Hacker News Reader

Hacker News

Comment by alephnerd | Hacker News Reader

Parent Full thread

alephnerd

> Are subsidies huge

Yep. If you earn less that $3k a year,

1. You pay no income tax

2. You get heavily subsidized groceries (what would cost $30/mo becomes $10/mo)

3. You can buy a heavily subsidized apartment (PMAY-U)

4. Depending on the state, you can get free electricity, water, etc.

5. If you are in a semi-rural area, you can get psudeo-UBI via the MGNREGA program

With all of this, you can end up netting an additional $700-1.2k a year tax free.

Fundamentally, China and Vietnam were able to succeed at pushing people into factory work because these kinds of subsidies didn't exist, forcing people to choose between working at a factory or starve. Also, factories in China and Vietnam would build dormitories, but in India that falls foul of labor laws.

This is why most migrant workers in India are from the state of Bihar - the government in this state has been incompetent at running welfare programs, so rural poverty has not been alleviated.

View on HN

>Fundamentally, China and Vietnam were able to succeed at pushing people into factory work because these kinds of subsidies didn't exist, forcing people to choose between working at a factory or starve. Also, factories in China and Vietnam would build dormitories, but in India that falls foul of labor laws.

That's dubious thinking. The hurdles to establishment of a manufacturing base are not labor shortages. The biggest issue in India is the ease of doing business[0] and the bureaucratic red tape. India ranks 136 in 190 countries in starting new businesses, among many other accolades.

[0] https://archive.doingbusiness.org/en/rankings [1] https://news.ycombinator.com/item?id=24106545

No, it's not that simple. Some of the regulatory capture that exists in India is layered on by existing companies like Tata and Maruti. These companies and existing relationships make it difficult for new entrants but wouldn't make it hard for existing firms to build and staff factories as they have been doing.

EV Car Laws are a classic example of this.

The only major EV Car manufacturer in India is Tata Motors. They lobbied the Indian government to set EV Car GST at 5% instead of 50% like it is for other cars.

When Toyota India (and it's partners Maruti Suzuki and Hyundai India) started considering manufacturing Hybrids [0], Tata went on a lobbying blitz to prevent Plug-in Hybrids from getting similar tax treatment as EVs [1].

The Indian government ended up siding with Toyota [2]

Oh, btw. This entire story only happened in the past 3 months.

[0] - https://www.reuters.com/business/autos-transportation/toyota...

[1] - https://www.reuters.com/business/autos-transportation/tata-m...

[2] - https://auto.hindustantimes.com/auto/cars/nitin-gadkari-bats...

Yes I'm aware sadly. Have a friend of a friend involved in the 3 wheeler EV business in India. Not going to drop names because it's a small world.

Oof. Best of luck to them. I'm curious how they differentiate themselves from the Jugaad three-wheeler manufacturers. That seems to be where a lot of the demand and growth has been from what I've seen.

> The hurdles to establishment of a manufacturing base are not labor shortages. The biggest issue in India is the ease of doing business[0] and the bureaucratic red tape. India ranks 136 in 190 countries in starting new businesses, among many other accolades

It all comes down to India's Labor Laws and Land Acquisition Laws.

No one actually follows Labor Laws in India, but Enforcement Agencies and local Politicians will use them to extract bribes. You will invariably be breaking some labor law (eg. under Indian Labor Laws, you need to provide a baby room/creche for every woman), and as such you need to pay off the Trade Unions, local ruling Politician, local opposition Politician, the district labor commissioner, the district magistrate, etc.

In India, the laws are used as a way to extract the maximum number of bribes out of you.

This is why Tamil Nadu and Gujarat do so well at manufacturing in India - the politicans in both states are equally corrupt, but the ruling parties (DMK and BJP respectively) run a One-Party State where you only pay them off, and everyone has to listen.

If you pay off your GJ BJP MLA or your TN DMK MLA, you will be free to do whatever you want - similar to how you operate in Guangdong or HCMC.

In a lot of other states in India, corruption is nowhere near as streamlined.

Is India still stuck on the Land Acquisition Act of 1894? Pakistan has been totally unable to make any changes to it, despite/because it allows for so much corruption, graft and control.

Yep.

Narendra Modi has been campaigning on radically reforming the LAA since he became Prime Minister in 2014, but he never got the supermajority needed to safely pass it.

The current 2024 election is basically being fought over this Land Reform Law [0].

The UCC, Ram Mandir, etc stuff is all a distraction from interests fighting for and against this law.

It's a good reform, but Modi isn't fighting for it out of altruism. Easier land acquisition makes it easier to manufacture mass housing under the PMAY-U program, which would basically make Singaporean style HDBs for Indians. Once that is in place, the BJP will win elections for the next 20 years, because they've provided modern housing (and the ability to get rich from graft on the way).

[0] - https://www.thehindu.com/news/national/land-reforms-included...

Changing land acquisition would be a huge boon for much more than just housing for the BJP. As you say this opens up a lot more opportunities to get rich from graft for a lot of non-housing purposes as well.

Yep! I mentioned housing specifically because PMAY-U and PMAY-G was supposed to be Modi's crowing achievement (also the easiest way to pull off graft en masse), along with UBI [0].

Food security, Housing, and UBI are the three holy grails - whichever party successfully delivers on all 3 becomes invincible for a generation, and why the BJP has been doing what it's doing.

[0] - https://www.economist.com/finance-and-economics/2017/02/04/i...

This government's track record of passing radical reforms has been pretty poor (the Farm bills, labour reforms, GST implementation) so I am not holding my breath. It is not the supermajority that was hindering the Farm bills either - their main issue has been the lack of advance outreach to the relevant sections of society. There is no way you are going to simply pass laws like that in India without first priming the farmers / labour unions etc. first, even at acute tax payer expense. If they learnt from their mistakes then we can hope for something but their modus operandi has been to completely ignore any opposition to their policies so I will not hold my breath.

I’d say an ever bigger roadblock is societal balkanization and resulting incoherent corruption and law enforcement.

It’s not uncommon for lawsuits in India to get ‘stuck’ for decades or longer, while squatters do their thing to property without involvement from police, and the mob (as in groups of angry people) just does what it wants with no effective penalties or accountability.

India was formed by non-consensually welding together 200+ long term distinct religio-ethno-socio states, and pretending they are all one country.

In China, and to a lesser extent Vietnam, it’s a different dynamic.

If the communist party likes you, you can do whatever you want and quickly. If they don’t, good luck surviving at all. And the ethnic groups are limited and small minorities. So there is a coherent majority whose interests can be known and that can be appeased.

So if you’re in the good graces there, it’s speedy, efficient, and profitable.

India, there is no one group effectively in charge (at least anymore), and you’re constantly dealing with having to pay off or work around yet another different group that somehow was able to get themselves in a position they could force you to pay them. Often dozens in any one area.

And because the ‘Indian’ identity is relatively weak compared to their more specific ethnic/caste identity, it’s much harder to override for the ‘greater good’.

This is a very orientalist view of India.

Most states in India have a single party ruling, and it's fairly easy to understand who to be chummy with, and how to operate a JV.

The issue is swing states have competing political poles internally, which slows down the ability to operate as you need to deal with 2x the overhead.

Even in China and Vietnam you have a similar mentality, but the difference is it's all part of a single party.

Furthermore, at least in VN's case, you have the exact same problems as India if not worse. The main difference is most factories in VN end up getting built in the Red River Delta region (Hanoi-Haiphong), so there is a strong network effect.

Once you go to other cities in Vietnam (eg. Pleiku, Can Tho) you lack the kind of administration that has experience dealing with foreign investors and businesses, forcing you to have to make JVs.

India is basically a country with 26 Vietnams - some of those states have fairly decent institutional capacity, others less so.

I can’t tell if you’re agreeing with me, insulting me, or some combination of the above.

I will say, it’s a lot more than 26 Vietnams in India though, since most decent sized Cities have their own nested level of Chaos going on that likes to ignore the larger state infrastructure and is highly resistant to outside intervention. At least in most areas I’ve seen.

And that is also ignoring the Muslim/hindu/jain/sikh/etc. friction going on within each area too. And the occasional random bombings, mob ‘interactions’, etc.

Money does talk though.

I’ll also say, I’ve never been called an orientalist before - that’s cool. I guess?

India will never be a manufacturing hub because of the absurdly high land costs. India is simply uncompetitive because land acquisition eats up into your budget.

The moment any large manufacturing facility is cleared through the red tape, speculators buy up all the land in the vicinity, making the entire supply chain more expensive.

You can work on red tape and ease of doing business, but the simple reason why Indian small and medium manufacturing units never graduate to large scale is because they simply can’t acquire the land to grow.

Hence why Modi is fighting to get a supermajority in the Lok Sabha [0].

A 362+ seat range in the LS is enough to push through the LARR repeal without being negatively impacted by defections.

[0] - https://www.thehindu.com/news/national/land-reforms-included...

I think this paints an overly rosy picture of welfare programs. It reads like what a rich person would imagine how poor people think.

Taxes in India are computed in "slabs" of different rates. I believe everyone in India are allowed to exclude $3.5K from their annual income for computing their tax obligation. Of course, those making less that $3.5K do not pay any taxes. But those making over $3.5K do not pay any taxes for the first $3.5K of their annual income. So, there is no incentive to earn less as OP seems to suggest.

> overly rosy picture of welfare programs

I agree (I couldn't edit it by the time the limit ended)!

The bigger issue is factory work is unappealing because working 10-12 hours a day under the table earning $250-300/mo doesn't make sense for most people.

Rural and lower class life does suck (heck my dad grew up in a jhuggi), but earning money for yourself is better than being at the mercy of a factory owner who can and often holds back your salary and doesn't provide housing.

That's a major differentiator between Chinese and Indian style factories - Chinese factories provide dormitories but Indian ones can't due to some regulatory issues.

Furthermore, most well paying factories aren't established in smaller towns or non-tier 1 metros, and the kind of demographic who would be open to working at a factory doesn't want to leave their hometown to take a massive risk living as a migrant worker in Chennai or Noida.

And that's why you see the boom in e-rickshaws in Tier 3/4 metros and small towns - it's an easy way to start your own business that's paying somewhat decently, and in most states welfare disbursement is "good enough" (as in better than 5 years ago).

That said, this is a localized maxima, and major reforms are needed, because this kind of an unorganized industry is going to eventually crash due to oversaturation.

I mean, is the stuff they get in utility stores of acceptable quality? Pakistan got rid of them at federal level (like PDS) in the 80s after the Americans or IMF complained I think but there was a lot of hoarding and backroom dealing going on. I think certain provinces still have them.

> stuff they get in utility stores of acceptable quality

Depends on which scheme/welfare program you're using.

The ones managed by the Federal/Central Government have better QAing and because of Aadhar it's much harder to do shenanigans and steal en masse. The brands provided are also available at your local Indian grocery store [0].

State Level schemes tend to be of varying quality. Some states (eg. Himachal, Punjab, Tamil Nadu, Kerala) are able to maintain a high quality, but other states (eg. Bihar, West Bengal, Madhya Pradesh) are unable to properly execute.

The Pakistani PDS collapsed because the hoarding and backroom dealing you mentioned. It fundamentally wasn't a bad program, it just lacked the institutional infrastructure needed to prevent corruption and lossage. The same thing happened in India until Digital Public Infrastructure (DPI) like Aadhar was rolled out. With Aadhar, UPI, etc, it's easier to detect anomalous disbursements and thus root out corruption, as you have an audit trail.

Federal Schemes in India all require Aadhar/Biometric Validation. State Level Schemes don't require biometric validation, and as such can (and have) been abused.

[0] - https://www.nafedbazaar.com/

Reply on news.ycombinator.com