Sri Lankan lessons for India | Value Research The author explains why Sri Lanka has forged ahead and India has lagged behind

Sri Lankan lessons for India

The author explains why Sri Lanka has forged ahead and India has lagged behind

I had visited Colombo five years ago, just after the civil war ended, and had found it to be a pleasant but unremarkable city. Then during my children's summer holidays in May, I found myself making another trip with my family to Sri Lanka. This time round, after a brief stay in Colombo - a city which has become visibly more prosperous and that much more interesting over the past five years - we ventured further into the countryside. What I saw in Sri Lankan villages impressed me enough to delve deeper into understanding why Sri Lanka has delivered so much more to its citizens than India has been able to.

Visually there are four very striking things about this island country and its countryside:

The levels of filth are visibly lower. Neither in the cities nor in the Sri Lankan countryside did I see the sort of squalor and filth that we associate not only with overcrowded Indian cities like Mumbai but also with most parts of northern and eastern India. Not only are large open drains absent in Sri Lanka, urban planning - even in a small town like Galle (population of 1.1mn) - is clearly exercised more tightly than in the vast majority of Indian cities.

Women are much more visible. Having grown up in Delhi, I am used to living in Indian cities where for every ten men on the street, you see two or three women. In Sri Lanka, the men-to-women ratio is very visibly 50:50.

The quality of housing is much better. I asked an auto-rickshaw driver in Galle to take me to his residence. Then I walked around the neighbourhood in amazement because I was able to see from the series of parked auto rickshaws on the street that their drivers lived in properly built houses (neither flats, nor tenements) with little gardens in the front and a spacious living room which looked on to narrow but clean streets.

The Chinese are everywhere. In December 2014 Mahinda Rajapaksa was voted out and Maithripala Sirisena became the president in an election which was supposedly influenced by India. Mr Rajapaksa was supposedly more sympathetic to the Chinese than Mr Sirisena is. However, the latter's victory clearly has not deterred the Chinese from continuing to extend their influence in Sri Lanka. The port in Colombo is being built by the Chinese and the port in Hambantota has already been built by the Chinese. The superb highways along the entire Sri Lankan east coast (which did not exist until three years ago) have been built by the Chinese and I could not help but notice that most of the containers in the Colombo's main container terminal were Chinese.

Thirty years ago both the countries had similar levels of per capita income - around $300. Now, however, Sri Lanka's per capita income is more than twice India's - $3,600 vs $1,600. How did Sri Lanka pull away so much from India?

When it comes to GDP growth, India has actually done better than Sri Lanka. Over the past 20 years, India's real GDP has delivered a CAGR of 7 per cent vs 5 per cent for Sri Lanka. However, Sri Lanka has done a much better job of controlling the denominator of the per capita income ratio. Sri Lanka's population growth has slowed from 1.6 per cent in the 1970s to 1.4 per cent in the 1980s to 1.2 per cent in the 1990s to 0.8 per cent in the noughties. India's population growth has also slowed down during the last four decades but the rate of growth of population has remained much higher than Sri Lanka's. India's population growth slowed down from 2.3 per cent in the 1970s to 2.2 per cent in the 1980s to 1.8 per cent in the 1990s to 1.5 per cent in the noughties. As result, over the last 30 years, Sri Lanka's population density, which stands at 327 people per square feet, has risen at a CAGR of just 1 per cent vs India's 1.7 per cent (India has 421 people per square feet).

So why has Sri Lanka been able to control its population in a way that India simply has not been able to? Economists believe that there is a direct relationship between women's literacy rates and the number of children they have. A study conducted by the Registrar General of India and the East-West Population Institute noted that: "The states in which female literacy rates are high, fertility rates typically are low. In those states that have low fertility rates, child mortality rates are also low." Not only are overall female literacy rates for India way behind Sri Lanka's (we are at 66 per cent vs their 90 per cent) but the situation is especially bad in the northern and western Indian states (literacy rates well below 60 per cent). Interestingly, southern Indian states like Kerala (92 per cent) and Tamil Nadu (74 per cent) have female literacy rates and fertility rates closer to Sri Lanka's than to northern India's.If ever proof were needed that culture plays as big a role in economic outcomes as politics does, this contrast between India and Sri Lanka as well as between different parts of India and Sri Lanka would make an interesting case study. In the meantime, Indian policymakers and those of us with an interest in public policy would do well to read Amartya Sen's book, The Argumentative Indian, in which he writes, "In my view the imposing tower of misery which today rests on the heart of India has its sole foundation in the absence of education. Caste divisions, religious conflicts, aversion to work, precarious economic conditions - all centre on this single factor."

Saurabh Mukherjea is CEO - Institutional Equities at Ambit Capital and the author of Gurus of Chaos: Modern India's Money Masters.

This column appeared in the August 2015 Issue of Wealth Insight.

Other Categories