India Lacks Formal, Salaried Jobs

References a previous post: http://marginalrevolution.com/marginalrevolution/2017/03/ind... - which blames the lingering influence of the "license raj". A problem a lot of ex-colonial countries have is a regulatory system that was set up to prevent efficient local business.

The excellent book The Other Path covers how simplifying the regulatory environment to make it usable brings people into more secure formal arrangements.

To pull an excerpt from a post regarding culture [1] that was on the HN front page a few days ago,

"Flipping through the annals of ethnography, one cannot but be struck by the “fit” that exists – most often – between the culture of a society and the demands that its institutional structures make. A society that is under constant military threat will have a culture that celebrates martial virtues, a society that features a cooperative economy will strongly stigmatize laziness, an egalitarian society will treat bossiness as a major personality flaw, an industrial society with highly regimented work schedules will prize punctuality, and so on.There are, of course, instances in which there is a poor match between the two (i.e. where the culture is dysfunctional). And, of course, one of the chief impediments to changing the institutional structures of many societies is that the culture is not “adapted” to the new pattern. (Thus, for example, it is difficult to create bureaucracies in cultures that strongly value family ties, because the latter generate nepotism and corruption.)"

As I grow older and understand the world better, I've come to appreciate how often bold proclamations rest upon hidden assumptions in one's worldview. Correspondingly, it is very difficult to give useful advice to someone else without first understanding their worldview. For the hard societal problems, the crux is often buried several levels deep, and treating superficial symptoms will not help much.

India has many development challenges, but flippant prescriptions without an understanding of the context are quite useless. One's worldview dictates what one considers success, what one considers wealth and what one considers acceptable tradeoffs to get there. The very notions of business/entrepreneurship/growth are also very different in India, traditionally. Add to that the fact that India is a collage of many diverse cultures, so there can't be one "right" answer. All this is definitely changing due to the last few decades of globalization, but the situation is sufficiently unique that much is lost in translation. Unfortunately, my understanding is not yet comprehensive enough to articulate the contrasts.

[1] http://sciphijournal.org/why-the-culture-wins-an-appreciatio... (I highly recommend reading this; it got me to start reading Iain Banks)

What these numbers tell me is that while lots of people start their own companies, these companies tend to stay small.

That is one way of looking at it. In India businesses are a family affair. Every subsequent generation of those families also get into business. As family tree grows people tend to branch out into running other businesses. So, the average size of business remains small. And those don't lend them formal, salaried jobs. On an average the business size tends to be 1 or 2 employees ie the owners.