'If Indians keep investing in FDs': ISB alum links mindset to GDP lag behind China, South Korea

India’s per capita GDP remains a fraction of China’s and South Korea’s, and ISB alumnus Manab Majumdar says the country’s obsession with safety-first investments like fixed deposits is partly to blame.

In a LinkedIn post, Majumdar contrasts India’s 2023 per capita GDP of $2,300 with China’s $12,500 and South Korea’s $35,000. “If Indians keep on investing in FD and always follow safety-first approach then the growth in per capita GDP will be also like this,” he wrote, noting how India started on par with its Asian peers in 1961 but has since fallen dramatically behind.

Beyond risk aversion, Majumdar lists deeper structural issues that have stunted India’s economic rise — from a narrow manufacturing base to systemic failures in governance and education. “We need to introspect why we failed so miserably,” he urged.

Among the core problems is the limited expansion of India’s manufacturing sector, which accounts for just 17% of GDP compared to 29% in China. Poor infrastructure, high logistics costs, and unreliable utilities continue to drive up production costs, making Indian manufacturing globally uncompetitive.

Majumdar also criticized the country’s chronic skills gap, pointing to a lack of vocational training and practical education. “Even an Electrical Engineer from IIT waits for the electrician to come and fit the tubelight in his home,” he wrote. In contrast, China, he said, has “football fields filled with tooling engineers.”

Political inertia and what he calls the “problem of 20%” — a segment of the population he claims extracts state benefits without contributing to growth — further entrench stagnation.

India’s banking system, marked by high interest rates and limited credit access, also dampens entrepreneurial ambition. Only 14% of MSMEs, which employ 40% of India’s workforce, have formal access to credit. R&D spending lags far behind global leaders, limiting innovation and technological advancement.

As the world moves into an era of advanced manufacturing, India’s path forward, Majumdar suggests, depends on shedding its fear of risk and radically rethinking its development model.