Is India the model for Argentina?

India imageA proposal known:

The idea that Argentina should be a country of services and production of raw materials was wielded by the dictatorship of 1976 with Jose Alfredo Martinez de Hoz in the Ministry of Economy, and decades later retaken during the Menem administration. In both cases, social and economic policies implemented to achieve this goal were catastrophic. Even if considered seriously what “being a country of services” is not clear whether what is desired is a platform for call centers, low wages and job insecurity; or sell to the world of high added value services to the way of what makes an engineering company like SENER Spanish. The latter option could contribute to emerge from underdevelopment to a country of the size of Argentina, generating knowledge, technology and quality jobs, but this requires a thorough pre-Industrial anchor and not aspire to get rid of this sector. Behind the slogan “country of services” actually it is promoting the Argentina to focus on tasks that are offshored in the developed world to be carried out in countries with low wages and provided that they remain so. On January 12, 2016, in the cycle Conversations newspaper La Nacion, Labour Minister of Argentina, Jorge Triaca, he said that Argentine wages have historically been above the average for Latin America and now Argentina must have “the same level of competitiveness of other countries in the region.” In other words, do not go looking for higher levels of welfare, but to the realities of the most neglected areas of the continent.

The back of the “model” India, as a “successful example” of country-based services, hidden negative issues. There almost 1300 million people live, 53% are poor (living on less than $ 3.10 per day), while in Argentina, in the first half of 2015, poverty was 19.7% (DIGIT -CTA). In 2014, per capita income in India was $ 1,570 and in Argentina of $ 13,480 (in local currency, according to the World Bank). As for the growth rate of both countries, between 2000 and 2014, despite the Argentina started the period considered with a monumental economic debacle that led her to lose 10.9% of its GDP in 2002 and that India never looked back in that time-in four times at rates close to 10% – the average growth for the years analyzed Argentina was only half Indian (3.5% vs. 7% respectively), reflecting the enormous resilience of its economy (see chart below). In addition, between 2004 and 2011, even with a surprising growth, poverty in India declined only 21%, while in Argentina did 52% (see chart).  

Of course, Argentina and India are two very heterogeneous countries. India is a country historically crossed by a lacerating inequality, legitimated even theologically, in the context of predatory globalization has given rise to a typical society of “two speeds”, where hundreds of millions live in abject poverty, while others are among the richest on the planet.

By putting India as an example of “country service” it overlooked other details. This nation is an industrial power with a GDP of 2,048,000 million (World Bank, 2014). Of this total, the value added of agricultural production represents 17.8%, the industry 30.1% and services 52.1%. In the case of Argentina, with a GDP of 537,659 million dollars, the added value of agricultural production is 8.3% of GDP, industry 28.8% and the services sector, 62 , 9%. Interestingly, the share of industrial value added in India is higher than in Argentina and agriculture has twice the relative share in the Indian economy than in Argentina. If this situation is compared with that of a highly developed country with a high standard of living and an economy originally based on agricultural production, such as Canada, it is noted that the value added of the agricultural sector to GDP is 1.5% overall, the industry 27.7% and services 70.8%. Argentina, in principle, would have a distribution structure similar sectors of the economy to a developed country than India, but these numbers are misleading and distort as much as they reveal. Exports are key to a more accurate measure the relative development of each country and India shows that there is also a strong industrial nation. It can be seen (see chart below) how Canada outperforms India and Argentina in exports of goods and services as a percentage of GDP (31.6%). The same applies to the export of manufactured goods, where India, with a GDP four times the Argentine, far exceeds (9.9%) to Argentine exports in this segment (4.3%). The Argentina only surpasses India and Canada on food exports (7.5%, 1.8% and 2.9%, respectively), which implies a strong evidence that being the “supermarket to the world” does not lead to development. Interesting it is also to show the percentage of export of high-tech products in relation to GDP of each of the countries concerned. Here again Canada outperforms the other two nations with 1.58%, followed by India (0.9%) and Argentina (0.4%).  

India is certainly a country that is known for its production and export of services, but this phenomenon is strongly supported by a large and powerful industrial and technological structure. With all the asymmetries and heterogeneities of its economy, India has powerful technology industries that include support services boom surface. The Tata group, with its 108,780 million billing (2014-2015) and its 600,000 employees, diversified into the automotive, chemical and steel industries, among many others, it is a clear example. Its investments outside India are also relevant: Tata Steel Europe is the second largest steel producer in the Old Continent. In another area of ​​high-tech, such as aerospace, India has HAL (Hindustan Aeronautics Ltd.), a company developing and manufacturing aircraft in 2015 a turnover of 2,271 billion and has 31,144 employees. It is very likely that many social problems that nest in India have a clear link with its still incomplete industrialization, besides the difficulties accommodate a seventh of the world population.

Porcentaje de las exportaciones de alta tecnología respecto del PBI total

A false, but not innocent dichotomy The dichotomy between services and industry involves the same fallacy that of the second with respect to agricultural production. Historical experience shows that, to achieve development, more traditional forms of production must underpin the next link in the chain, which is based on the achievements of its previous stages. Thus, agricultural competitiveness can not establish itself as the ultimate goal of the economic system, but must act for the industrial development that, once reached, it allows it to be mounted on services. India is a country with too many hindrances to be put as a model. A good performance in some specific aspect does not make a company an example to follow. But still, the “miracle” of India services is rooted in a broad industrial capacity. It’s funny how a significant part of the Argentina leadership (political, business and union) do not choose as a paradigm to countries like Canada, or better yet, Sweden -model equity, welfare, innovation and competitiveness internationally, and recurrently appeal to signal the way, examples of societies in which raw inequality and suffering of millions. For aspiration of a fair society based on knowledge and its applications as pillars of value creation it is not trivial that their highest authorities see with so much contempt for the industry, one of the essential bases of development.