, it is often disastrous to tinker around with the primary sector. Governments are almost always biting off way more than they can chew with such schemes. Truly mismanaged agriculture almost inevitably cause mass devastation and can wipe out whole populations.[15]And Inefficient Agriculture Precludes All of The Above: A sufficiently inefficient primary sector means no sustainable development at all. Inefficient agriculture basically mandates something approximating a subsistence economy. It ties people down to the land rather than freeing them up to do various other productive things. Since agricultural output is immediately consumed no systemic or expansive value-added benefits accrue throughout the economy. Efficiencies in the primary sector determine the number of people that can be put to work doing anything else in the economy. It actively determines the scale and scope of the industrial and service sectors. This is not a just a matter of missed opportunities but accumulating costs and inefficiencies as well. Countries try to break their inefficient agricultural systems because they are a a cap on the overall developmental potential of a country.A big part of the reason why the Ganges Plain is so heavily populated is because it is the only sizable lowland plain in the entire country.[16]India’s Situation is Particularly Precarious: India has unique challenges as a result of its uniquely large, compacted yet at the same time extremely varied and heterogenous population. Nearly 1/3rd of India’s population lives in the Ganges plain. Today it is the densest population concentration anywhere in the history of the world. Low capital generation also gives it the highest density of poverty anywhere in the world. This makes it very fragile. The effects of widespread famine conditions in this region would be biblically terrible. Under no circumstances can Indian agriculture be allowed to fail. Government officials who take this perspective may not be mavericks supercharging development outcomes but they are definitely prudent officials avoiding disaster. No one said development was easy.The Basics of Indian AgricultureProbably the most important thing to remember from this answer is that a country’s agricultural system plays a huge role in determining the character of its development.A good understanding of Indian agriculture goes a long way to understanding its development trajectory and prospects.Indian agriculture is similar to Chinese agriculture in some important ways but also very different in others. I’ll put a link to my answer on Chinese agriculture at the end of this section for those who are interested in comparing the two.Compare this map with the one above. India’s agriculture is concentrated in the Ganges, along the coasts, and up a few minor rivers. The rest occurs at high elevations.Land to Population: India has 2.5% of global land and 17% of the world population. It has approximately 140 million hectares of cultivated land. This absolute number is second only to the United States’ total, however, in individual terms India only has .12 hectares per person, less than two-thirds the world per capita average. Modern India has the same challenge feeding its population as ancient India or ancient Chin had. Today it just appears as malnourishment rather than famine. 15% of India’s population, or around 200 million people, are undernourished. This is a quarter of the world population of hungry human beings. There are only 7 countries in the world with more total people. This enormous number is a direct result of various problems and inefficiencies in the agricultural system as well as a reflection of its natural limits.A horrifying percentage of Indian children suffer from the effects of malnutrition. This has terrible and long-lasting effects.[17]Quality and Extent of Agricultural Land: There is always some uncertainty about the exact amount of arable land in a country. This is especially true for a country as discontinuous as India. Regardless, conversations about ‘agricultural land’ quickly get out of hand. A lot of ‘agricultural land’ is incredibly marginal and requires substantial inputs and subsidies. It is much better to focus on high quality agricultural land. This is the land likely to have the best technical efficiency. It is the most naturally productive land and requires the least amount of inputs. It is the most sustainable from a comprehensive, energy, environmental, and economic perspective. The key fact to know is that all of India’s large, contiguous high quality land is concentrated in the Ganges Basin.Agricultural Labor Force: India retains an enormous agricultural labor force. Around 50% of the Indian population is still involved in agriculture. In absolute terms India has over 600 million people, or twice the US population, involved in agricultural work. On a percentage basis the US had a similar farm labor share of its population in 1870. China currently has twice the proportion of its (at the moment) larger population available for non-agricultural labor. This means only 50% of the Indian labor force is available for non-agricultural work. Underneath this obvious statement lurks the reality of how limiting and inefficient the Indian farm labor force is. This is important because, as mentioned earlier, labor is the most important resource to free up. It doesn’t matter how much food you produce if it takes that many people to produce it.The goal is to get this farm labor percentage as low as possible without producing various negative externalities that destabilize the economy. This is easier said than done. There is more to it than just the balance between agricultural efficiency and stability. The capacity of the other sectors of the economy to absorb the new laborers is important. This means jobs but also education, health, housing, and every other type of good and service. Huge inflationary or deflationary price shifts are almost guaranteed and these produce development bottlenecks.High Output: That being said, the good thing about Indian agriculture is that it does have high output (as it always has) in a number of agricultural products. With such an enormous agricultural workforce it would be crazy if it didn’t. It is important to realize that this is still a major feat in of itself. India may not be able to do it in an efficient manner but it has at least been able to meet the demand of its growing population for the last few decades. It feeds, by itself, a population that many in the middle of the 20th century thought would be impossible to feed. The ‘green revolution’ increased output on high quality agricultural land and expanded cultivation on previously marginal land. It let many countries, such as India and China, finally resolve the dilemma of agricultural efficiency and stability without immediate disaster. However, ‘immediate disaster’ is the operative phrase. As in China, increased agricultural output is almost entirely a result of increased agricultural inputs such as fertilizers. Extended use of these fertilizers has created a massive, destabilized agricultural system disproportionate to available systems and resources and very dangerous to long-term production.(Purely For Fun) India is the largest producer of:spicespulsesmilkteacashewjuteIndia has a north/west and south/east split in its cereal consumption and production patterns. This mirrors a similar, and very ancient, split in China between wheat and rice.India is also the second largest producer of:WheatRice,FruitsVegetablesSugarcaneCottonOilseedsGrain Self-Sufficiency: In particular, India has a very high cereal grain output. It produces around 280 million tons of food grains each year. A main reason for high Indian cereal output is the national policy goal of grain self-sufficiency. Indian calorie intake is very grain-heavy. Wheat and rice account for 78% of the food grains produced in India and close to 50% of calories. Like China India is simply too large for it to realistically depend on other countries to feed it. It also can’t fail to feed its population for all of the negative reasons outlined above. This requires policies to ensure that enough food gets produced. The answer has been to require grain production. This also ensures economic distortions, less efficient production, and a less flexible and dynamic sector on the whole. As with cash crops, which are seen as worth it to export in exchange for foreign capital, these trade-offs are seen to be worth it in exchange for high, local supplies of needed calories.The Indian diet is still very grain-heavy. This makes self sufficiency in calories and population growth easier to handle but all bets are off if there are increases in meat consumption.Inefficient Production: This high output in cereal grains is fed by mass cheap labor and a government focus on high, stable production of basic foodstuffs. Again, behind these high output numbers is a very inefficient production system. Indian yields in basic cereals are around half that of the USA or China. Its farm labor productivity is a third that of China’s and less than 1% that of the United States’.[18]A number of factors go into this inefficient system including: small and shrinking farms, declining land fertility, overuse of fertilizers, reliance on the monsoon, limited credit, poor farm income, lack of technology, lack of capital, lack of education, age of the farming workforce, and so on.[19]A few of these, those that impact future output potential and potential productivity gains, are worth going more in depth on.Farm Structure: The number and size of farms is a major challenge for Indian agriculture. The number of farms in India has doubled from 1970 to today. At the same time India’s ~145 million farms have shrunk dramatically. 86% of Indian farms are less than 2 hectares. 67% are less than 1 hectare. On average they are half as big they were 50 years ago. This is a result of rural population growth and distributed land inheritance, so Indian farms will not be expanding any time soon. Indian private property rights are creating farms that promote even greater inefficiency, requiring more labor for less output. In the US these forces are pushing in the opposite direction, towards larger, more integrated farms. Permaculture enthusiasts will cringe but large, consolidated farms are a privilege afforded to very few countries. Over 80% of farms worldwide are less than 2ha.[20]Hundreds of millions of Indians would have no employment or income if Indian agriculture consisted of large land extensive, capital intensive, and technologically advanced farms.India [21] and China both have problems with small farms. India’s problem, however, has been getting worse. Increasing farm number and decreasing farm size is the opposite of the US trend and far worse for India than large farms are for the United States.India[22] also has less variability in farm size. China has more variability primarily as a result of the larger farms in the Northeast China Plain.Political Economy of Farm Structure: A comprehensive economic analysis of optimal farm size across the entire range of countries (in terms of population size and development level) is tedious and not very illuminating. For India, and China, however, small or declining farm sizes are an obvious problem. A huge population with an enormous number of tiny farms implies a large agricultural labor population and limited scale efficiencies, hampering the broader economy. Private property rights and democratic processes also make farm size a major issue in Indian politics. Politicians are motivated to give the many extremely poor farmers (who are also voters) with little or no land some land, or greater subsidies or both, and to set limits on excess land acquisition by the wealthy. This helps manage political conflicts but does not aid Indian agriculture. Bigger farms are a key factor in achieving agricultural efficiencies.Where To Find Agricultural Efficiencies: Many Americans really dislike modern agro-industry and for some good reasons. Disappearing family farms and the consolidation of agricultural land is seen as symptomatic of industrialization gone awry. Leaving that aside, what large farms allow for is the efficient deployment of land, capital, and technology. They are far more likely to have the capacity to deploy new technologies, update systems, and achieve newer and larger efficiencies. At the extreme, oligopolistic end of the spectrum this can turn into a bad thing but land size is something people and governments actually have a degree of control over. Many of the other factors resulting in agricultural efficiencies are natural factors that cannot be changed. India will find it hard to uncover many new efficiencies if it is moving in the direction of smaller farms.This chart shows the technologies that lead to the astronomical output increases and labor hour decreases on American farms over the last 170 years. Unfortunately, India’s geography does not allow it to use these same technologies to anywhere near the same effect.Hilly Land Means Small Farms: The biggest natural impediment to the consolidation of agriculture into large farms is the terrain. Very hilly land is incredibly hard to consolidate into large farms. It is not hard to do in a bureaucratic or legal sense, instead it usually just does not make economic sense. Very hilly land cannot make good use of mechanization. It does not gain the same sort of labor efficiencies as large farms on flat land. It also often does not have the best nutrient profiled due to its geological history. Therefore, even if the right transactions or authoritarian government interventions could impose this reality on India’s primary sector it would make little difference.India is in a bind with regards to its terrain. It has a lot of people in the flattest part of its land, the Ganges plain, where it might make the most sense to consolidate farms. This is the most naturally productive region (hence the high population) but the large population with property rights makes this exceedingly difficult to do. Of course even if the government had the power to impose consolidation, industry could not metabolize all the new workers.Overloading the Land: Leave the Ganges Basin and a lot of Indian agriculture is confined to small micro-regions where the soil quality, water availability, and elevation work out to allow for some amount of agriculture. These regions are often not naturally contiguous. They require higher inputs and capital to sustain their high output. This in turn compromises their long term viability (this applies to the Ganges as well). To sustain output India, like China, has been injecting unsafe levels of chemical fertilizers into its land for many years. A good analogy for what is going on is a bodybuilder taking steroids. Both bodies and fields can only take so many injections over so long. There are optimal ratios that can be safe but incentives, ease of use, and the desire for quick gains quickly push things to unsafe levels. Government subsidization of, control over, and provision of nitrogen fertilizers has lead to a major imbalance in the nutrient ratios of major Indian agricultural areas. Beyond just fertilizers India is seeing a widespread, general decline in its water, soil, and land quality with very serious impacts for its agriculture, economy, and society.India and China have taken the same route to feeding their populations. Greater yields come from greater fertilizer use. Correcting the externalities and imbalances of this method of production is basically impossible when over 1.3 billion mouths now rely on it.Thirsty Dirty Farms: Water is the fundamental agricultural input and India has the largest freshwater demand of any country on earth. Over 90% of water use in India is used for agriculture,[23]compared to around 66% in China. Indian farms are only about 30% to 35% efficient in water usage[24]and over 50% of food grain land is irrigated. Everything but water availability is conspiring to push that number higher. 40% of cultivatable Indian land (and growing) lays in drought-prone regions.[25]On the whole Indian irrigation is a dirty, imprecise operation with wasteful water use mixing with actual waste. India is overusing and seriously polluting its surface water while also draining its groundwater. Depleting and polluting water resources will not only lead to declines in output and higher costs but serious water scarcity at all levels of society.Return of the Monsoon: 70% to nearly 90% of India’s water comes from the monsoon so a short, weak, or mistimed monsoon has always meant a quick road to disaster. Unfortunately, the spatial distribution of the monsoon is becoming more erratic just as India is experiencing a growing reliance on the monsoon: 2019 was the second-driest pre-monsoon season in the last 60 years.[26]Already over 50% of India faces high to severe water stress, over 100 million people live in areas of poor water quality, 600 million people face acute water shortages, and over 200,000 people a year die from scarcity or poor quality water - and these problems are getting worse.[27]India’s distributed land ownership and inheritance, suboptimal terrain, weak governance, hotter and drier weather, and high calorie needs make it very hard to get ahead of any of these issues.This is a global map of overall water risk. It is frightening to see that all of India is as bad as northern China.Pollution and Scarcity at Ecological Scale: India, like China, has such a large population condensed into such a small piece of land that its ‘environmental’ problems are better thought of as ecological challenges. The causal factors, the damage, and the scale of what would be required to reverse the trends are all an order of magnitude greater (at least) than almost anywhere else. India’s widespread land degradation is the result of typical human activities such as over-cultivation, overgrazing, water mismanagement, urbanization, and deforestation as well as changing climatic factors. It comes in the form of desertification, salinization, micronutrient deficiencies, soil toxicities, macronutrient imbalances, eutrophication and a number of other growing ecological challenges across India. It is emblematic of an economy that is extremely resource inefficient while also resource constrained. This is important to keep in mind as we shift from talking about agriculture to the rest of the Indian economy.Red indicates where road construction would benefit agricultural output (relative to environmental costs). Basically all of India would benefit. Why? Transportation infrastructure is weak and underfunded.A Hard Ceiling For Indian Agriculture: India lacks enough flat, well-watered land with high quality soil and navigable rivers to support the number of people it is trying to support without adverse long term consequences. A huge amount of Indian agriculture is wasted or goes bad. Lack of navigable rivers means major costly infrastructure challenges everywhere. A large percentage of Indian agriculture is in a sub-optimal production, transportation, distribution, and storage situation. Many of the problems throughout the production and consumption system appear insoluble and are getting worse. These factors collude to usurp the potential for the region to pool together the capital, government capacity, national identity, natural agricultural efficiencies, and sustainable agricultural efficiencies needed to support the productive, durable transfer of another quarter of more of its population to other sectors of the economy.From Agriculture to Industry: India remains an agricultural country. Over 15% percent of GDP comes from agriculture compared to the world average of 6.4%. Around 50% of the population still depends on agriculture for their livelihood (and this livelihood is not seeing the welfare or income benefits associated with modernity). At the time of Indian independence over 50% of GDP and over 70% of the population tied to agriculture. So there has been relative progress but everything is still high in absolute terms. While agriculture is the original dynamo powering industrialization, Indian agriculture, like Chinese agriculture, is a sputtering car belting out black smoke. Marginal labor efficiencies, an enormous population, low capital availability, and intractable geographic limitations make the Indian primary sector a very, very shaky foundation for any future growth miracle.All talk of Indian development miracles will remain a fantasy unless and until substantial progress is made in its agriculture system. The problem is that the political economy of Indian agriculture makes everything very hard to change.Going forward the primary government concern will likely be agricultural stability rather than the pursuit of transformative efficiencies.(As promised, here’s my summary of Chinese agriculture for comparison.)India has not been able to move the needle on fundamental agricultural metrics even in the context of the capital-rich, globalized world following the end of the Cold War. That was the ideal development window.Industrialization and InvestmentA Decentralized Subcontinent: The Indian subcontinent has always been ruled in a decentralized manner. Its geography divides the region into many localities with different ethnicities, religions, languages, and states. There were neither existential threats demanding unity nor any astounding economic and social benefits to be gained from attempting unification. It was largely infeasible for more than a few generations. The regions’s greatest centralizers were foreign powers such as the British or conquering Muslim armies. Every real Empire was also administered in a de facto decentralized manner. The Maratha Empire, the final Indian state prior to democratization, was in fact a Maratha Confederacy, institutionalizing the reality that had unfolded on the subcontinent over the preceding millennia. Where China is ruled by a historical pattern of consolidation and fragmentation, India exists on a foundation of division and decentralization. This has consequences for the shift from pure agrarian life to industrialized life.The Pre-Industrial Pattern: Indian political history patterned out this way because the natural equilibrium between regional capital, labor, land, and state capacity lead to distributed localities and multiple differentiated identities. Again, going a bit deeper, the reason why this happened was because there was no natural infrastructure to link the region together. A land of highlands, jungles, deserts, small coastal plains, and limited water connectivity does not lead to an ‘out of many, one’-type situation. China had far more of an endogenous (even existential) reason to try to consolidate. Yet even there practical challenges made this far less of a successful process than most people seem to believe. Nonetheless, the valiant efforts at least gave China a much longer history of political centralization than India. China’s schemes to try and overcome the geographic hand it has been dealt, though in vain, are legendary. Indian state capacity, by contrast, is perennially weak.The southeastern port city of Chennai is the coastal core of Indian industrial exports, housing up to 40% to 45% of Indian auto parts and automotive manufacturing industries.[28]As a result it has a higher metro GDP per capita than nearby, and more famous, Bangalore.Industrializing the Pieces: This is all relevant because it helps explain the fragmentary process of industrialization in India. India has a heterogenous geography filled with numerous small localities, with limited connections, limited capital, limited communication capacity, and separate identities. It was never going to industrialize en mass on its own using its own resources. No history of centralized rule also means no ability to pool together capital and impose economies of scale where natural linkages are absent. It was not going to happen from the bottom-up or the top-down. As a result Indian industrialization is something that had to happen from the outside-in. The most likely pattern was always industrialized enclaves near coastal trading centers, the same ones initially colonized by Europeans such as Goa and Chennai. Pushing this throughout the whole of the Indian subcontinent is a far more challenging prospect. This is not a situation where the beginning of British rule annihilated the possibility of a widespread, local Indian industrial revolution. India was not on track for anything of the sort.Administering Industrial Devastation: Industrialization obliterates the prior, prevailing modes of production. The advent of industrial processes in the British textile industry wrecked havoc on Indian local, homespun, handicraft, and cottage manufactures, most notably in textiles. Textiles were important for early industrialization because back then everything was made from natural, grown fibers such as wool, cotton, hemp, etc.. This made textiles the natural manufacturing step out of agriculture. The higher, more efficient agricultural output of an improving British primary sector combined with better tools, machines, and processes for manipulating natural fibers to yield a production and productivity explosion. This spiraled into systemic improvements in power, metallurgy, chemicals, back into agriculture and textiles, and throughout the rest of the economy. The Indian pre-industrial textile manufacturing system had no chance.[29]Gandhi[30] wanted self-reliance in manufactures. When pre-industrial methods compete with industrial methods, however, the long term outcome is certain.No De-Industrialization of the Non-Industrialized: We need to be very clear about one thing: India did not experience ‘de-industrialization’ before 1900. It was not industrialized in the first place. Early Indian manufacturing did not use industrial products or processes so it is more confusing than helpful to call it industrial. What happened to Indian manufacturing was a case of the economic and technical implications of the European and North American industrial revolutions annihilating non-industrial production processes all around the world. India got hit particularly hard because it had such a large, highly-traded textile industry. While this was a big blow to many Indian states, and particularly the one administering Bengal, a real industrial revolution in India would have done the exact same thing just to greater local benefit. The fact it happened due to the actions of foreign powers during a period of colonial rule drags it into charged conversations about colonization.What It Takes: Real industrialization is a process of transferring and organizing former agricultural workers as they to shift to non-agricultural work on a mass scale. India began industrializing in a serious way only after WW2, once it got access to industrial agricultural inputs (to finally boost farm efficiency) and industrial work processes and technologies, such as interchangeable parts, assembly lines, sources of dense energy etc., to make other forms of efficient production possible. Nonetheless the ruin that occurs when industrialization knocks out prior industries and ‘frees’ up agricultural labor is very often more a problem than a positive. As a new non-agricultural mass society emerges the economy must produce enough new work as well as new, effective methods of organization to support it. This requires effective governance, whether centralized or decentralized.One of the most complicated things to organize is where people live and act. Once people leave rural life they bring future generations with them and managing that growth is extraordinarily difficult.India will be dealing with this challenge for a long time to come. Indian political economy is simply not set up to deal with it.Two big reasons why:1. Industrialization requires the thoughtful use of large amounts of capital, as well as the education and re-organization of a whole population’s behavior, over a long time horizon. This is not easy in the context of mass democracy mass and poverty. Spontaneous self-organization of mass industrial society was not in the cards for India: it had no true national markets and Indian political authorities had no practice in centralized administration nor in high-productivity decentralized organization and no other organizations could naturally reach the scale and profitability needed to direct these resources on their own. Indian political and economic organizing systems push it in the other direction.2. Industrialization requires a reorganization of not just human activity but human space as well. Spatial reorganization comes about in the form of large cities layered on top of the old agricultural world. Applying industrial processes to the land creates multi-layered, interdependent systems providing for and enabling human activity in a very dense environment. Notably the patterning of these cities is often based on optimal pre-existing locations in the agricultural value chain, but before modern industrial transportation technologies cities were very small places, think a fifth the size of San Francisco, and well over 90% of every population lived in the fields. Managing hundreds of complex urban areas is more often that not beyond state capacity. No countries (besides China) has had to attempt it at anywhere near the scale necessary in India. If the urban environment cannot provide jobs or residences then a large informal economy and shantytowns around cities are only the most visible of many inevitable, negative results.Without effective capital, labor, and land management policies India will become swamped by the diseconomies and dislocations of the agricultural transition rather than its possible benefits.Managing this scale of spatial reorganization without central guidance or very compelling, strong, and capable local organizations is a permanent challenge.[31]Limits to Indian Industrialization: Industrialization does not allow a country to surmount its basic economic geography even though it used to be sold that way, similar to how digitization processes are marketed today. Instead Industrialization demands more from every aspect of society, not less, and requires the country to come together (by building on top of industrial transportation and communication technologies)and achieve higher forms of integration while overcoming major growing pains. India’s poor economic geography, fragmented political geography, and diverse cultural and linguistic geography is a near hopeless challenge to widespread industrialization, let alone to a predominant service or knowledge economy. There is only one theoretical answer: investment. Investment in everything from literacy, education, healthcare, sanitation, medicine, legal systems, land ownership, to infrastructure and, well, everything else. Unfortunately, investment requires capital and India’s local stocks and flows of capital are limited. This is the same development Catch-22 mentioned earlier and the same one that has stymied so many countries from ever developing: almost invariably countries that need capital to develop are the same ones that don’t have it.India needs larger systems than everywhere else but China. Trash is just one of the many pollutants and externalities that can choke and overwhelm urban areas, as well as air, water, and other types of land when they are inadequate.Acquiring Necessary Capital: This truism lurks behind all development efforts of the post-WW2 era. It is also the reason why exports have served as the primary means of national industrial development for the big-name growth stories of the time period. Exports allow a country to receive reliable flows of foreign capital. Strange as it sounds humanitarian aid, development aid, and remittances work on the same principle. For India to acquire the external capital it needs to develop it has to extract it from consumers in capital-rich countries such as the United States (e.g. countries with naturally high capital as well as limited capital needs). Leaving aside any ideological aversions to this model of development, it is a crowded field. Every country with competent leadership is trying to develop this way if it has even a remote shot at it. Most fail. Success is a very intricate process of fostering an export-friendly environment, often one that receives serious FDI, while also over time developing diversified local competencies and self-sustaining economies. Doing all this while staying competitive, dealing with inflation/deflation, and piercing through developmental plateaus is as complicated and precarious as it sounds.A Weak Export Machine: India has never adequately invested enough in its export sector to compete with the major players in this arena. It certainly did not do anything near what was required to compete during China’s heyday. Even today it is too little, too unfocused, too late. India is such a large country that it would need to dominate many export markets to accrue the high levels of necessary investment capital. Having an advantage in a few industries, particularly in some service industries, is not enough. India would need something of a similar caliber as China generate and sustain needed investment levels. That does not mean, however, that China’s rise drowned out any potential Indian growth machine. India simply did not have the right societal systems, the right sort of political-economic framework, to export, improve, compete, re-invest, re-tool, and re-develop the way other export-led economic development stories did.Even more challenging is something like air pollution. The Ganges plain and Himalayas lower, trap and heat up pollutants. All ten of the most polluted cities in the world are in North India. [32]Limited capital, limited state capacity, limited natural enablers, and multiple historical disadvantages make creating and sustaining robust levels of service/industrial work, organizing the evolving spatial and behavioral aspects of non-agricultural society, and directing it effectively towards the acquisition of necessary external capital beyond the ability of the Indian government or any other organizational systems present on the subcontinent.As a country India is structured to manage chaos rather than to build higher and more effective forms of order.India is not even one of the top 15 exporters in the world. Its top five exports are natural resources.[33]Exporter Success and Failure: China’s long history of corralling capital and marshaling labor let it manage a complex capital-intensive and export-driven growth model for a very long time. Everything from landmasses to Chinese farmers were, and still are, unceremoniously removed to make way for government priorities. Japan, South Korea, Germany, Taiwan, Singapore, and Hong Kong all managed a similar delicate balance, albeit with less totalitarian means. Not so in India. In India no one is able to consistently pull together the needed levels of capital, labor, and land to address chronic deficiencies and develop new capacities. In 2020 the possibility of an Indian export and investment led growth model is long since past and was never really a possibility in the first place. Severe import dependence appeared before any export success. The country has far more capital and organizational needs just to develop its export sector, let alone a diversified economy, than it has local resources to accomplish the task. As a result, India has a declining export market share that has barely kept up with the declining growth in world exports.[34]Infrastructure: Not industrializing through exports means India has never developed infrastructure comparable to other countries who relied on exports to succeed in global markets. Today India’s lack of quality infrastructure puts it at a massive disadvantage both relative to competitors and as a matter of internal development. Infrastructure is necessary to open up more of India to economic development, market growth, and greater economic interconnection. To the greatest extent possible, industrial infrastructure must make up for absent natural transportation infrastructure. However, most infrastructure development has been local and limited in ambition. Infrastructure bottlenecks choke the number of customers large Indian suppliers can reach at an affordable price, increasing costs across the board and further localizing and fragmenting different parts of the country. What this means is that as exporting industries continue to leave China they will not be moving to India. Or at least they will not be leaving for India on the scale the country would need. Growth won’t happen by accident and poor, costly infrastructure will be an increasing drag on local development as continues to lags behind increasing needs. The Indian infrastructure deficit is many trillions of dollars and growing.[35]India needs infrastructure not just for exports and capital access. Whether symbolic or not, infrastructure is one of the few things that can better tie the country together.Infrastructure Economics: Logistics account for up to 18% of Indian GDP[36]and India struggles to increase the efficiency, utility, and scale of basically every system in the country. It loses at least 2% of GDP a year to infrastructure deficiencies. Indian infrastructure does not do well in terms of quality, speed, reliability, efficiency, or cost. India has 1/20th the container traffic of China and a cost to export per TEU that is 75% greater than China’s. The ports are almost all government owned and run and in need of state support.Indian road transport costs are 45% greater than rail costs yet 60% of Indian transport happens by road, compared to 30% in China or 36% in the US.[37]Its road system is huge on paper but 40% are unpaved rural roads, only 3% are highways and of these 75% are two lanes wide (one on each side).[38]A truck on an Indian highway covers less than 40% as much distance per day as a US truck.[39]The old, overburdened, and inefficient rail system is slow, half electrified, and 75% single track.[40]Freight costs are also inflated to make up for passenger subsidies. Meanwhile, the Indian power industry loses up to a quarter of all power generated during transmission and distribution and suffered the largest blackout in history.[41]This is just a sample of basic, and growing, problems in energy and transportation systems that ripple throughout the economy and are likely to get worse without the necessary, but unaffordable, investment programs.This is a pretty good representation of the transportation systems as a whole. It is also a reminder of how difficult it is to improve systems that already see very heavy use.Systemic Inefficiency: All these sectors and more need serious capital and consistent investment. They are plagued by systemic inefficiencies. The Chinese answer to similar problems was the largest investment binge in world history administered by a relentless authoritarian state. Cheap labor, absolute control over land, markets flooded with credit, and very carefully controlled input production factors let China build up a growth machine. India doesn’t have this option. India lacks effective capital investment and technical management processes because its history was not defined by putting capital, labor, and expertise to work at scale and with speed. Its industry is dominated by large conglomerates, monopolies, oligopolies, and inefficient public companies without the right environmental pressures and incentives to becoming highly efficient and productive organizations. India is fighting a never ending battle against the decentralized ‘keep the peace’ legal, economic, and political mechanisms it has run for most of its history while envying the China-style mass capital expenditure campaigns its politicians lack the power to enact but see as emblematic of the caliber of effort necessary to overcome the investment gaps on the subcontinent.Sustaining energy production on the subcontinent will be a major challenge as industrial, urban, and agricultural (irrigation) use grows.An Unlikely Miracle: All of this is just an extended way of showing how the inefficiencies first seen in the primary sector appear throughout the rest of the Indian economy. They make it very hard for India to take advantage of the factors that contribute to growth miracles. India has a weak human capital equation, limited mechanisms to accrue large amounts of foreign capital, strained abilities to exploit the agricultural transition, issues re-investing precious capital into transformative projects, and major contradictions in how democratic politics and technical expertise play out in its development strategy. Anyone talking about an East Asian-style growth miracle in India is hoping for an actual miracle.Trade, Security, and Capital AccessThe World of Foreign Capital: India’s will never experience a growth miracle unless it can gain access to the capital needed to spur investments. As mentioned earlier the only way this can happen is through accessing external capital. Even then India has such a large population and its authorities have so little authority that just getting into the middle income levels on a per capita basis would be a major achievement. The population pressures that hamper China, in different ways and for different reasons, also impact India’s development. Having a lot of people makes many, many things difficult for a country. So long as India attempts to grow in a heavily capital constrained environment it should not get its hopes up for a major explosion in growth. The aperture will be even further narrowed as basic demographic changes in the capital-rich developed world make foreign capital even less available in the coming decade.Today[42]more foreign direct investment goes to the developed world than to the developing world. In a shocking reversal for some the US now receives 2x China ’s inflows.The Four Elements of a Growth Miracle: To summarize what we’ve gone over, there are four things needed for a growth miracle:1. Favorable Demography: The country must be able to take advantage of demographic advantages.2. Agricultural Transition: The economy must derive huge productivity and labor benefits from the agricultural transition.3. Re-Investment: Government and industry must effectively re-invest new capital.4. Stable Trade & Security Environment: A stable global trade regime ensures access to trade networks and international capital flows. A stable security environment limits the wars, mass refugee movements, and other destabilizing costs/problems associated with state breakdown or political conflict.How India Fares on Demography: The most basic version of this simply means that a country filled with old, sick people will not develop. Young countries temporarily protected against the great costs associated with aging get a lot of work at a bargain price. There is no better example than China which had to pay little (in social terms) for the insane output of its 800 million period labor force during their prime years. While India has a young demography it doesn’t really have the best ability to martial this labor. It does not make effective use of its people. Education and gender stereotypes are a factor. Many of the country’s most educated citizens also leave the country or stay abroad once they have gained highly valuable technical skills. Finally the flip side of India’s young demography is its lack of mature workers. These established, competent, low debt, highly productive, high income workers are what feed the economy. India’s low numbers of them is another reason for the limited capital on the subcontinent and, when combined with underutilized youth, gives India a bad mark for this requirement.On Agricultural Transition and Re-investment: We’ve already gone over in detail India why does not have what it needs in either of these categories.Indian military expenditures are one of the top 5 in the world on an absolute basis. Again the huge US defense budget should not be used as a reference for what is or is not sustainable.Security: The question of India’s security environment brings us back to where we started. The partition of the Indian subcontinent has always been a security problem. Just Bangladesh has a greater population than all of Germany’s neighbors, to give a relevant comparison to another historically conflict-prone zone where multiple nations share a single large agricultural zone. Bangladesh also has the highest population density in the world and over 50% of its population is a stone’s throw away from poverty, even before considering that it is among the most vulnerable parts of the world to any rise in sea levels. Pakistan is an obvious security threat. While the long term result of a conflict would be an Indian victory that does not mean the Indian economy would see high growth numbers before, during, or after.Import Dependence: Beyond how local security situations might impact domestic or foreign investment, Indian growth is reliant on the free flow of all sorts of resources across the globe. Oil, gas, minerals, metals, electronics, and parts from all over the world are needed to keep everything in India running let alone growing. The more India develops the more it needs of all the things it doesn’t have.[43]The modern world creates conflicts over energy and other societal inputs that can be just as bad as the old battles over farmland. This insecurity can play out in political conflicts but more often than not it takes shape in crises and disasters on the balance of payments ledger.Debts denominated in foreign currencies, trade imbalances in goods and services, growing development needs and goals, and unpredictable exchange rates are a famously volatile combination.Monetary Management: Managing local and foreign currency levels amidst changing quantities and varieties of transactions is incredibly difficult and often especially so for large democracies. China has been able to avoid major currency problems with a very, very heavy government hand and high exports. Now that its current account is in the red this will not continue. The US, for all its import imbalances, has the global reserve currency. India has neither the global reserve currency, nor high exports, nor a technocratic or authoritarian government system. As a result India’s ability to effectively manage the monetary aspect of a growth miracle for over two decades is very unlikely. What is likely is that India would struggle to manage its growth, debt, currency, and trade portfolio. The recent demonetization attempt inspires little confidence and repeats of 1991 are not impossible.ConclusionIndia did not experience the same level of growth as China because it did not receive the same level of benefit from a demographic dividend, the agricultural transition, government re-investment, and a favorable international trade and security environment. The latter was an absolute revolution in Chinese history. India is also not going to see a convergence of those favorable factors in the coming years. Like China the country started out with too little capital and too many people to develop without also transfiguring the world in the process. Unlike China, however, neither government nor industry is able to organize the Indian people, land, and capital to highest advantage. India does not have the history of centralized administration needed to snowball any initial successes. Nothing on the horizon suggests this will change.Indian politics are not becoming less fractious and governance systems don’t seem to be heading towards a happy medium of technical competence and democratic control. Many core societal systems such as agriculture, water use, power generation, transport infrastructure, air quality, and education are on a path to being swamped by the population pressures on the subcontinent. These systems are suffocating under the weight of the country’s needs rather than growing to meet them. There is simply not enough investment going on to maintain current levels of service let alone transform the country. A recent World Bank report[44]states that India needs at least 30 years of 8% or more growth just to get 50% of its population into the global middle class. This isn’t going to happen.All that being said India is an amazing place. I recently dredged up this picture of me somewhere in Haryana province seven years ago. Thanks for reading!Of course I also wouldn’t bemoan not developing like China.The bills for attempting something that monumental eventually come due and they are almost inconceivable as the growth itself.Hopefully this was interesting and informative. Let me know your thoughts in the comments!Footnotes[1] http://Image Credit: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.pinterest.com%2Fpin%2F259238522278164839%2F&psig=AOvVaw1pstLUFFh9J_ABQa4jfOMa&ust=1584218981651000&source=images&cd=vfe&ved=2ahUKEwiU67neqZjoAhWEhZ4KHZpLDFYQr4kDegUIARDtAQ[2] India plans to overhaul rivers for shipping[3] A New Formula to Help Tame China’s Yellow River[4] http://Image Credit: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.moneycontrol.com%2Fnews%2Findia%2Fopinion-inland-water-transportation-is-the-next-big-thing-in-green-cargo-3141191.html&psig=AOvVaw3wdocYWVKqReWw4fw3XzH5&ust=1584219373795000&source=images&cd=vfe&ved=2ahUKEwjYuLiZq5joAhWGkJ4KHahSBdwQr4kDegUIARD4AQ[5] FAO's Information System on Water and Agriculture[6] Full text of "Inland Navigation On The Gangetic Rivers"[7] Discovering an Ancient Hydraulic System Rewrites Chinese Engineering History[8] As the Monsoon and Climate Shift, India Faces Worsening Floods[9] http://Image Credit: https://howmuch.net/articles/world-wealth-map-2018[10] http://Image Credit: https://www.economist.com/blogs/graphicdetail/2014/10/daily-chart-9[11] http://Image Credit: https://www.populationpyramid.net/china/2020/[12] AGRICULTURAL CHARACTERISTICS OF THE GANGA BASIN[13] Competitiveness, Productivity and Efficiency in the Agricultural and Agri-Food Sectors[14] Famine[15] Ten Civilizations or Nations That Collapsed From Drought[16] http://Image Credit: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.flickr.com%2Fphotos%2Fnevilzaveri%2F2909522893&psig=AOvVaw0rdxtiV03Ykb2IlQaKy3Cb&ust=1584219684149000&source=images&cd=vfe&ved=2ahUKEwjK97atrJjoAhWSkZ4KHVZ4Be8Qr4kDegUIARC-AQ[17] Long-Lasting Effects of Undernutrition[18] India faces the risk of a decline in growth of crop yields[19] https://www.prsindia.org/sites/default/files/parliament_or_policy_pdfs/State%20of%20Agriculture%20in%20India.pdf[20] The land challenge underlying India’s farm crisis[21] http://Image Credit: https://www.livemint.com/Politics/SOG43o5ypqO13j0QflaawM/The-land-challenge-underlying-Indias-farm-crisis.html[22] http://Image Credit: https://www.livemint.com/Politics/SOG43o5ypqO13j0QflaawM/The-land-challenge-underlying-Indias-farm-crisis.html[23] How India's Water Ends Up Everywhere But India[24] As India’s Ganges runs out of water, a potential food shortage looms[25] Five digital maps – to transform Indian agriculture[26] As Land Degrades, India Struggles to Save Its Farms[27] India has just five years to solve its water crisis, experts fear[28] India has just five years to solve its water crisis, experts fear[29] https://www.tcd.ie/Economics/staff/orourkek/Istanbul/JGWGEHNIndianDeind.pdf[30] http://Image Credit: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.linkedin.com%2Fpulse%2Ftop-10-qualities-mahatma-gandhi-how-incorporate-them-your-alok-sharma&psig=AOvVaw1iU8Rj_bUIttaXRWGte8ak&ust=1584220171938000&source=images&cd=vfe&ved=2ahUKEwiBnIOWrpjoAhXVnJ4KHQz0CcMQr4kDegUIARDAAQ[31] http://Image Credit: https://www.livemint.com/Politics/4UjtdRPRikhpo8vAE0V4hK/How-much-of-India-is-actually-urban.html[32] Dirty air: how India became the most polluted country on earth[33] http://Image Credit: https://howmuch.net/articles/the-worlds-biggest-exporters-2018[34] http://documents.worldbank.org/curated/en/814101517840592525/pdf/India-development-update-Indias-growth-story.pdf[35] India’s infrastructure deficit too large, will take time to be eliminated: S&P[36] http://Indian GDP[1]  [1] https://www.worldbank.org/en/country/india/brief/developing-india-first-modern-inland-waterway[37] Business News Today, Latest Stock Market, LIVE BSE/NSE Sensex & Nifty, Mutual Funds Analysis[38] The paradox of India’s infrastructure [39] Connecting India’s States with Good Logistics[40] The paradox of India’s infrastructure [41] 2nd Day of Power Failures Cripples Wide Swath of India[42] http://Image Credit: https://howmuch.net/articles/countries-receiving-most-investment-from-abroad[43] India (IND) Exports, Imports, and Trade Partners[44] http://documents.worldbank.org/curated/en/814101517840592525/pdf/India-development-update-Indias-growth-story.pdf

There is one “legendary treasure” in Vietnam that many people might not be aware of.Thailand, Indonesia, Malaysia, Laos, Myanmar, and the Philippines don’t have this treasure.China has it. The USA has it. Western and Northern Europe has it.What characteristics do the above three have in common?They are all economically powerful. This “treasure” is one of the reasons that could help them quickly developing manufacturing industries and reducing operating costs. Therefore, this “legendary treasure” is a secret weapon for “modern” economic prosperity.Unfortunately, India, the Middle East, and Australia don’t have this treasure.Now I am telling you that Vietnam has this treasure. If Vietnam uses it well, they could achieve double-digit economic growth.Can you guess what is this “treasure”? Please pause for a minute and think about it.Let me give you a hint for this puzzle: “Balloons”.I know it is a very difficult puzzle. If you wish to know the answer, please continue to read this extremely long post. I’m sure you can learn something new about Vietnam.First, we need to use China as a reference to understand Vietnam. Here is the satellite image of the Yangtze River Delta in China.If you zoom in and traverse along the bank of Yangtze from the coast to inland for around 1000km, you will find thousands of ships sailing along the river. This is a sign of a booming economy.Ships sailing east in Yangtze River, Nanjing, China 32°10'10.4"N 118°57'19.9"EIn Vietnam, there is a similar river called Mekong River or the Nine Dragons River. The Mekong river is very similar to the Yangtze River in China. Both of them are long, wide and steady. The Mekong river is also an international river. It runs through China's Yunnan Province, Myanmar, Laos, Thailand, Cambodia, and reaches the sea in Vietnam.Mekong river delta in Vietnam, a dense mesh of canal networks can be seenIf you zoom in and traverse along the Mekong River from the coast and move upstream, you can find numerous vessels sailing along the river, either big and small.Thành Phố Châu Đốc 朱笃市 10°42'20.9"N 105°08'03.0"EBut wait, this is not the “treasure” I am talking about. There are a lot of other great river deltas around the world. What’s special about Vietnam?To understand what’s special about Vietnam, let’s look at the Ganges-Brahmaputra River Delta in Bangladesh and India for comparison. They obviously have a much bigger and wider river originating from the Himalayas.Ganges-Brahmaputra Delta in India and BangladeshHowever, if we zoom in and have a closer look at the Brahmaputra river, we can see that the Brahmaputra is actually not “one” river but many small rivers intertwined together.The Brahmaputra river streams intertwine like “roots”, 25°50'01.2"N 89°50'34.4"EDuring the monsoon season, it becomes “one” river. The heavy rainfall during monsoon pours a huge amount of water into this river. These streams would form into one river and flood all the fields along the bank. In the dry season, there is not enough water to fill the whole width of the river, leaving a few streams intertwined on the river bed.Since the river flow volume fluctuates so much, it is impossible for big ships to travel along the river. That’s why India and Bangladesh can’t develop large inland river commodity shipment.So how do we address this river problem? Now it is time to reveal the treasure: “balloon lakes” (吞吐型湖泊).A balloon lake is a kind of fresh-water lake that is connected to a river. In a rainy season or monsoon season, balloon lakes take in an extra amount of water from the river to avoid excessive floods. In the dry season, balloon lakes spit out water into the river to keep the river flowing smoothly.China‘s Yangtze River is connected with five balloon lakes: Changhu Lake, Dongting Lake, Poyang Lake, Chaohu Lake, and Hong Tse Lake. In the monsoon season, these lakes are like a sponge, absorbing a huge amounts of water and expanding several times its original size. In the dry season, these lakes supply a huge amount of water back to Yangtze River.From the following satellite image, we can see that the Poyang Lake is spitting water to the Yangtze River. (Satellite image usually shows a dry season image in China. They can not be taken during the monsoon season due to the heavy clouds.)Poyang Lake, a balloon lake in China 29°43'36.0"N 116°11'02.2"ESimilarly, the USA has its Great Lakes serving as balloon lakes. Some questioned it is not. But we can’t deny the fact that the Mississippi River is steady and calm so that cargo ships can sail from the ocean and reach deeply inland.So enough about China and the USA, what about Vietnam?Of course, the Mekong River in South East Asia is also blessed with a huge balloon lake. And only Vietnam and Cambodia can enjoy the benefits.This is the Tonlé Sap Lake Tonlé Sap - Wikipedia in Cambodia, the largest lake of South East Asia. This lake is also a typical balloon lake.The Mekong River is connected to the lake at Phnom Penh in Cambodia. During the monsoon season, Mekong river can pump extra water into the lake. During the dry season, water from Tonlé Sap flows into the Mekong river, boosting the flow volume downstream.Balloon lakes do have their side effects. Because they expand several times over during the monsoon season, people living around these regions suffer a lot from flooding. However, only Cambodia carries the burden of expanding balloon lakes. It is so lucky for Vietnam to just enjoy its benefits. Vietnam, you should be really grateful for Cambodians taking the side effects.Now we understand what are the balloon lakes. Next, let me explain why the balloon lake is the secret legendary weapon for Vietnam to boost its economy (and same for China, USA, and Europe).A legendary weapon has its “special effects”Weapon effect 1: -80% flooding damageRivers with large or many balloon lakes would get more flooding-tolerant. During the monsoon season, extra water would be buffered in the balloon lake and flooding in the downstream would become less severe. This significantly benefits the massive amount of Vietnamese people living in the delta.Without balloon lakes, for example, India has suffered from the monsoon floods for thousands of years. People are reluctant to put efforts into building their villages and improvement.“If my farmland and home get destroyed every year by flooding, why do I need to keep working on it?”And therefore during monsoon season, those Indian farmers who live by the river would normally do less farm-work and this seems to have influenced their culture over the thousands of years.Flooding in India during the monsoon season.In contrast, let’s look at Vietnam in the Mekong river delta region. The Vietnamese named this delta the “Nine Dragon Rivers Delta”. This delta region is the most productive region in Vietnam. Its rice production accounts for almost half of the total Vietnam rice production.Nine Dragon Rivers are filled with a dense mesh of canals 10°05'31.4"N 105°25'29.7"EThe Vietnamese people spent hundreds of years digging canals for irrigation, growing rice and cultivating their fish ponds. Thanks to the balloon lakes upstream, those canals and rice fields don’t get destroyed by flooding. They might still get light flooding occasionally but not to the devastating extent of their farms and homes, which get destroyed every year.For the past hundreds of years, Emperor Gia Long of the Nguyen Dynasty (嘉隆帝) has led his people to construct massive canal networks over the delta. With this dense canal network, the Mekong Delta is less prone to flooding.These cultivation and hard working styles have also been embedded in Vietnamese cultures too.Weapon effect 2: +Constant River Flow EffectOn the other hand, balloon lakes provide a constant flow of water all over the years. The constant flow could drive rivers to deepen their river bed. The river surface becomes calm too. So the river would never become fragmented and intertwined like the Brahmaputra river in India.Now you might understand why the Vietnamese love to travel by boats and why their rivers are so calm and steady. Normal families can carry their produce using their own boats and sell products on the market set on the flat river. This becomes a part of their unique culture too. This kind of transportation is extremely cost-effective and convenient.River market around Can Tho, fourth largest city in VietnamCai Rang Floating Market around Can ThoWhat is the proof claiming that balloon lakes have such effects?Based on the description of the Mekong River from The Use of Rivers for Transportation in Vietnam:Upstream from Phnom Penh, navigation along the Mekong River is impaired by natural obstructions so that vessel transport is confined to relatively short river segmentsPhnom Penh is exactly where the balloon lake Tonlé Sap is connected to the Mekong River. Without the supplements from Tonlé Sap, upstream Mekong River gets less water during the dry season and therefore it is unnavigable. It is not due to the Chinese dams built along the upstream Mekong river as some people claim.Weapon unique effect I: -400% inland logistics costsA steady river surface and deep river bed provide an ideal environment for inland cargo shipping. This kind of transportation is very cost-effective and efficient. People in Vietnam use it for carrying sand, stones, coal, and other construction materials to build their homes and factories. It might look rustic to you, but it is actually much cheaper to carry it by boat compared to a truck. This happens in China, USA, and Europe as well.Now the Vietnamese have also realized their huge potential in large scale commodity shipping in the Nine Dragon River. A 7000 tonnage commodity ship can now sail deep into Mekong river and reach the Vietnam and Cambodia border. And, in theory, the ship can reach all the way to Phnom Penh, the capital of Cambodia.Why is large tonnage shipping so essential on the manufacturing industry? Let me use a very simple example:Suppose the city of Can Tho (芹苴市), the fourth largest city of Vietnam, wants to manufacture car components for Hyundai. The city needs to import 5000 tons of oil and coal to generate power. It also needs to import 5000 tons of raw materials including steel and other smaller components from other parts of Vietnam or the rest of the world. After manufacturing, it needs to export the 5000 tons of car components to the rest of the world.Imagine what would be the cost if you transport them using trucks? using trains? or using ships? Of course, we know that ships are the cheapest. But even for shipping, it is much cheaper to use one 5000 tonnage ship instead of 50 100-tonnage small ships. These costs would be reflected in the final price of “Made-in-Vietnam” and their competitiveness in attracting foreign investments.A 5000-ton container ship sails along with the Mekong riverWeapon unique effect II: Riverbank has the same effect as CoastlinesInland rivers with balloon lakes naturally have deeper river bed, which can support large-tonnage commodity shipping. Therefore, it actually has the same effects as the coastlines. Moreover, it is much better than coastlines because you have double land exposure on both sides of the river bank; the land price by the river is much cheaper than the land price by the coast.Look at the rest of South East Asia, Malaysia, Singapore, Indonesia, they all have great ports along their coast. Why do I believe Vietnam has better potential than them? They have fewer flatlands along the coast. Those lands are typically very expensive.Now let’s go back to China and see how China efficiently uses this “legendary weapon” to make its Made-in-China products “cheap” despite the higher labour costs. The following satellite image shows a section of Yangtze River in Jiangsu, which is around 300km upstream from the coast.Zhenjiang, Jiangsu, China 32°12'39.1"N 119°40'27.4"EIf we zoom in, we can find a typical Chinese factory that manufactures cheap electronics. What’s interesting about this factory is that they have their own ports by the river.An example of a standalone Chinese manufacturing factory by the Yangtze river. 32°12'39.1"N 119°40'27.4"EContainer ships can offload the factory import containers and take aboard the export containers. Moreover, the container ships can serve all the other factories along the river in one go. Now do you realise the amazing efficiency in both logistics and factories revealed here?It is much cheaper to set up factories deeply inland than the coastal area by seaports. If you are an investor, would you place your factory here? Of course, you will consider if the logistic cost reduction overweights the labour cost increase.This is one of the factors that contribute to why China can make “made-in-China” goods so cheap. It is not due to the cheap labour, but cheap logistic, its scale and land costs. If you have time, please use your Google Earth to have a look at the bank of all the river networks in China, and you will find countless factories along the rivers. That also explains why Southern China is relatively more economically prosperous than Northern China.Hopefully, from the explanation above, you can also understand why it is very difficult for India to develop cheap logistic networks. It is because of their lack of navigable river networks.Now let’s go back to Vietnam.What’s amazing for Vietnam is that it has two river deltas: the Mekong River Delta (21 million people) and the Red River Delta (17 million people). Both are destined to become megalopolis of over 20 million people in the next 50 years of urbanisation.For the Red River Delta in the north, the Vietnamese government also accidentally made two artificial “ballon lakes”: Thac Ba Lake and Hoa Binh Lake. Both lakes are connected to the red river, making the red river easy to navigate.Thac Ba Lake 21°47'59.2"N 104°58'33.9"EWhat’s more amazing is that Vietnam is blessed with a long coastal line as well as dense river networks. Look at the river and coastal map of Vietnam:With proper port infrastructure developments, cargo ships in Vietnam have the potential to navigate any part of the country cheaply through seas and rivers. Its exposure to navigable waters is higher than in other ASEAN countries. That’s why Vietnam has a brighter future than any other ASEAN country.Besides its geographic potential, let’s look at Vietnam’s climate potential.Based on the German climate classification, Köppen climate classification - Wikipedia, we can find that Northern Vietnam is the only region of South East Asia that has “temperate climate”. A temperate climate is especially beneficial in developing the economy. The world’s most developed regions are normally correlated with regions of temperate climate but not tropical climate.Fortunately, Northern Vietnam has a similar climate as in the Canton region of China including Hong Kong and Shenzhen. It means that Northern Vietnam has the same climate potential to develop its economy as Canton.Why is the tropical climate not as beneficial in developing the economy? One possible explanation is that people in tropical regions with hot and humid climate are normally reluctant to work. You get tired easily when working at a hot temperature. The climate affects their psychology and becomes less hard-working. And it has been embedded in their cultures over thousands of years. Moreover, hot and humid weather causes more diseases, deadly bugs and disasters, making it more expensive to install basic welfare for the whole society.So Southern Vietnam is not so lucky in terms of its climate. Its potential and labour efficiency might take a hit due to its hot and humid weather. However, there is a way around this. The Vietnamese government needs to learn from Singapore to focus more on the health system, pest control, and basic education in the tropical area. There is no other tropical country in the world that does better than Singapore.And actually, hot and climate weather is not a problem when it comes to air conditioning. Even in a temperate climate, most cities in China are actually much hotter than Vietnam during the summer. That’s why the Chinese government promotes its domestic air conditioning industry and significantly lowers the air conditioning costs and electricity costs. As a result, normal Chinese household can at least afford an air conditioner.Therefore it is essential for the Vietnamese government to focus on promoting its air conditioning penetration. At least ensure an air-conditioned environment in every school, hospital and public transport hub.Yes, Vietnam is currently on its correct track. It surpasses Thailand in term of air conditioner sales and soared to the same level as India and Indonesia, despite having fewer people of around 100 million. The Vietnamese government should try their best to attract air conditioning industry and foster domestic AC brands.Vietnam a really cool market for air-conditioner makers - VnExpress InternationalNow we understand Vietnam has its geographic potential and climate conditions to become a manufacturing hub. But the next question is: Does the Vietnam government fully exploit its geographic potential?We all know the Vietnamese Communist Party has learned from China and open up its economy through a series of political and economic reforms (Đổi mới). They are fully aware that developing infrastructure is the key to unleash their geographic potentials and economic growth. That’s why we are currently seeing so much on-going infrastructure construction in Vietnam.When normal Chinese people look at these infrastructure developments in Vietnam, they would be confused. Huge bridges, huge electricity grid over rivers, rice fields and fish ponds, etc. Is it in China or in Vietnam? Why are they so similar?I’m telling you they are in Vietnam.Cầu Phước Khánh, Phước Khánh, Nhơn Trạch, Đồng Nai, VietnamMost of the projects are funded by Japanese, Korean and Chinese companies.Mega bridges constructed over Saigon River 10°39'32.1"N 106°44'24.9"ENhật Tân Bridge in HanoiVietnamese Communist Party vs Chinese Communist PartyHowever, despite the good will of developing infrastructure projects, developments in Vietnam seem to be slower than the Chinese. In 2008, when China has a similar GDP per capita as Vietnam in 2018 (around $2800), China still managed to complete a lot of infrastructure projects (per capita). One example is that in 2008, numerous Chinese cities already has several lines of metros.In contrast, in 2019, Ho Chi Minh City has yet to deliver its first metro line Ho Chi Minh City Metro - Wikipedia, despite the fact that it was first proposed in 2001.For Hanoi, two metro lines are on construction. However, progress is also significantly slower if you compare with the Chinese speed.Due to the lack of efficient public transport, Vietnamese people still have to use scooters for commuting. Yes, it is efficient for individuals but it is not so efficient in terms of the whole urban transportation network and development.Why are infrastructure developments in Vietnam so slow? Some of my Vietnamese friends said it was due to the corruptions. But I would say, I didn’t see too much difference between the Chinese and Vietnamese in terms of corruption. But why could the Chinese get things done quickly despite corruption?Let’s look at the fundamental difference between the Vietnamese Communist Party (VCP) and the Chinese Communist Party (CCP) to understand why.Difference 1: Lack of strong leadership and meritocracyThe two populous river deltas in Vietnam is a blessing but also a curse. Hanoi and Ho Chi Minh City are over 1000 km apart and they do have difference culturally and politically. As a result, the VCP has to compromise and balance the interests between the two regions.That’s why we can see VCP normally picks a Northern Vietnamese as their General Secretary of VCP, a Central Vietnamese to be the President of Vietnam, and a Southern Vietnamese to be their prime minister (or rotation). The three leaders have approximately similar power and they can check and balance with each other. We typically call it the “Troika” of Vietnam. There is no apparent top leadership among them.They are efficient if the three leaders are heading for the same direction but not so efficient if they are heading for different directions. In China, there are a lot of debates in whether a strong capable leader is better for a nation or seven strong capable leaders are great for a nation. It remains to be seen.But what is true is that the three leaders in Vietnam will form their own circles of power and interest groups. It breaks the meritocracy promotion and circulations because you always have a leader from the North and a leader from the South. As there is no higher leadership that oversees them, it is more difficult to crack down corruptions top-down in the pyramid power grid.To know more about this pyramid power theory on to reducing corruption, please check my answer in:Janus Dongye Qimeng's answer to How much corruption is there in PR China? How does it differ on the different levels of the administration, and what is its history?Recently Vietnam seems to learn from China and broke this “Troika” relation. Now Vietnam has two leaders. Is there a possibility they might eventually have one leader? That remains to be seen.What if Vietnam becomes a democratic country? There would be a north-friendly party and south-friendly party. Democracy would only further polarise their political divide and destabilise the country. And of course, it would never prevent corruption problems just like India.Difference 2: Private ownership of the land in VietnamThe second fundamental difference between Vietnam and China is that VCP allows its people to own their land, whereas all the lands in China are owned by the government and the Chinese government only leases its land to the people.Again, I am not saying that one is necessarily better than the other. Both have advantages and disadvantages. But the most notable effect is that it is easier for China to acquire land for its infrastructure projects. Those Chinese people who own the right to use the land would hurry to extend their current floor plan just hoping the government might acquire their land for better compensation. You might not see this trend in other parts of the world.The second effect is that Vietnam local governments are too weak in terms of finance and power. Without the power of selling lands to real estate developers (because they don’t have enough land), the Vietnamese government is normally weak in their income.As a result, they would:propose fewer constructions compared to Chinaspark more instances of government-level corruption in other parts of the process because “it is not lucrative enough”.have to seek financial assistance from foreign countries including Japan, Korea, and China. It is likely to fall into a debt trap.Difference 3: Military doing business in VietnamAgain, this is also a controversial topic. Vietnam has its “military complex” just like the USA because it has been at war for several decades. Interest groups in the military have become so large that they now control politics and over 10% of the domestic economy of Vietnam. While Vietnam has their own state enterprises, some of them have become de facto military enterprises.Normally, a country can collect taxes and feed its military, so that its military has to listen to the state and asks for military budgets. But if the military can sustain itself through doing business, why do they need to listen to the state? If there are no checks and balances for the military, Vietnam runs the risk of being intervened and controlled by interest groups from the military. Without checks and balances, it would foster even more corruption in the military.Difference 4: Vietnam is more “democratic” than ChinaAlthough VCP learned from CCP to open up its economy through a series of political and economic reforms (Đổi mới), they actually took a more “free” approach in their political reforms. For example, the Vietnamese “congress” or the National Assembly of Vietnam is allocated with more power compared to the National People's Congress in China. The detailed difference is worth another dedicated answer. But specifically for infrastructure development, Vietnam Congress can reject development projects such as high-speed railway projects based on the representatives’ votes, which are represented by different interest groups.North–South express railway (Vietnam) - WikipediaAgain, I am not saying which approach is better. But having a different system would provide us a perfect political system experiment for us to study and compare in the next few decades. It would be extremely helpful for China’s own political reforms too.Finally, after reading about the geographic, climate and political potentials of Vietnam, I hope you can have a comprehensive view of Vietnam. Vietnam has its geographic potentials and it remains to be seen whether the Vietnam government can fully exploit its potential. But its fast-growing economy tells that its potential is being explored.Recently, many of my fellow Chinese, perhaps including me, have been bragging about the rapid development of China. The most representative picture we typically use is:This is the city of Shanghai. From 1999 to 2019, in just two decades, Shanghai witnessed an unimaginable transformation, especially on the bank in Pudong.The land of future, 10°46'16.6"N 106°42'59.5"EFrom Google Earth, if we look at the historical satellite image around 2000, we can see that the river bank (the Bund) is almost grassland. Who knows that skyscrapers arise like bamboos in the future!What if I tell you that the satellite image above is not Shanghai, but Ho Chi Minh City (Saigon) in Vietnam? What if I tell you that Ho Chi Minh City is experiencing a similar growth path like Shanghai? What if I tell you that skyscrapers are already rising like bamboo in Ho Chi Minh City?Sunset of Ho Chi Minh CityAlong the bank of Saigon river, new skyscrapers are erected every year. You can easily spot the tallest building in Vietnam: landmark 81, which was completed in 2018.However, this title will be overtaken by another skyscraper, the empire city tower, an 86-story building. The tower would become a new landmark of Vietnam, just like Taipei 101 in Taiwan and Twin towers in Malaysia. And the tower would bring more investors and more skyscrapers along.Besides skyscrapers, you might also spot construction of many massive business parks in Vietnam. And you can see that these industrial zones are quickly expanding and taking over the adjacent rice fields.Industrial zone 2, Ho Chi Minh City 10°43'06.7"N 106°55'35.5"EIt is estimated that there are around 300k factories located in the city. Many of them are invested by foreign companies from Korea, China, Japan, and the USA. The most representative investments are in the electronics sector, Samsung invested 6.5 billion dollars here to manufacture its OLED monitors. Intel invested 1.5 billion dollars and built a fabrication factory here to produce their CPUs. The AirPods from Apple would also be manufactured here. The same happens in Hanoi and the rest of Vietnam as well.And also Vietnam is so lucky to become a member of each free trade agreement network led by the USA, China, and ASEAN. It gains huge benefits by being in the middle between China and USA. Foreign investments found Vietnam could be a safe spot to avoid the damage from the trade war between the USA and China.Some of my fellow Chinese fear that foreign investments leaving China for Vietnam would be bad for the Chinese economy. But from what I can see, these investments are not a zero-sum game. China can still maintain most of the foreign direct investments it has due to its massive market and excellent infrastructure. And Vietnam has just around 100 million people and it lacks the capacity to consume all the investment. For manufacturing in the downstream value chain, China should join Japan and South Korea to actively invest in Vietnam to develop its economy and get a share of its economic growth.As a Chinese, I think Vietnam will have a bright future because of its amazing geographic potential. What matters now for Vietnam is how to attract investments based on its efficient logistic networks, infrastructure and supply chain. This would be the key to overcome a potential middle-income trap in the future.Thanks for taking the time to read this extremely long post, I hope you learned something new about Vietnam and China.

This answer may contain sensitive images. Click on an image to unblur it.Thanks for A2A SirMe being nosey i had to read all the responses before i would give my biased or unbiased answer. I will try to keep it short as my one year old son is wreaking havoc in the living room just like my country who since 1947 has thrown various tantrums while finding its position in the World Order.Pakistan:As a state Pakistan will move forward tremendously. we started our journey as an extremist society and now waves of reality have more or less tamed us. A country that was founded on the base of religion its religious vote went from 20% in 1970 to 9% 2018.if i go in technical details it is actually less than 9% because some of the feudal lords have joined religious parties in Balochistan, thanks to the charismatic leadership of Maulana Fazal ur Rahman or also known as Maulana Diesel who himself lost both of his seats and now sitting on a charpai thinking how i lost to a 40 year old honey seller.Military has done its adventures thanks to those fancy toys that US gave us and now have realised that India has more of them so no point showing them “Look i have this what you have” with India growing its conventional superiority this has forced the hand of Pakistani top brass to most extent accept the role of India in Subcontinent. Politically General Musharraf has done enough damage which changed the mindset of Generals and that hangover generation of soldiers who tasted defeat in 1971 is pretty much gone. Military will back institutions to run the state while playing the role of a closet monster to keep politicians in straight line.Supreme Court has emerged as third pillar of state after 2007 when same Chief Justice of Pakistan was removed twice in a year but was restored each time once by Supreme judicial council then the civilian government without a single bullet fired. Supreme Court will keep both military and civilian government in the limits of constitution. This will prevent incidents like when Nawaz Sharif attacked Supreme Court in 1997 and Cheif Justice had to call Army Chief for security or when Musharraf gained legitimacy through apex court in 1999 Coup.Rise of a third national level party under Imran Khan has changed the politics of Pakistan. A party that has won seats all over the country including Imran Khan winning 5 seats from all the provinces. This new ingredient in the political recipe will have a long lasting effect. In future respect of a voter will be the main goal of every political party rather than using ethnic/linguistic lines.Key note: MMA is an alliance of all religious parties and its Balochistan seats are all of feudal lords which is not a religious vote.NowI will start answering the question because many people just issue blanket statements about Pakistan like we are The Sentinelese.Pakistan will be economically be much better in 25 years as capacity building has started one example is of CPEC and other big projects which exposed the true face of Pakistani public sector where they were forced to share contracts with Chinese companies or lost it to private Pakistani companies. Energy requirements will be met by 2020. Terrorism has shown another dark side of Pakistani law enforcement agencies like Police who failed miserably and Khakis couldn’t be everywhere as a result a large chunk of Elite Task Force (Police) is now trained by Pakistan Military. Strengthening of Police is a positive sign for the internal security which will also keep Pakistan military in barracks in emergency.197 million population and 120 million mobile phones have connected the whole country and public opinion is widely shared through social media. Internet is spreading faster than ever. Pakistan will have more urban population than rural at the end of this decade.Banking sector has started to use blockchain on a limited scale with the partnership of Local Banking and Alipay (Alibaba Group) largely thanks to FATF. E-commerce is growing exponentially. New investment deals are coming to Pakistan thanks to improving security situation and infant democracy. Large amount of focus is on tourism and changing the perception of Pakistan globally. Pakistan’s film industry is reviving itself with young directors and producers. 55 countries including EU countries will get visa on arrival. Some EU countries have taken off the travel advisories e.g. France, PortugalA funny incident:Minister of Information calls to Visa section officer: Why have you refused the visa applications of Figo and Kaka?Visa Officer: Who is Kaka and Fiku?These small recent developments which are showing symptoms of a bright future. Big missing piece is our Big neighbor India who hopefully will commence dialogue after 2019 elections as Kartarpur gesture is shown from Pakistan. Please don’t attack me with “T” word.Afghanistan:As a kid who grew up in 90s i made tonns of Afghan friends and played cricket with them every weekend. Madrassa vs School matches were a fascinating spectacle. We used all unfair means to defeat each other sledging was frequent. Common words like Daalkhor, Naswaar Khan or Naswaaru etc some unpleasant or crude words were also used in close finals.Afghanistan has gone through similar change in last 17 years. A vibrant civil society has emerged though not big but noticeable. US and India have played a very big role in that especially that Library Modi G built. I am not joking knowledge is something that Afghanistan’s new generation really need. Afghans are a resilient nation and they will fight for their lifestyle of that i have no doubt.But they key issue is the power centres in AfghanistanKabul Government & NDSExternal forces and their favouritesTalibanJust like Pakistan, Kabul regime and their security agency pursue things differently this is evident from Hamid Karzai’s revelations. War lord culture is hard to change and when you have forces like Taliban to counter It makes things even worse. I don’t exactly know how much this democratic setup is empowered by US. Generally a Four Star NATO General takes all the security related decisions.Dialogue with Taliban is crucial to determining how to integrate them into mainstream. They cannot come back as undisputed victors which they might believe at this moment. What most people have mentioned in other answers is the 20th century approach and this is not game Pakistan and other regional powers want to play. This is why we saw Foreign Minister of Pakistan saying that India has an important role in Afghanistan and then further he said on Chinese tv CGTN that we have conveyed to Talibans that you cannot just ride into Kabul and Pakistan will not support that. Iranian FM also said recently in an Indian Tv interview that Taliban can not have a dominant role.This way Pakistan is signaling to India for talks so the concensus can be achieved regarding Afghan issue. There is another important factor is China which was a slightly different country in 1996 when Taliban took over. China has stakes or developing stakes in nearly all countries of South Asia. I have a positive feeling about this and hope that Afghans can live peacefully. Pakistan is fencing the Afghan Border to stop people who want to destabilise. Visa restrictions are also imposed from Pakistan to limit the flow.One positive thing is in this whole process is many regional countries are trying to stabilise Afghanistan. This can also be a “Too many Chefs in a kitchen” sort of situation but lets see and pray it won’t.Economics will play a huge part in maintaining peace. At the moment there are over 300,000 Afghan security forces employed for which US is paying plus annually billions are given to Afghan govt to function. Afghanistan has never maintained this sort of force. This is where India, Pakistan and Iran can play central role. Ideally if India had transit route to Afghanistan through Pakistan, it would have been beneficial to whole region. But for now Chahbahar port will play a major part in Afghan economics.I will shed some light on Talibans before this question gets any longer. Pakistan has good relations with Taliban but they don’t have as much control as world might think. Former ISI General Hamid Gul was invited on national day parade in Afghanistan back in late 90s after Taliban took over Kabul. He tried to convince Taliban about various issues like girls education, separation from Al Qaida especially Arab fighters and justice system etc. Taliban accepted things but never implemented because the lacked the capacity to rule. They were good fighters but not good administrators. They went hard on poppy production and that resulted in collapse of their economy or whatever it was called. Their governance was medieval and rigid.It will be interesting to see what kind of change they have gone through as their leadership is changed. Mullah Omar motivated them to achieve goals but he was stubborn when it came down to old school honour and hospitality. This is why he refused to handover OBL after bombing of US embassies even though Pakistanis pleaded that it will bring death and destruction.Afghanistan could progress or fall back into chaos which will be a tragedy. There are so many unknown variables in Afghanistan’s future model that it takes me back to my Calculus class.Links:Pakistan’s digital revolution is happening faster than you thinkPakistan’s First Blockchain-Based Remittance Service Launched Using Alipay’s Technologyhttps://www.google.co.uk/amp/s/www.thebrokebackpacker.com/travel-to-pakistan/amp/Pakistan's political shift raises hopes for tourism comebackPWC’s ‘brave’ report forecasts Egypt and Pakistan will surpass Canada’s economy by 2050Thanks for reading