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 the Sri Lankan villages impressed me enough to delve deeper into understanding why Sri Lanka has delivered so much more for its citizens than India has been able to.
Visually there are four very striking things about this island country and its countryside:
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 – $3600 vs $1600. 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 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 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 1980s to 1.8 per cent in 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 (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 (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 was 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’.)