The second piece on importance of trade for economies in moving up (or remaining stuck) the value chain is fascinating. The analysis of China's entry into WTO and the consequent impact on Ghana and other African nations was particularly instructive. Made me wonder if there could be a similar analysis of India's massive IT-services exports and how it impacted our progression in the value chain.
hey Bipin, thanks a ton for the thoughtful comment! something to do for the future, but TL;DR, Indian IT is (rightfully) considered a success story for Indian industrial policy, going as far back as TCS being established in 1968. moving up this chain has created certain path dependencies - the emergence of UPI and IndiaStack was certainly one such path. but software does need hardware, and we're not the best in the latter. that's limited growth + have been very slow on AI adoption apparently
It is fascinating that Taiwan being such a small Islandic country houses two giants - TSMC and Foxxconn. They heavily invested in tech R&D, almost as if their survival depended on it back in the 1980s and they are getting huge dividends right now. US depends upon Taiwan and can't let go of her and at the same time China wants to annex it, but can't now that US and her Allies keep a watch on it.
India is doing the right thing, where as the big-bullies fight with each other, help Taiwan diversify its manufacturing hub so that it doesn't need to depend upon China while also gaining some manufacturing strength in India.
What really demoralizes me about India is - even though India made such a breakthrough run in getting manufacturing recently - it doesn't get highlighted in poll manifestoes and what still gets people high on blood is - caste and language. I hope a day comes when the average Indian voter also starts deriving their identity from industrial RnD rather than these petty issues.
I don't think Indian engineers or the general analytical mind of India is in any way lesser than anyone else in the world - rather the best - but somehow it is deeply distracted by such petty issues. These same Indians when in the US realize their innate productive spirit and generate huge benefits for the corporate America eventually. And eventually some of that spills over back to India. But the lack of productive ecosystem hurts India the most. Hope it all changes for the best in the future.
Hey Abhijeet, thanks for the lovely comment. replying to both your strands of thought:
a) I think that the govt of Taiwan, much like SGP, understood the conditions of its survival. I remember reading that the govt marshalled TONS of resources and capital from its wealthy industrialists to build a monster like TSMC. Foxconn was more private as a project, but it certainly benefited from Taiwan's industrial policy
b) You're right - Indian engineers are very smart and will go toe-to-toe with anyone else. but I think one nuance that often gets missed is *what* we're smart about. Indian engineers are excellent in software, owing to India's foundations in IT. but hardware is something we have been very late to in comparison to China's engineers. our engineers do come back from the US, but the startups they choose to build are often in the software layer.
That is true. The cost of setting up anything hardware related requires upfrontal setup cost + government subsidies. For software, all you need is a laptop and an internet connection. Sometimes I joke that it is a great fortune for India that computers were invented and that PC's became ubiquitous enough. This is again something I have seen over the years, that if the playing field is level - then Indian engineers will rock the heck out of it - which is what software provides. A laptop and an internet connection and you can learn every single thing (maybe except distributed computing) related to computer science.
For hardware, we will need a very self-aware government who understands the longevity that a hardware company provides and thus helps private companies in nurturing it.
I listen to Sridhar Venmbu a lot who has acutely understood this gap and he is trying to find niche startups in India which are hardware based and is trying to support it through ZOHO investments. I am a fan of this guy. He not only builds software from India and sells to the world (which is already unique) but at the same time - he is using his revenue to invest in hardware startups - which are capital intensive - and he knows that the RnD edge won't come immediately - but he also knows there is no other way.
I think you'd really like Prof Richard Baldwin's thesis on this. he says that information technology basically propelled globalization by making distance a non-factor when it came to production - and led to the economic rise of many Global South countries including ours. everytime I read something about Indian software / IT, the thesis comes to mind
Zoho is obviously a generational Indian firm that is an EXCELLENT example of this thesis, and one of the best at taking risks. but it's going to take more than brute force capital from even a successful person like Vembu to build India's hardware edge. in my opinion, we need to change our industrial policy so that we stop picking winners beforehand and only rewarding bigger firms as opposed to more capable firms (which, sadly, we've always done)
You've covered various Q4 results across different sectors in previous episodes. However, one major sector that was noticeably missing is IT. We would appreciate a comprehensive analysis of the IT sector after all the big four have released their numbers.
The second piece on importance of trade for economies in moving up (or remaining stuck) the value chain is fascinating. The analysis of China's entry into WTO and the consequent impact on Ghana and other African nations was particularly instructive. Made me wonder if there could be a similar analysis of India's massive IT-services exports and how it impacted our progression in the value chain.
hey Bipin, thanks a ton for the thoughtful comment! something to do for the future, but TL;DR, Indian IT is (rightfully) considered a success story for Indian industrial policy, going as far back as TCS being established in 1968. moving up this chain has created certain path dependencies - the emergence of UPI and IndiaStack was certainly one such path. but software does need hardware, and we're not the best in the latter. that's limited growth + have been very slow on AI adoption apparently
Hey Pranav..thanks for the reply..once again terrific job of curating a top-draw read.
thanks for reading and engaging :)
It is fascinating that Taiwan being such a small Islandic country houses two giants - TSMC and Foxxconn. They heavily invested in tech R&D, almost as if their survival depended on it back in the 1980s and they are getting huge dividends right now. US depends upon Taiwan and can't let go of her and at the same time China wants to annex it, but can't now that US and her Allies keep a watch on it.
India is doing the right thing, where as the big-bullies fight with each other, help Taiwan diversify its manufacturing hub so that it doesn't need to depend upon China while also gaining some manufacturing strength in India.
What really demoralizes me about India is - even though India made such a breakthrough run in getting manufacturing recently - it doesn't get highlighted in poll manifestoes and what still gets people high on blood is - caste and language. I hope a day comes when the average Indian voter also starts deriving their identity from industrial RnD rather than these petty issues.
I don't think Indian engineers or the general analytical mind of India is in any way lesser than anyone else in the world - rather the best - but somehow it is deeply distracted by such petty issues. These same Indians when in the US realize their innate productive spirit and generate huge benefits for the corporate America eventually. And eventually some of that spills over back to India. But the lack of productive ecosystem hurts India the most. Hope it all changes for the best in the future.
Hey Abhijeet, thanks for the lovely comment. replying to both your strands of thought:
a) I think that the govt of Taiwan, much like SGP, understood the conditions of its survival. I remember reading that the govt marshalled TONS of resources and capital from its wealthy industrialists to build a monster like TSMC. Foxconn was more private as a project, but it certainly benefited from Taiwan's industrial policy
b) You're right - Indian engineers are very smart and will go toe-to-toe with anyone else. but I think one nuance that often gets missed is *what* we're smart about. Indian engineers are excellent in software, owing to India's foundations in IT. but hardware is something we have been very late to in comparison to China's engineers. our engineers do come back from the US, but the startups they choose to build are often in the software layer.
That is true. The cost of setting up anything hardware related requires upfrontal setup cost + government subsidies. For software, all you need is a laptop and an internet connection. Sometimes I joke that it is a great fortune for India that computers were invented and that PC's became ubiquitous enough. This is again something I have seen over the years, that if the playing field is level - then Indian engineers will rock the heck out of it - which is what software provides. A laptop and an internet connection and you can learn every single thing (maybe except distributed computing) related to computer science.
For hardware, we will need a very self-aware government who understands the longevity that a hardware company provides and thus helps private companies in nurturing it.
I listen to Sridhar Venmbu a lot who has acutely understood this gap and he is trying to find niche startups in India which are hardware based and is trying to support it through ZOHO investments. I am a fan of this guy. He not only builds software from India and sells to the world (which is already unique) but at the same time - he is using his revenue to invest in hardware startups - which are capital intensive - and he knows that the RnD edge won't come immediately - but he also knows there is no other way.
I think you'd really like Prof Richard Baldwin's thesis on this. he says that information technology basically propelled globalization by making distance a non-factor when it came to production - and led to the economic rise of many Global South countries including ours. everytime I read something about Indian software / IT, the thesis comes to mind
Zoho is obviously a generational Indian firm that is an EXCELLENT example of this thesis, and one of the best at taking risks. but it's going to take more than brute force capital from even a successful person like Vembu to build India's hardware edge. in my opinion, we need to change our industrial policy so that we stop picking winners beforehand and only rewarding bigger firms as opposed to more capable firms (which, sadly, we've always done)
Being a beginner in the field of finance and economics, this letter has been such a goodread. Thankyou for this :))
You've covered various Q4 results across different sectors in previous episodes. However, one major sector that was noticeably missing is IT. We would appreciate a comprehensive analysis of the IT sector after all the big four have released their numbers.