Social Infrastructure of India

 Dayna McKnight

January 26, 2003

Executive Summary

Social infrastructure refers to those factors which render the human resources of a nation suitable for productive work (Sullivan, 2002). India is drastically different in terms of how its labor laws are regulated, how its citizens are educated, and how their health is handled.  When considering a country to enter into, Staples should evaluate whether the country has an adequate social infrastructure to foster economic growth.

Introduction

India is reportedly the world's largest and most diverse democracy.  “The country has seen remarkable social, agricultural, and industrial progress. Life expectancy has doubled and the specter of famine no longer stalks the sub-continent (Hammond, 2003)”.  On the other hand, India (and the south Asian region as a whole) has the world's worst poverty, the most widespread malnutrition, and the most extensive use of child labor (Hammond, 2003).

The opening chapter of The Economic Way of thinking discusses the importance of social cooperation.  It states that we “depend on processes of coordination for far more than we usually think of as economic goods”.  It further goes on to explain that economic way of thinking has a lot to do with the notion that everything depends on what people believe to be benefits and costs and the relative value they place on those benefits and costs (Heyne, Boettke, & Prychitko, 2003). That IS the economic way of thinking. Likewise, social infrastructure plays a major role in economics. The social infrastructure of India will directly impact how Staples is able to operate in India.

Demographic Data

According to the most recent census data (March 2001), India’s population stood at 1,027,015,247 persons (Census of India, 2003). With this, India became only the second country in the world after China to cross the one billion mark. India's fertility rate is nearly 4 children per woman, so the region's population, now 930 million, is expected to reach 1.5 billion and could be as high as 1.9 billion in the year 2050.

India's population is still growing rapidly and seems likely to surpass that of China before it stabilizes. India’s population rose by 21.34% between 1991-2001.  Approximately 40% (402,512,190) of India’s citizens are classified as workers and the remaining 60% as non-workers.  India is a $400-billion economy, yet more than 35% of its one billion population live below the poverty line. Most poverty is due to under performance of the economy relative to its potential (USAID, 2003).

Education

The Indian government has expressed a strong commitment towards

education for all of its citizens.  Education is highly valued in India and considered a great asset among its people.  The currently literacy rate is 65.38% (males: 75.96% and females: 54.28%) (Census of India, 2003).  India has one of the lowest female literacy rates in Asia.  The low level of literacy has a negative impact on women’s lives, as well as on their families’ lives and on their country’s economic development.  Numerous studies show that illiterate women have high levels of fertility and mortality, poor nutritional status, low earning potential, and little autonomy within the household (Yelkoff, 1998).

Literacy in India has improved steadily over the years.  Many states have started ‘total literacy campaigns to eliminate illiteracy among the disadvantaged populations. The literacy rate varies from state to state.  For example, the rate in Tripura is quite high and the state has a good network of educational institutions, including technical institutions.  The largest barrier to literacy in the country is intense poverty.   

Staples is committed to supporting educational initiatives, including partnering with “Gifts in Kind International” to provide contributions to disadvantaged youth and education-focused nonprofit groups through their chain of stores. If the decision is made to expand into India, the company will ensure that the same care to improve education will be taken.

Work Ethic

            India’s citizens have a sound work ethic.  Their fundamentals values include: thrift, hard work, sense of duty, respect for the family unit, respect

for education, mathematical skills, and entrepreneurial skills (Srinivasan, 1995).

India has large numbers of well-educated and trained workers skilled in English language.

A land of diversity and contradictions, India has the most sought-after software professionals in the world even as over half its population cannot read or write. The country is a major exporter of software services and workers.  The unemployment rate of educated youth is quite high, including those who are technically qualified. This can be turned into an advantage, by suitably deploying the available manpower, to meet the industrial needs.  This could prove to be an asset to Staples when identifying workers for its stores.  For a poor nation, Indians are remarkably thrifty, saving up to 28% of heir gross national product.

While not as high as that of the Chinese or the Japanese, this is certainly very high (World Fact book, 2002).   

          The labor laws of India are drastically different than those of the United States, lacking the same level of regulation that U.S.-based organizations are accustomed to.  Child labor is a problem in India. There are more children under the age of fourteen in India than the entire population of the United States.  Children under fourteen constitute around 3.6% of the total labor force in India.  The Government of India is determined to eradicate child labor in the country. “The world's largest child labor elimination program is being implemented at the grass roots level in India, with primary education targeted for nearly 250 million” (Indian Embassy, 2003).

Health

HIV/AIDS, Hepatitis B and C, malaria, and TB are all major problems in India and Southeast Asia, in general. Healthcare is becoming available to more of India’s citizens. As life expectancy increases, so is access to health care.  India, a nation of a billion people, has officially reported 3.8 million cases of HIV infection. India is estimated to be second only to South Africa in terms of number of HIV infections, but it is poised for a rapid escalation in numbers. Over 75% of HIV infections in India are acquired heterosexually, and women in India constitute a rapidly growing group at risk for HIV.  Denial of the impact of HIV is widespread among the public, policy makers and medical personnel. 

Staples must consider how the health of India’s workers would affect its organization.  The company can support country initiatives to improve the overall heath of its citizens.

Environment

Environmental degradation is widespread and resource scarcities are growing, helping to further impoverish India's rural population. The growing demand for power, fueled largely by high-ash coal, contributes to air pollution and chronic respiratory diseases in India.  Inadequate access to clean water and sanitation adds to the incidence of other communicable illnesses.  India's use of energy is expected to grow at least 520 % over the next 50 years. Without cleaner technology or more effective environmental policies, emissions of air pollutants may increase by the same amount. Over the same period, the region's industrial growth and its production of chemicals, metals, and paper-the main source of toxic emissions-are expected to increase 980 %. Without improved industrial processes and better enforcement, toxic emissions and health threats may grow by a similar amount (USAID, 2003).

Staples is an “environmentally responsible” company, working to preserve and recycle resources whenever possible (Staples, 2003).  The company is committed to increasing knowledge of environmental issues related to their products.  Staples would need to ensure that they are entering into an environment which will allow them to continue their energy-conservation practices. 

Conclusion

Although, the emergence of an increasingly prosperous middle class in India may one day create substantial new markets for U.S. goods and services, now is not the time for Staples to invest in the country.  There are many unknown variables and differences in social infrastructure.  Education doesn’t appear to be a hindrance. Although the country has a high illiteracy rate, there is a still a decent level of skilled and educated workers.  India has the labor productivity to be a viable location; however, there are many possible barriers including the differences in labor laws and existing child labor practices.   

References

Census of India. (2003). Retrieved online January 24, 2003 from http://www.censusindia.net.

CIA World Factbook. (2002). Retrieved online January 24, 2003 from  http://www.cia.gov/cia/publications/factbook/geos/in.html#People.

Embassy of India. (2003). Retrieved online January 24, 2003 from http://www.indianembassy.org/policy/Child_Labor/childlabor.htm#study.

Hammond, Allen. (2003). Which world? Scenarios, for the 21^st century.  Retrieved online January 20, 2003 from http://mars3.gps.caltech.edu/whichworld/index.html.

Heyne, P., Boettke, P., & Prychitko, D. (2003). The economic way of thinking (10th ed.). Upper Saddle River, NJ: Prentice-Hall, Inc.

Srinivasan, Rajeev. (February 1995).  The Hindu Work Ethic: or, The New Hindu Rate of Growth. Retrieved online January 25, 2003 from http://www.hindunet.org/alt_hindu/1995_Feb_2/msg00142.html.

Staples, Inc. (2003).  Retrieved online January 25, 2003 from www.staples.com

Sullivan, J. J. (2001). Exploring international business environments. Boston, MA: Pearson Custom Publishing.

USAID, India. (2003). Retrieved online January 25, 2003 from http://www.usaid.gov/in/aboutusaid/about.htm.

Velkoff, Victoria A. (October 1998). Women’s education in India.  Retrieved online January 20, 2003 from http://www.census.gov/ipc/prod/wid-9801.pdf.