Some time ago- I can’t remember the exact date- there was an argument at young Shivam’s blog about what the poster child of Indian reforms was- Shivam said it was BPO, while Gaurav Sabnis said that telecom was a better example. A link isn’t provided because that particular post was deleted when Shivam transmogrified into Albert Krishna Ali.
I realised- admittedly some months late- that Gaurav’s assertion about telecom being the poster child was slightly flawed. The telecom sector can be a poster child, but it’s a very unrealistic poster child. All other things being equal, the kind of growth the telecom sector has seen won’t be matched by any other sector.
The reason for this, of course, is the good old network effect. Telecom growth feeds on itself because every time the number of users increases, it makes even more sense for a nonuser to become a user- there are that many more people to contact when he takes a phone. On the other hand, an increase in the number of motorcycle users doesn’t make motorcycles more or less attractive to other users.
This raises two questions:
- Given the same level of reform, is there any other sector in India which will see the same level of growth?
- Out of all the industries which don’t benefit from network effects, which one can be a realistic poster child for reform?
In keeping with the grand tradition of procrastination on this blog, I will answer both of these in separate posts.