India
June 01, 2004
Is India’s Shine Gone? (Part Two)
By Sam Wilkin, Editor in Chief
[printer-friendly version]
Attempts by India’s governing party, the BJP, to play up the country’s recent economic success and take credit for it backfired spectacularly. India’s rural poor, it emerged, did not buy the success – much less give anyone credit. So the BJP is out and the Congress Party in power. What next for India? (Part two of a two-part series.)
“…India’s economy, for instance, could be larger than Japan’s by 2032…” – Goldman Sachs, October 2003.
A new Silicon Valley sprouting in Bangalore. A roaring economy achieving nearly nine percent growth in 2003. A rising hysteria that every good US job might be outsourced to Mumbai.
And suddenly India was no longer a byword for poverty. It seemed the country had achieved that Leninist fantasy – leaping stages of development. From subsistence farming to software services almost overnight. To be sure, about 80 percent of Indians were – as commentator Sundeep Waslekar pointed out – still too poor to afford a bicycle. But the rest had catapulted their country to the forefront of the high-tech global economy.
In fact, no. What was an idle fantasy for Lenin remains so today. India has not leapt over anything. In India’s recent growth there is, unfortunately, less than meets the eye.
The story of India’s unlikely boom is extraordinary but ultimately tragic. It began in the 1980s, when the ruling Congress Party attempted to see off the opposition BJP by co-opting the BJP’s business backers. The government – long hostile to private business – began handing out favors. Though meager, this was enough. India’s businesses, beaten down by decades of central planning, responded to a bit of good treatment by unleashing a mini-boom. Economic growth rates hit five percent per year.
But this growth was volatile and driven in part by immense budget deficits. In 1991, India lurched into a balance-of-payments crisis. Forced to turn to the International Monetary Fund for help, India began economic reform in earnest. Onerous regulations were lifted, taxes cut, import barriers lowered, capital markets opened. This unleashed another surge of growth – topping seven percent from 1994 through 1996.
But it was the greatest reform program that no one had ever heard of. As scholar Ashutosh Varshney pointed out, the reforms impacted important but esoteric areas – investment, exchange rates, capital markets. Reforms with direct impacts on the Indian public – agriculture, labor law, government spending – were generally avoided.
The response of the Indian people to a mid-1990s survey on the popularity of economic reform was resounding: “what reform?” About 80 percent – 86 percent in rural areas – had never heard of the economic reforms. By contrast, nearly two-thirds had heard of the controversial destruction of the mosque at Ayodhya. While India’s politicians were talking up Ayodhya, they were doing their best to keep economic reform a secret.
In the meantime, India’s companies did their best given the lopsided business environment. Unreformed agriculture stagnated (less than two percent annual growth in the five years to 2002) and industry hobbled along (under five percent growth). But services – less dependent on the unreformed bits of the economy, such as the dismal transportation infrastructure – boomed, hitting eight percent growth per year. It was like leaping stages of development. Agriculture and industry, still stunted, would be left behind.
And here is where the story turns tragic. Emboldened by the service sector’s improbable success, the BJP – now in power – decided, finally, to sell economic reform to the Indian public. This was a bit late – some twenty years after Deng Xiaoping told the Chinese people, “to get rich is glorious.” But better late than never. The BJP’s version was “India Shining.” Here was India’s chance to equate economic power with national power, and bring the people behind a patriotic economic boom.
It was a stunning failure. The BJP was thrown from office. Even at the state level, many who talked up reform – for instance, Chandrababu Naidu of Andhra Pradesh – were booted out.
The poor had not seen the intended message in all those “India Shining” ads. Instead of Indians getting rich, they saw the upper castes getting rich, and wanted none of it. Instead, they voted for politicians like Laloo Prasad Yadav – now railways minister. He is spectacularly corrupt, but also lower caste. The lower castes thrill to see one of their own finally getting rich. Admittedly by dubious means. But the possibility that the poor might themselves become rich, if they elected better leaders, is – understandably – outside the realm of imagination for rural farmers unable to afford a bicycle.
So India remains a long way from full-blown economic success. The political will is not there at the national level. An attempt to put it there was nipped in the bud.
To be sure, the new Congress-led government is generally pro-reform. But without broad public support for economic development the truly difficult reforms – impacting neglected areas of agriculture and industry – are likely to go untouched. India’s growth will remain uneven and rates of nine percent the exception, not the rule. In economics, India is not yet shining. Though it has come closer than ever before.
[printer-friendly version]
Attempts by India’s governing party, the BJP, to play up the country’s recent economic success and take credit for it backfired spectacularly. India’s rural poor, it emerged, did not buy the success – much less give anyone credit. So the BJP is out and the Congress Party in power. What next for India? (Part two of a two-part series.)
“…India’s economy, for instance, could be larger than Japan’s by 2032…” – Goldman Sachs, October 2003.
A new Silicon Valley sprouting in Bangalore. A roaring economy achieving nearly nine percent growth in 2003. A rising hysteria that every good US job might be outsourced to Mumbai.
And suddenly India was no longer a byword for poverty. It seemed the country had achieved that Leninist fantasy – leaping stages of development. From subsistence farming to software services almost overnight. To be sure, about 80 percent of Indians were – as commentator Sundeep Waslekar pointed out – still too poor to afford a bicycle. But the rest had catapulted their country to the forefront of the high-tech global economy.
In fact, no. What was an idle fantasy for Lenin remains so today. India has not leapt over anything. In India’s recent growth there is, unfortunately, less than meets the eye.
The story of India’s unlikely boom is extraordinary but ultimately tragic. It began in the 1980s, when the ruling Congress Party attempted to see off the opposition BJP by co-opting the BJP’s business backers. The government – long hostile to private business – began handing out favors. Though meager, this was enough. India’s businesses, beaten down by decades of central planning, responded to a bit of good treatment by unleashing a mini-boom. Economic growth rates hit five percent per year.
But this growth was volatile and driven in part by immense budget deficits. In 1991, India lurched into a balance-of-payments crisis. Forced to turn to the International Monetary Fund for help, India began economic reform in earnest. Onerous regulations were lifted, taxes cut, import barriers lowered, capital markets opened. This unleashed another surge of growth – topping seven percent from 1994 through 1996.
But it was the greatest reform program that no one had ever heard of. As scholar Ashutosh Varshney pointed out, the reforms impacted important but esoteric areas – investment, exchange rates, capital markets. Reforms with direct impacts on the Indian public – agriculture, labor law, government spending – were generally avoided.
The response of the Indian people to a mid-1990s survey on the popularity of economic reform was resounding: “what reform?” About 80 percent – 86 percent in rural areas – had never heard of the economic reforms. By contrast, nearly two-thirds had heard of the controversial destruction of the mosque at Ayodhya. While India’s politicians were talking up Ayodhya, they were doing their best to keep economic reform a secret.
In the meantime, India’s companies did their best given the lopsided business environment. Unreformed agriculture stagnated (less than two percent annual growth in the five years to 2002) and industry hobbled along (under five percent growth). But services – less dependent on the unreformed bits of the economy, such as the dismal transportation infrastructure – boomed, hitting eight percent growth per year. It was like leaping stages of development. Agriculture and industry, still stunted, would be left behind.
And here is where the story turns tragic. Emboldened by the service sector’s improbable success, the BJP – now in power – decided, finally, to sell economic reform to the Indian public. This was a bit late – some twenty years after Deng Xiaoping told the Chinese people, “to get rich is glorious.” But better late than never. The BJP’s version was “India Shining.” Here was India’s chance to equate economic power with national power, and bring the people behind a patriotic economic boom.
It was a stunning failure. The BJP was thrown from office. Even at the state level, many who talked up reform – for instance, Chandrababu Naidu of Andhra Pradesh – were booted out.
The poor had not seen the intended message in all those “India Shining” ads. Instead of Indians getting rich, they saw the upper castes getting rich, and wanted none of it. Instead, they voted for politicians like Laloo Prasad Yadav – now railways minister. He is spectacularly corrupt, but also lower caste. The lower castes thrill to see one of their own finally getting rich. Admittedly by dubious means. But the possibility that the poor might themselves become rich, if they elected better leaders, is – understandably – outside the realm of imagination for rural farmers unable to afford a bicycle.
So India remains a long way from full-blown economic success. The political will is not there at the national level. An attempt to put it there was nipped in the bud.
To be sure, the new Congress-led government is generally pro-reform. But without broad public support for economic development the truly difficult reforms – impacting neglected areas of agriculture and industry – are likely to go untouched. India’s growth will remain uneven and rates of nine percent the exception, not the rule. In economics, India is not yet shining. Though it has come closer than ever before.
May 25, 2004
Is India’s Shine Gone? (Part One)
By Sam Wilkin, Editor in Chief
[printer-friendly version]
Attempts by India’s governing party, the BJP, to play up the country’s recent economic success and take credit for it backfired spectacularly. India’s rural poor, it emerged, did not buy the success – much less give anyone credit. So the BJP is out and the Congress Party in power. What next for India? (Part one of a two-part series.)
“…it was hard not to feel the strength of the hopes and desires of the people lining up to vote; hard not to see poignancy in the devotion they brought to their only and very limited intervention in the unknown outside world; hard not to be moved by the eagerness with which they embraced their chance to alter the world that wielded such arbitrary power over their lives.” – Indian journalist Pankaj Mishra, observing elections.
First reactions to India’s shocking election results were sharp and negative. The markets reeled – India’s benchmark Sensex fell by 16 percent, and foreign investors pulled a net $495 million out of the country’s stock markets.
But in reality, the elections demonstrated, powerfully, that the basic laws of Indian democracy, which have kept the country stable for decades, are still in force.
India has historically done a spectacularly poor job of delivering benefits to the poorest segments of society. Statistics on infant mortality are a revealing measure of this kind of basic distributional equity. It usually does not take much to keep a child alive – access to clean water, adequate nutrition, sanitation, basic medical care. Hence a high infant mortality rate indicates a profound breakdown in the most fundamental functions of government. On this measure, India – with 64 infant deaths per 1,000 live births – is in the company of barely-functional regimes such as Haiti (61), Yemen (71), and Zimbabwe (58).
Thus there are regions of India where government effectiveness breaks down; and segments of society which are simply abandoned by the system. It is from such abandoned people and state breakdowns that political violence frequently emerges. (Indeed, a mid-1990s study by the US Central Intelligence Agency found that the single best statistical predictor of a country’s level of political instability was the infant mortality rate.) And in India, the instability is there. Each year, India leads the world in the number of major riots and strikes reported. Hindu-Muslim riots claiming the lives of nearly a thousand people in Gujarat are a recent memory.
And yet, India is also stable, on a fundamental level. No revolutions, no coups, and over a half century of democracy. The reason is that the poorest members of society, those most likely to foment violent instability, buy into India’s political system. They believe in the power of the vote. A survey by India Today found that 59 percent of Indians said their vote makes a difference, against only 21 percent saying the opposite. Voter turnout at Indian elections handily exceeds that in the United States. And, unlike most democracies, it is the poorest Indians who vote most – low-caste untouchables have the highest rates of political participation.
So the BJP’s loss, while shocking, is profoundly stabilizing. It turns out the poor were right – their votes do make a difference. The BJP’s “India Shining” campaign, which played up the success of the country’s emerging middle class, only made the poor angry. But far better this anger emerge at the ballot box than in a violent revolution. That is democracy in action.
There was one more principle of Indian democracy shown to great effect at recent polls: stabilizing diversity.
The conventional wisdom has it that ethnic and religious divisions are fundamentally destabilizing. And there is some truth to this. Cross-country research by Paul Collier suggests that countries with a dominant ethnic group – 45 to 90 percent of the population – are disproportionately at risk of severe political violence. The majority ethnicity will often oppress the minority; the minority will sometimes take up arms to fight back. At first blush, majority-Hindu India seems to fall into this category.
But this overlooks the spectacular diversity of Indian society. As India scholars Lloyd and Susanne Rudolph have pointed out, India is divided along far more than simple ethnic lines. And these identities often overlap – a low-caste southern Hindu, for instance, might have more in common with a poor southern Muslim that with another Hindu from a different caste, a different region, who even speaks a different language. (India is home to at least 50, and possibly as many as 400 distinct languages.)
India is fragmented on so many levels – ethnicity, religion, tribe, language, caste, region – that appeals to ethnic chauvinism generally flounder. Especially at the national level. Collier’s research shows that such extremely diverse states – where no single social group has a majority – are less likely to experience violent instability. Not just compared to states with a dominant ethnic group, but even compared to states with only a single ethnic group. There is stability in diversity.
In India’s recent elections this diversity principle again held true. Attempts by the BJP to foment Hindu nationalism failed because poor, low-caste Hindus did not buy into it. In poor regions, voters rejected appeals to their religion and instead voted along economic lines. And thus the secular Congress Party won and the Hindu BJP lost even in Hindu areas. This was true, in fact, for Gujarat, site of recent Hindu-Muslim violence, where the BJP, despite its control of the state, lost six parliamentary seats, falling from 20 seats out of 26 to only 14.
To be sure, the BJP may react to this loss by promoting Hindu nationalism even more stridently. This may lead to further violence in some areas. But in doing so, the party will likely shoot itself in the foot – proving again that such strategies are bankrupt in diverse India. As a stable democracy, India shines still.
Next week: How will India fare under Congress?
[printer-friendly version]
Attempts by India’s governing party, the BJP, to play up the country’s recent economic success and take credit for it backfired spectacularly. India’s rural poor, it emerged, did not buy the success – much less give anyone credit. So the BJP is out and the Congress Party in power. What next for India? (Part one of a two-part series.)
“…it was hard not to feel the strength of the hopes and desires of the people lining up to vote; hard not to see poignancy in the devotion they brought to their only and very limited intervention in the unknown outside world; hard not to be moved by the eagerness with which they embraced their chance to alter the world that wielded such arbitrary power over their lives.” – Indian journalist Pankaj Mishra, observing elections.
First reactions to India’s shocking election results were sharp and negative. The markets reeled – India’s benchmark Sensex fell by 16 percent, and foreign investors pulled a net $495 million out of the country’s stock markets.
But in reality, the elections demonstrated, powerfully, that the basic laws of Indian democracy, which have kept the country stable for decades, are still in force.
India has historically done a spectacularly poor job of delivering benefits to the poorest segments of society. Statistics on infant mortality are a revealing measure of this kind of basic distributional equity. It usually does not take much to keep a child alive – access to clean water, adequate nutrition, sanitation, basic medical care. Hence a high infant mortality rate indicates a profound breakdown in the most fundamental functions of government. On this measure, India – with 64 infant deaths per 1,000 live births – is in the company of barely-functional regimes such as Haiti (61), Yemen (71), and Zimbabwe (58).
Thus there are regions of India where government effectiveness breaks down; and segments of society which are simply abandoned by the system. It is from such abandoned people and state breakdowns that political violence frequently emerges. (Indeed, a mid-1990s study by the US Central Intelligence Agency found that the single best statistical predictor of a country’s level of political instability was the infant mortality rate.) And in India, the instability is there. Each year, India leads the world in the number of major riots and strikes reported. Hindu-Muslim riots claiming the lives of nearly a thousand people in Gujarat are a recent memory.
And yet, India is also stable, on a fundamental level. No revolutions, no coups, and over a half century of democracy. The reason is that the poorest members of society, those most likely to foment violent instability, buy into India’s political system. They believe in the power of the vote. A survey by India Today found that 59 percent of Indians said their vote makes a difference, against only 21 percent saying the opposite. Voter turnout at Indian elections handily exceeds that in the United States. And, unlike most democracies, it is the poorest Indians who vote most – low-caste untouchables have the highest rates of political participation.
So the BJP’s loss, while shocking, is profoundly stabilizing. It turns out the poor were right – their votes do make a difference. The BJP’s “India Shining” campaign, which played up the success of the country’s emerging middle class, only made the poor angry. But far better this anger emerge at the ballot box than in a violent revolution. That is democracy in action.
There was one more principle of Indian democracy shown to great effect at recent polls: stabilizing diversity.
The conventional wisdom has it that ethnic and religious divisions are fundamentally destabilizing. And there is some truth to this. Cross-country research by Paul Collier suggests that countries with a dominant ethnic group – 45 to 90 percent of the population – are disproportionately at risk of severe political violence. The majority ethnicity will often oppress the minority; the minority will sometimes take up arms to fight back. At first blush, majority-Hindu India seems to fall into this category.
But this overlooks the spectacular diversity of Indian society. As India scholars Lloyd and Susanne Rudolph have pointed out, India is divided along far more than simple ethnic lines. And these identities often overlap – a low-caste southern Hindu, for instance, might have more in common with a poor southern Muslim that with another Hindu from a different caste, a different region, who even speaks a different language. (India is home to at least 50, and possibly as many as 400 distinct languages.)
India is fragmented on so many levels – ethnicity, religion, tribe, language, caste, region – that appeals to ethnic chauvinism generally flounder. Especially at the national level. Collier’s research shows that such extremely diverse states – where no single social group has a majority – are less likely to experience violent instability. Not just compared to states with a dominant ethnic group, but even compared to states with only a single ethnic group. There is stability in diversity.
In India’s recent elections this diversity principle again held true. Attempts by the BJP to foment Hindu nationalism failed because poor, low-caste Hindus did not buy into it. In poor regions, voters rejected appeals to their religion and instead voted along economic lines. And thus the secular Congress Party won and the Hindu BJP lost even in Hindu areas. This was true, in fact, for Gujarat, site of recent Hindu-Muslim violence, where the BJP, despite its control of the state, lost six parliamentary seats, falling from 20 seats out of 26 to only 14.
To be sure, the BJP may react to this loss by promoting Hindu nationalism even more stridently. This may lead to further violence in some areas. But in doing so, the party will likely shoot itself in the foot – proving again that such strategies are bankrupt in diverse India. As a stable democracy, India shines still.
Next week: How will India fare under Congress?