Opening Remarks

India: Miracle, Interrupted


India: Miracle, Interrupted

Photograph by Subhash Sharma/Polaris

Indian scholars and authors like to write about something they call the “idea of India,” a loosely defined concept of national identity. It’s an attempt to impose a measure of coherence on the messiness of a country of 1.2 billion people. That messiness, however, is real. From the ground, it’s hard to imagine how a single idea could ever capture India’s reality.

Perhaps that’s why observers of the subcontinent (both domestic and foreign) tend to retreat to easy generalizations and simplistic narratives. For much of India’s post-independence history, the country was an economic basket case—a textbook example of financial mismanagement, wasted potential, and stunted growth. Then, in the 1990s, after India embarked on market reforms and began opening its closed, semi-socialist economy, the narrative changed. As native companies aggressively acquired international brands, and as growth rates approached double digits, the media was full of triumphalist rhetoric about impending “economic superpowerhood.”

Over the last few months the narrative appears to have shifted again. Growth has slowed from more than 10 percent in 2010 to around 7 percent today. Inflation is persistently high, agricultural productivity has declined, and foreign investment and the stock market are down. Social unrest and deteriorating law and order in many parts of the country have potential investors spooked. Corruption is estimated to cost India at least $18.4 billion a year.

A recent Economist headline on the nation’s growth prospects read: “Slip-sliding away.” At the meeting of the World Economic Forum in Davos, Switzerland, India’s trade minister, Anand Sharma, was questioned by journalists about everything from corruption to inflation to social inequality. “Why are you picking on India?” the minister was reduced to asking. “What is going wrong with us?”

The truth is that India’s prospects were never quite as bright as they were made out to be—nor are they quite as dire as they are held to be today. Instead, the recent swings in the Indian narrative are another reminder of the role of sentiment in investors’ perceptions and decisions. Nations, like markets, are subject to often irrational (and certainly ill-informed) cycles of boom and bust.

India’s transformation during the 1990s was both exhilarating and disorienting. Almost overnight, a nation infused with the drab austerity of Nehruvian socialism—where basic items like cheese and toilet paper were considered luxuries—was unshackled, exposed to a riot of international brands and consumer goods. Indian companies listed on Nasdaq, the ranks of billionaires soared, and the country became one of the fastest-growing economies in the world.

People started talking about an “Indian model” of development, a private-sector-driven ascent fueled by the nation’s thriving high-tech and service industries. This model was contrasted with China’s state-led system and reliance on manufacturing. China and India (“Chindia,” as they were called) would compete for dominance in a new Asian Century.

Even in those sunny days, though, it was apparent there were fault lines in the new Indian story. Many of the ills that observers bemoan today were already evident at the height of the nation’s boom. In retrospect, many were exacerbated by that boom.

India’s government, and especially its state governments, have always run large deficits, partly because regular elections are an invitation to profligacy. Corruption has been rampant for decades, though today’s scandals—such as the furor over the nation’s allocation of 2G telecom licenses—are shocking for their brazenness and the sheer sums of money involved. They are in many ways the fruit of India’s rapid prosperity and the brand of robber-baron capitalism it has bred.

Gurcharan Das, an author and former businessman, has written that while China succeeded because of the state, India thrived despite its government. For a while that seemed like a workable formula: Companies bought generators to get around frequent blackouts, hired their own security, and even maintained roads to compensate for the shortcomings of public facilities.

The country’s recent travails, however, have shattered the illusion that the private sector can thrive without a functioning state. Policy and regulatory confusion, and rising social and environmental problems, are all reminders that sustainable growth isn’t possible without an ecology of sound institutions and responsive government. In many ways it is now apparent that the advances of the last couple of decades were built on shallow foundations.

Yet there’s a danger in overstating today’s weaknesses. Given the global financial crisis it was probably unrealistic to expect India’s economy to remain unscathed. At least part of the decline in foreign direct investment is due to a general tightening of credit and a flight to safety around the world. The Indian stock market’s downturn reflects a broader investor wariness of emerging markets.

Investors are also reacting (and arguably overreacting) based on incomplete information. Jessica Seddon, an economist who is writing a book about data and Indian policymaking, argues that a full picture of India’s economic health remains obscured by unreliable and patchy data. For example, an astounding 93 percent of India’s workforce is employed outside the formal economy, which means that unemployment estimates are inevitably inaccurate. Some of the most important statistics on consumption and demographics come out infrequently, often years after the fact. Similarly, poverty measurements are politically charged, contentious affairs; there exist a multitude of competing methodologies and wildly varying figures for the number of poor.

Seddon emphasizes that the bulk of the evidence does suggest India is slowing, but the severity of that slowdown isn’t clear. Analysts of the Indian economy, she adds, are often “grasping at straws.” Pessimists make their case for Indian decline without full information; optimists use the poor quality of information as an excuse to argue that the country is in fact doing far better than suggested by leading indicators. Reality, as is so often the case in India, probably lies somewhere in between.
 
 
Over the last few years, I’ve had occasion to spend considerable time in the Indian countryside, in villages and farms in the southern state of Tamil Nadu. These places are important to understanding India. For all the hype about the cities and their technology industries, some 70 percent of the population still lives in the countryside.

What I’ve seen is considerably more nuanced than is suggested by either the optimistic or pessimistic narratives of modern India. The villages around here are layered with stories of triumph and hardship, success and failure. Farming is dying, a reminder of the nation’s declining agricultural productivity, which threatens food security and rural livelihoods. The environmental damage wrought by India’s rapid growth is apparent in polluted bodies of water and steaming mounds of uncollected waste.

But for all these problems, there are also signs of India’s promise. People who have quit farming become entrepreneurs; they open cell-phone stores and restaurants and other small enterprises that drive an emerging new rural economy. Young men (and increasingly women) go to college; their horizons are far wider than their parents could have ever imagined.

Outside the village of Molasur, an agricultural hamlet quickly growing into a small town, I recently met a man named V. Puroshothaman. He was 40 years old, a former farmer who had started a food-catering business. He’d done well for himself, having built a new house and bought a van. His daughter was studying to be a doctor; he said he was happy she wouldn’t have to work in the fields.

Even as Puroshothaman told me all this—as he talked about how difficult it was to be a farmer and how much more comfortable his family was today—he expressed ambivalence, even sorrow, over his new life. Standing on the land he had once farmed (as had his father and grandfather), he talked about how much he missed his old profession. He expressed concern over the death of agriculture in the region—how his village’s traditional economy and society were dissolving, how young men who had once been held in place by the old social order were increasingly turning to crime.

Puroshothaman acknowledged all that his new profession had given him. But he told me he thought almost every day of abandoning it. Eventually, he hoped to save enough money to buy his land back and return to farming.

This ambivalence—this messy, complex, and even self-contradictory reality—is what defines the modern Indian condition. It is not easily captured by even the most sophisticated narratives or concepts. It lacks the neatness of a model. There is only the country’s irreducible, and at times maddening, multiplicity. That makes interpretation hard. India is never as grim as it may appear, nor as glittering.

Kapur is the author of India Becoming: A Portrait of Life in Modern India (Riverhead Books, 2012).

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