Author: Maria Misra
Publication: The Times, UK
Date: August 13, 2007
URL: http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article2246159.ece
India may yet win the struggle for economic
supremacy in the East
With the sixtieth anniversary of independence,
enthusiasm for India in the West is at an all-time high. And though the Hindu
nationalist slogan "India Shining" was decisively and derisively
dismissed as overoptimistic in India itself at the 2004 general election,
among Western commentators the sub-continent's sparkle remains untarnished.
India seems to be the nation of the future - a vibrant, democratic, multicultural
and increasingly free-market alternative to the grimly uniform authoritarianism
of China. India seems finally to have fulfilled the dream of its chief architect,
Nehru, who predicted that, once freed from the British Raj, the new nation
would become a free, democratic and developed state - the global embodiment
of "the spirit of the age".
And yet journalistic optimism has not been
reflected in the decisions of hardheaded Western businessmen, who continue
to prefer India's nominally communist neighbour, China. Despite a recent upturn
in foreign investment, India still receives only a fraction of China's share.
Business has good reason to be cautious. For while the rise of India's high-tech
and software industries strikes fear among the West's white-collar workers,
in reality a bare 3 per cent of the population speak good English and 30 per
cent are illiterate. India's electricity consumption is but one third of the
world average; and only 2 per cent of its roads are four-lane highways.
Western businessmen are not the only ones
making unfavourable comparisons. Indians themselves are haunted by success
of their Chinese neighbour. In the 1960s they fretted about not being as good
at socialism, now they fear they aren't as good at capitalism either. Indian
commentators are rather divided on how to respond - unsure whether to beat
them or join them. The ranks of Indian pop-economists urging the tiger to
roar at the dragon, or the tortoise to sprint past the hare, are matched by
those dreaming of a new global entity - Chindia. The partnership of China's
awesome manufacturing power with India's enviable IT and services sector would
make Chindia the factory and back-office of the world. The problem with this
scenario is that China is beating India in the services sector, too.
For India's more sober policymakers, emulation
rather than partnership or head-on competition is the preferred response.
In Nehru's time, teams of bureaucrats crossed the border to study collectivisation.
Now it is a phalanx of CEOs who descend to analyse management style and productivity
gains. The Government, too, is keen to copy the Chinese. But efforts to promote
foreign investment are being obstructed by an unlikely coalition of Maoist
peasants, neo-Gandhian middle-class eco-warriors and a finance minister fretful
at the loss in tax revenues. So, despite the frothy headlines, India's economy,
in comparison with that of its dragon of a neighbour, remains a lumbering,
if frisky, elephant.
What lies behind India's relatively disappointing
performance? Some blame Gandhi and his Luddite ruralism; others castigate
Nehru for the lost decades of planning, and everyone cites pervasive corruption.
But none of these is convincing. Gandhi is the patron saint of India, not
its chief economist; the legacy of Nehru was not all bad; and if corruption
inhibited growth then China would still be in the Dark Ages. The truth is
that India's problems are not so much economic as political.
This is not, as was once fashionably asserted,
because India is a democracy, while China is authoritarian. Democracy is not
necessarily an obstacle to rapid economic development, as the reconstruction
of Japan and Germany testify. The problem is not democracy, but how it is
practised. And here the British must take a bow. For along with railways and
the English language, the British also left behind a legacy of profoundly
politicised identity politics. And India's multiple caste, linguistic and
religious communities continue to see themselves as bitter competitors for
the largesse of the State, not as collaborators.
Sadly India's politicians have often found
themselves unable, and sometimes unwilling, to tackle this fractiousness.
Caste divisions can become electoral constituencies and in consequence, Indian
governments have found it difficult to establish any sense of common national
purpose - and with it the willingness to pay the taxes necessary for education
and infrastructural spending.
Indeed, the corrupt and often violent recent
history of Indian democracy, with its far-right Hindu nationalists, panoply
of caste and regional parties and unstable coalitions, springs from the same
source as its sluggish economic reform: deeply entrenched social and political
fragmentation.
But will India always remain the tortoise-elephant
to China's dragon-hare? If India could transcend its fractious politics (and
there are signs in recent elections that it might), then it certainly has
the potential to excel economically. It has a demographic advantage over China
- it will have a larger working-age population by 2050. Its diversity is also
a source of creativity - something its dour northern neighbour fears it may
lack. And while China's rulers have managed economic liberalisation masterfully,
it remains to be seen whether they can achieve the same miracle in the political
sphere. China has enjoyed the short-term bonus of authoritarianism - the power
to impose restructuring regardless of popular opinion - but authoritarianism
also brings a lack of transparency. Many commentators believe this has shrouded
serious overinvestment, bad debts and potential asset bubbles.
Moreover, China - unlike India - has not been
effective at managing its gross regional inequalities. Few doubt that China's
economic triumph will eventually bring political turmoil in its wake.
India, unlike China, has had 60 years of experience
in managing political turmoil. Though there are pockets of extreme radicalism,
Maoist factions and Islamist extremism, mass revolutionary violence is highly
unlikely; people accept the mediation of political conflict through elections.
And so, paradoxically, though India's political life is chaotic, it is also
curiously stable. India's elephantine advantages may yet win out.
Maria Misra is a Fellow of Keble College,
Oxford, and author of Vishnu's Crowded Temple: India Since the Great Rebellion
