India trails far behind the other BRIC countries on, hold your breath, its track record on education; compared to Russia, China, and Brazil. India's growth environment score for education hovers just above 4, on par with global average for developing countries, and way below the 8, 7 and 6 marks of Russia, Brazil and China.
And it's not China, but Russia and Brazil which have made the most significant gains in 2007. It might seem counter intuitive, but this is research from the man who invented counter-intuitive.
Jim O'Neill is best known as the father of the BRIC report, the one that changed the face of globalisation. Managing director and head of global economic research at Goldman Sachs, Mr O'Neill warns that while the perception is that India and China have all this talent, it is in fact Russia and China which have the best growth environment scores and track record on education. Mr O' Neill recalls that in the early days, when Goldman came up with the report, he was usually met with surprised shock and a you've-got-to-be-kidding attitude. These days, he's considered some kind of messiah about the fate of the developing countries. Speaking to ET, here's his take on a variety of issues.
"Tinkering with import and export policies, and price controls, I'm convinced those are sticking plaster solutions. I believe that it's high time India sets up a mechanism for a long term inflation target, and the RBI is given the responsibility for it, as exists in many other countries. I'm puzzled as to why this mandate has not been given to the Central Bank," he said. And despite the global panic, he's not really concerned about rising food prices; "I'm not so worried about it as many other people; there have been a lot of speculative investments in food, and market prices will adjust," he says.
But here's a warning note from the man: while everyone now thinks that the BRIC report projections 'are a done deal' there are lots of things of great importance to make this happen. "Whenever I ask which Bric country has the best education credentials, everyone says India. It's actually Russia," said Mr O'Neill. Besides education, India needs to improve it's overall growth environment track record - GES scores is what Goldman Sachs uses to estimate the general environment to facilitate growth, and in 2007, India ranks at 110 with 4.6 in 2007, behind Russia (5.5) China (5.5) and Brazil (5.3).
Russia and Brazil again have shot up the ranking by 10 odd places each, while India has not. Recently, at a presentation to a large audience of India-watchers, Mr O'Neill reiterated this message; while the recession in the US may have modest direct consequences on India, the environment for future growth isn't all that rosy. "I don't do the regular forecasts we put out, but my view is that India will find it difficult to maintain growth rates of more than 8 percent without significant policy changes. I'd say 6 percent to 8 percent is more feasible, till the end of this decade," he told ET.
He's also relatively cautious about the Indian market, even though MSCI forward P/E index ranks India highest among all emerging markets. "It's potentially a great story, but one has to respect the prices, it's not cheap," he says. What market players need to watch out for is not global food prices but how deep the recession in the US turns out to be; a mild recession is likely to leave India untouched, but a dramatic slowdown will be a big external risk for everybody. Meanwhile, focus on education.
Over the last 15 years, India has been investing in large scale education improvement efforts, most recently through Sarva Shiksha Abhiyan. Unfortunately, whether it is in construction of handpumps or school buildings, purchase of materials or textbooks, training of teachers or implementation of mid-day meal, every aspect seems to be driven with tentacles of corruption. In a situation where one-fourth of teachers are routinely absent, and even with teachers present children get no more than roughly two hours of learning time (as against a minimum of 4) and that too for around half the days expected, it is no wonder that survey after survey shows poor learning levels. A government document (DISE Analytical Report) estimates an astounding average of 9 years for children to complete the 5 year primary stage. Over two lakh 'low fee private schools' have opened in the last 5-7 years alone; and children enrolled in a very high percentage of these are also enrolled in the government school - drawing incentives such as mid-day meals, free textbooks and the like from here but paying fees to actually study in the other. Interestingly, an overwhelming number of these are children of poor parents, and first generation learners, driven to paying fees in a context where free education is available - because the government education system is so dramatically dysfunctional. If this is not corruption marring the education system, what else is?
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