Like honeybees collecting nectar, Outlook, July 20, 2009

Ever since 1991 we have come to expect a vision of the economy’s future in the Budget speech of the Finance Minister. This did not happen on July 6, 2009. The day before, the Economic Survey had raised the hopes of real reform. Those hopes were dashed. Pranab Mukherjee spoke like an accountant, not a statesman, and the stock market fell by almost a thousand points. The new government lost an opportunity to spell out its program and win over domestic and foreign investors.

Ultimately, the nation needs private investment to pull us out of this economic downturn. Because of the failure to articulate the long term, investors worry that the big spending stimulus of this government is here to stay and it will crowd out private investment. A large deficit is understandable in these recessionary times, but we needed a commitment to return to fiscal responsibility once normal times return. Deficit spending on this scale risks a re-rating of the country, which would mean a higher cost of money, higher inflation, and bad consequences for the Indian rupee.

Nevertheless, there are many positives in this Budget. In our bad old socialist days, Finance Ministers would have raised tax rates to cover fiscal deficits. This time the FM actually decreased tax rates for individuals (from 34% to 31%) while holding them for companies. This was courageous and it is strongest indicator that Pranab Mukherjee has changed and believes in growth. Many countries suffering from the global recession have increased tax rates. This FM also showed guts in scrapping the irritating and ugly Fringe Benefit Tax. The major negative was the raising of the Minimum Alternative Tax for companies from 10% to 15%, and this will hurt our fastest growing companies and those in infrastructure.

The best thing the in the Budget is a re-commitment to a dual Goods and Services Tax (GST) from April 2010. This is a wonderful idea which has been championed for years by Vijay Kelkar. India is not a common market where goods and services move smoothly. Anyone who sells a product lives through a nightmare of excise, state and central sales taxes; entry, turnover, and service taxes; and the terrible octroi which keeps trucks waiting for hours at check points. GST will integrate all these indirect taxes into one flat tax, which is IT intensive, offering frictionless interface between taxpayer and collector. Like the VAT, it taxes only the added value at each stage, lowering the overall tax burden. Those who persist in selling without a bill will lose credit on taxes already paid, it will force them into the tax net. It will improve compliance and make us a more honest nation. A lot of work needs to be done to make GST happen but the Finance Minister’s re-commitment to GST will now galvanize the centre and states to work hard and move to the most important tax reform in India’s history.

Another positive feature of Pranab Mukherjee ‘s speech was his commitment to changing the attitude of tax collectors. P. Chidambaram, in his well-intentioned zeal for taxes, had let loose the tax departments on the taxpayers and this had created fear, bad blood, and the loss of some of the goodwill created during Jaswant Singh’s time. Mukherjee wants tax collectors to be “honeybees collecting nectar from the flowers without disturbing them, but spreading their pollen so that all flowers can thrive and bear fruit.” This is the right attitude. Despite many honest and hard working officers in income tax, customs and excise, these departments continue to give India a bad name. In successive surveys, foreign investors cite them as the reason why India is not a good place to do business.

The Congress Party was re-elected in May on the promise of economic populism. On July 6 the government delivered on that promise. This is bad news for India because populism is a temporary palliative and does not lead to long term prosperity of the poor; it is also something that our country cannot afford. The nation waited to hear about the reforms that would create precisely those enabling conditions for the poor to pull themselves up. India’s tax payers are not against a safety net for the poorest, but they want the benefits to reach the poor. When the FM announced handouts in the thousands of crores, it was his duty to reassure us that the money would not be lost once again in corruption. We waited in vain to hear what government was doing to improve delivery. Without the overhang of the Left, there is no excuse for the UPA taking the country backward. If it persists in this it will lose the goodwill of so many who voted for it.
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Gurcharan Das is the author of The Difficulty of Being Good: On the Subtle Art of Dharma (Penguin 2009), which interrogates the Mahabharata in order to find the answer to ‘why be good?’

To thine own self be true

When Polonius said in Hamlet, ‘to thine own self be true’, he was not thinking of Part I of the UPA government’s forthcoming Budget. Polonius was saying that integrity and success lie in being true to oneself. This Budget is expected to announce a massive give-away of rice and wheat at Rs 3/- per kilo, and the scheme is likely to fail because it fails Polonius’ test. Eighteen years of slow, incremental economic reforms have fashioned a certain kind of nation which was captured brilliantly in the film, ‘Slumdog Millionaire’. If the movie caught the character of the nation’s poor, the Indian Premier League (IPL) of cricket mirrors it for the middle class. The character quite simply is of a vibrant and energetic private sector that is hemmed in by an arid eco-system of weak governance. As if to underline this, our bureaucracy has recently been rated the worst in Asia in a survey of twelve countries.

While we deeply admire the UPA’s commitment to the poor, we are repelled by its inability to understand our state’s limitations. As it is, there is huge corruption in the public food distribution system and it would be far better to make cash transfers to the poor via smart cards. It will not harm the poor farmer either, as selling grains at Rs 3, which will inevitably end up in the black market. Smart cards are being successfully used in the national health insurance scheme (RSBY).

Millions of Indians are stuck between the factory and the farm but they do not sit around and complain. Each morning they pull themselves up and go out and create a livelihood in the informal sector. Our regulations, alas, do not make it easy—hence India is rated 128th in the ease of doing business. In a massive new study, Moving out of Poverty, people claim that they have risen out of poverty through their own initiative, and not through hand-outs. The poor prefer an enabling environment that lets them work with dignity. Our advantage over China is that we respect property titles and Karnataka and Andhra are showing that when secure titles are on-line, the poor capitalize on them to start businesses in the informal economy.

Unlike the statists behind the Rs 3/- scheme, many UPA ministers are refreshing in seeking to create enabling conditions for the poor. The new minister of HRD, Kapil Sibal, understands that teacher absenteeism is forcing even the poor to desert state schools and he is focused on better delivery through public-private partnerships. The energetic Kamal Nath has begun to cut red tape and remove bottlenecks in pursuit of an ambitious target to build roads, putting greater onus on the private sector. M M Kharge plans to spend Rs 30,000 crores to develop skills, and knows that the only way to impart vocational education is with the involvement of companies. Sivaprakash Jaiswal has announced the end of state monopoly in the corrupt coal mining sector, and it raises the hope of finally bringing efficiency to a sector that accounts for 55% of India’s energy basket. Veerappan Moily has promised ‘sweeping, holistic judicial reform’ that will tackle the backlog of 30 million pending court cases among other reforms. All these five ministers are following Polonius’s advice.

In the past year both China and India held a sports event. The magnificent Beijing Olympics were a tribute to the efficiency of the Chinese state. The Indian Premier League (IPL) is a testimonial to our private sector. When the timing of the IPL clashed with the elections this year the IPL did not give up. It played off the English and South African boards to get the best deal and the result was an amazing sight--Delhi playing Hyderabad in Cape Town and Mumbai playing Chennai in Johannesburg. With bold ambition, quick thinking, meticulous planning and brilliant execution—all the skills that are making Indian companies successful on the world stage—the IPL filled stadiums, shuttled ten of thousands of Indians to South Africa, and enticed millions to their TVs back home. It took a hundred years for Major League Baseball in America to hold its first game outside the US and fifty for the American Football League to play outside. The Indian Premier League has gone global in its second year.

The two sports events are metaphors for two models of development. The Chinese state can deliver rice and wheat at Rs 3 to the poor. But India’s cannot. The UPA government would do well to remember Polonius advice and be true to our nation’s character.

Why the future belongs to India

In preparing for a much publicised debate in London on the motion ‘The future belongs to India, not China’, I was reminded of a conversation with my mother. She had asked, what is the difference between China growing at a rate of 10% and India at 8%? I replied that the difference was, indeed, very significant. If we were to grow at 10% we could save twenty years. This is almost a generation. We could lift a whole generation into the middle class twenty years sooner. She thought for a while and then said gently, 'we have waited 3000 years for this moment. Why don't we wait another twenty and do it the Indian way?'

She had understood that the cost of democracy is the price the poor pay in the delay of their entry into the middle class. She did not elaborate the 'Indian way' but it must include taking a holiday on half a dozen New Years Days! It is easy to get mesmerized by China's amazing progress and feel frustrated by India's chaotic democracy, but I think she had expressed the sentiments of most Indians who will not trade off democracy for two per cent higher growth.
In referring to the 'Indian way', my mother meant that a nation must be true to itself. Democracy comes easily to us because India has historically 'accumulated' its diverse groups who retain their distinctiveness while identifying themselves as Indian. China has 'assimilated' its people into a common, homogeneous Confucian society. China is a melting pot in which differences disappear while India is a salad bowl in which the constituents retain their identity. Hence, China has always been governed by a hierarchical, centralized state-a tradition that has carried into the present era of reform communism. China resembles a business corporation today. Each mayor and party secretary has objectives relating to investment, output and growth, which are aligned to national goals. Those who exceed their goals rise quickly. The main problem in running a country as a business is that many people get left out.

India, on the other hand, can only manage itself by accommodating vocal and varied interest groups in its salad bowl. This leads to a million negotiations daily and we call this system 'democracy'. It slows us down--we take five years to build a highway versus one in China. Those who are disgruntled go to court. But our politicians are forced to worry about abuses of human rights, whereas my search on Google on 'human rights abuses in China' yielded 47.8 million entries in 13 seconds! Democracies have a safety valve-it allows the disgruntled to let off steam before slowly co-opting them.

Both India and China have accepted the capitalist road to prosperity. But capitalism is more comfortable in a democracy, which fosters entrepreneurs naturally. A state enterprise can never be as innovative or nimble and this is why the Chinese envy some of our private companies. Democracy respects property rights. As both nations urbanize, peasants in India are able to sell or borrow against their land, but the Chinese peasants are at the mercy of local party bosses. Because India has the rule of law, entrepreneurs can enforce contracts. If someone takes away your property in China, you have no recourse. Hence, it is the party bosses who are accumulating wealth in China. The rule of law slows us down but it also protects us (and our environment, as the NGOs have discovered).

We take freedom for granted in India but it was not always so. When General Reginald Dyer opened fire in 1919 in Jallianwala Bagh killing 379 people, Indians realised they could only have dignity when they were free from British rule. The massacre at Tiananmen Square in 1989, where 300 students were killed, was China's Jallianwala Bagh. China today may have become richer than India but the poorest Chinese yearns for the same freedom.

Because the Indian state is inefficient, millions of entrepreneurs have stepped into the vacuum. When government schools fail, people start private schools in the slums, and the result is millions of 'slumdog millionaires'. You cannot do this in China. Our free society forces us to solve our own problems, making us self-reliant. Hence, the Indian way is likely to be more enduring because the people have scripted India’s success while China’s state has crafted its success. This worries China’s leaders who ask, if India can become the world’s second fastest economy despite the state, what will happen when the Indian state begins to perform? India's path may be slower but it is surer, and the Indian way of life is also more likely to survive. This is why when I am reborn I would prefer it to be in India.

----The writer is speaking in a debate in London on 12 May 2009 in support of the motion ' The future belongs to India, not China'-----

Young India, old politicians

Not a single politician has explained to us during this election campaign why India has risen to become the world’s second fastest growing economy. It did not happen because our leaders gave cheap rice, reservations, employment guarantee schemes, loan waivers, or anything else on the mind of our political class. Hence, a suspicion has grown that our country may be rising despite its politicians and the economy grows at night when the government is asleep. The best that our leaders have done since 1991 is to gradually get out of the people’s way.

If one did manage to find a stray neta who understood the reasons behind India’s success, it would probably be a younger one. For it is young, self-assured Indians, whose minds are decolonized, and who are confidently scripting India’s success story via the private sector. This is unlike China, whose success is being orchestrated by a purposeful state. This too makes sense for three fourths of China’s politburo consists of young technocrats. In comparison, almost one fourth of India’s greying legislators have a criminal record.

If India can rise despite the state, it would seem to matter less and less who wins this election and which coalition comes to power. The ability of politicians to do real harm (as they could during the ‘licence raj’) has diminished. What is remarkable about India’s history is not what happened in 1991, but that every government after that has continued to reform, albeit in a slow, halting manner. Even slow reforms have added up to make India a high growth economy. That it has happened in a chaotic democracy in which Mayawati aspires to be PM is the real triumph.

The political reason for our success is that every government had a few young reformers, who understood that a nation prospers not by giving people fish but by teaching them to fish. In 1997, Chidambaram delivered a ‘dream budget’ when no one was looking; Arun Shourie had the determination to push through the privatization of loss making state companies against opposition within his coalition; BC Khanduri had the will and the skill to push forward an ambitious highways program; Lalu Prasad had the good sense to leave it to young Sudhir Kumar to stage the greatest turnaround in the Indian Railways; Suresh Prabhu did wonders in electric power until his envious, ageing boss cut him down. These were young men in a hurry. Compare them to the sad, elderly Arjun Singh, who fell asleep during meetings and cussedly refused to reform our education system.

The Sanskrit epic, the Mahabharata, is unique in engaging with the world of politics and it has a lesson for our rulers--learn to behave your age. The classical Indian life is lived in stages. The first is brahmacharya—the period of adolescence when one is a celibate student; in the worldly second stage, grihasthya, the householder produces, procreates, provides security for the family and enjoys the world. At the third, vanaprasthya stage, one begins to disengage from worldly pursuits to have time for rest and reflection; and in the final stage, sanyasa, one renounces the world in quest of spiritual release from human bondage. This is how to live a flourishing and balanced life. The Mahabharata reminds us that the second stage is the indispensable material basis of civilization, and this is the time for politicians to become statesmen. Our weary, old politicians have got it all wrong—they are trying to hold on to power at the wrong stage of life. The epic would approve of Rahul Gandhi’s efforts to bring the young into our political life.
Because of high growth, prosperity will now spread in India but happiness will not unless we fix governance. Every political party has promised cheap rice, more schools, more hospitals and more everything in its manifesto. But 80% of the rice will not reach the poor, 25% of the teachers will be absent from schools and 40% of the doctors will not show up at primary health centres. A few, younger MPs have understood the Indian voter’s deep despair over corruption in the delivery of public services. Hence, they have rightly concluded that our first priority must now be not economic reform but governance reform.

The Mahabharata also had a problem with the self-destructive, kshatriya institutions of its time, and it had to wage a war to cleanse them. We too, I fear, will have to wage a Kurukshetra-like battle against our corrupt government institutions in order to bring accountability into public life. Like Yudhishthira in the epic, we shall have to struggle in order to recover dharma and a meaningful ideal of civic virtue. Fortunately, a few younger netas understand this and it is they who will write our future and not the tired old men who are trying desperately to hold on to power while pretending to rule us.
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The writer’s forthcoming book, The Difficulty of Being Good: On the Subtle Art of Dharma, interrogates the Mahabharata in order to answer the question ‘why be good?’

Dharma fails on Wall Street

‘Oh, so you are one of them!’ is how someone greeted my nephew, who is embarrassed to tell people that he is an investment banker. ‘I’d rather say that I run a brothel,’ he says. ‘At least, that’s a business people understand.’ Bankers, having brought the world economy to its knees, have become pariahs overnight and a target of people’s rage. International Labour Organization warns that global unemployment could hit a staggering 50 million. A typical knee jerk reaction is call it ‘greed’ but that is not helpful. We have always known that if envy is a sin of socialism, greed is a failing of capitalism. Much has been written of this crisis but not enough about its moral quality. Do free markets inherently corrode character?

There were many dharma failures in this drama. When U.S. house prices were rising and interest rates were low, even the poor got a chance to get a mortgage and a home. Who could oppose that! Banks combined these mortgages into a collateral debt obligation (CDO), got it rated, and sold it to institutions, who also gained through better returns. When the housing market turned down the CDOs became toxic. Who do you blame? In a sense all are guilty. There is a fine line between self-interest and selfishness and the balance of dharma tipped the wrong way. The undeserving recipient of the loan lied about his ability to repay; the banker, moved by short term reward, promoted the ‘sub-prime’ mortgage; the rating agency was dishonest in colluding with the bank; the institution who bought the risky CDO failed in its duty to protect its shareholders.

The calamity might have been contained if Lehman Brothers had been bailed out on September 14, 2008. The old rivalry between Dick Fuld, the CEO of Lehman Brothers, and Hank Paulson, the former CEO of Goldman Sachs may have come in the way. The blue bloods at Goldman Sachs had long harboured a deep prejudice against the upstarts at Lehman. Fuld was arrogant and always managed to steal the limelight. But Paulson, as U.S. Treasury Secretary, possibly unconsciously, allowed personal prejudice to distort his thinking when he refused to save Lehman. When Lehman collapsed, so did confidence and bank liquidity, and this was the tipping point of the global collapse.

It is extraordinary that there is no remorse. Investment bankers who tipped the global economy into a recession, still expected bonuses, as though they had a God given right to earn more than ordinary human beings, much like the aristocracy just before the French Revolution. Particularly embarrassing was the disclosure about John Thain, chairman of Merrill Lynch, who spent $1.2 million to do up his office, which included a $1400 waste paper basket and $35,000 commode in the bathroom. He paid $4 billion in bonuses to his executives when Merrill Lynch had declared a loss of $15 billion in Q4. When he said that bonuses were needed ‘to retain the best people’, someone quipped, ‘What best people? They just lost you $15 billion!’

It is a lesson for the millions in India who have just risen into the middle class. Successes of capitalism produce over time enervating influences when a generation committed to saving is replaced by one devoted to spending. Ferocious competition is a feature of the free market and it can be corrosive. But competition is also an economic stimulant that promotes human welfare. The choice is not between the free market and central planning but in getting the right mix of regulation. No one wants state ownership of production where the absence of competition corrodes the character even more. The answer is not to seek moral perfection which inevitably leads to theocracy and dictatorship. Since it is in man’s nature to want more, let’s learn to live with human imperfection, and seek regulation that not only tames crooks in the market but also rewards dharma-like behaviour.

A person who lost her job because of troubles on Wall Street, insistently asks, ‘Why me? What did I do to deserve this?’ Draupadi asked the same question in the Mahabharata. ‘When everything was going well for us, why was our kingdom stolen in a rigged game of dice?’ She wants her husband to raise an army, and win it back. But Yudhishthira says that he has given his word. ‘But what is the point of being good?’ she asks. To which he replies, ‘I act because I must’. It is the uncompromising, compelling voice of dharma. This is an answer that the investment bankers might ponder.
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On the difficulty of being good

B. Ramalingam Raju has been much on the minds of the citizens of our Republic, whose birthday we celebrate tomorrow. It is thus a good time to reflect on Satyam’s moral significance for our post-liberalization era. Although the story is still unfolding, there are intimations of sadness and tragedy about a man who has committed the greatest fraud in Indian corporate history. The swindle was worth Rs. 7136 crores, and the deceit went on for seven years. As a result, the public—both Indian and foreign investors—have lost around Rs 23,000 crores in the value of their shares, and over 40,000 employees face an uncertain future.

Raju built through skill, talent and dedication a great company. Ten years ago, I looked him in the eye and I saw sincerity, competence, and great purpose. I saw ambition, not greed. Soon after that I ran into one of his customers in the U.S. and she spoke glowingly about Satyam’s dedication to quality, reliability, and integrity. There is no tribute greater than a satisfied, passionate customer, and it explained to my foggy mind, at least in part, why India had become the world’s second fastest growing economy.

Why should a person of such palpable achievement turn to crime? Was it just greed or was it because his stake in Satyam had dwindled to 8.6 %, and the company was in danger of slipping out of the family’s control? Raju had two sons and possibly a sense of filial duty drove him to create companies in real estate and infrastructure, two sectors of our economy that are only half liberalized, where politicians insist on bribes up-front for favours delivered. Since revenues from the new companies were far away, Raju dipped into Satyam to pay the politicians. It might have worked but no one counted on a downturn and a liquidity crisis. Desperately, he tried to restore the stolen assets back to Satyam by merging it with his son’s companies but that didn’t work.

When Raju crossed the line from his cheerful and familiar world of open and competitive capitalism into the dark nether regions of crony capitalism, he was no longer in control. He had walked from the transparent world of reformed India into the shadowy underworld of unreformed India, whose rules are set by crooked politicians. Why did he do it? Greed is too easy an answer. It might have been hubris, like Duryodhana’s in the Mahabharata, who thought he was master of the universe and could get away with anything. It is easy to believe your infallibility when everyone in Hyderabad tells you so.

The better comparison, I believe, is with the father. Raju was ruined by his Dhritarashtra-like weakness for his sons. We should nurture our children, but we don’t need to leave them a company each, certainly not by crossing the line of dharma. It takes moral courage to resist the sentiment of partiality to one’s family. This is why the Mahabharata challenges the old sva-dharma of family and caste, preferring instead the newer, universal sadharana-dharma, which teaches us to with behave impartially with everyone.

Satyam is a case of fraud and criminality. So, let us also stop wringing our hands, looking for regulatory answers. It is not a governance failure. Internal and external auditors, and independent directors are guilty only of negligence. This was such an ingenious crime that that no still understands it. Remember, there are crooks in every society, and they will get around the most fool-proof systems. So, don’t try to reform the system—it will only create more red tape and kill the animal spirits of capitalism. The important thing is to quickly get to the truth, and put the guilty behind bars. Ideally, make the crooks sing and book their political protectors as well. Don’t blame liberalization either--the answer is more reform, not less, in order to break the nexus between politicians and business in the unreformed sectors of our economy.

Raju’s story causes us discomfort because it challenges our unexamined conception of success. Surely, there is a better way to live, we ask. Yudhishthira also challenged the kshatriya concept of success in the Mahabharata. When he insisted on taking a stray dog into heaven, he performed an act of dharma, showing that goodness is one of the few things of genuine worth in this world that might take away some of the familiar pain of being alive and being human in these post-liberalization times.

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The Next World Order, New York Times

CHINA and India are in a struggle for a top rung on the ladder of world power, but their approaches to the state and to power could not be more different.

Two days after last month’s terrorist attack on Mumbai, I met with a Chinese friend who was visiting India on business. He was shocked as much by the transparent and competitive minute-by-minute reporting of the attack by India’s dozens of news channels as by the ineffectual response of the government. He had seen a middle-class housewife on national television tell a reporter that the Indian commandos delayed in engaging the terrorists because they were too busy guarding political big shots. He asked how the woman could get away with such a statement.

I explained sarcasm resonates in a nation that is angry and disappointed with its politicians. My friend switched the subject to the poor condition of India’s roads, its dilapidated cities and the constant blackouts. Suddenly, he stopped and asked: “With all this, how did you become the second-fastest growing economy in the world? China’s leaders fear the day when India’s government will get its act together.”

The answer to his question may lie in a common saying among Indians that “our economy grows at night when the government is asleep.” As if to illustrate this, the Mumbai stock market rose in the period after the terrorist attacks. Two weeks later, in several state elections, incumbents were ousted over economic issues, not security.

All this baffled my Chinese friend, and undoubtedly many of his countrymen, whose own success story has been scripted by an efficient state. They are uneasy because their chief ally, Pakistan, is consistently linked to terrorism while across the border India’s economy keeps rising disdainfully. It puzzles them that the anger in India over the Mumbai attacks is directed against Indian politicians rather than Muslims or Pakistan.

The global financial crisis has definitely affected India’s growth, and it will be down to perhaps 7 percent this year from 8.7 percent in 2007. According to my friend, China is hurting even more. What really perplexes the Chinese, he said, is that scores of nations have engaged in the same sorts of economic reforms as India, so why is it that it’s the Indian economy that has become the developing world’s second best? The speed with which India is creating world-class companies is also a shock to the Chinese, whose corporate structure is based on state-owned and foreign companies.

I have no satisfactory explanation for all this, but I think it may have something to do with India’s much-reviled caste system. Vaishyas, members of the merchant caste, who have learned over generations how to accumulate capital, give the nation a competitive advantage. Classical liberals may be right in thinking that commerce is a natural trait, but it helps if there is a devoted group of risk-taking entrepreneurs around to take advantage of the opportunity. Not surprisingly, Vaishyas still dominate the Forbes list of Indian billionaires.

In a much-discussed magazine article last year, Lee Kwan Yew, the former prime minister of Singapore, raised an important question: Why does the rest of the world view China’s rise as a threat but India’s as a wonderful success story? The answer is that India is a vast, unwieldy, open democracy ruled by a coalition of 20 parties. It is evolving through a daily flow of ideas among the conservative forces of caste and religion, the liberals who dominate intellectual life, and the new forces of global capitalism.

The idea of becoming a military power in the 21st century embarrasses many Indians. This ambivalence goes beyond Mahatma Gandhi’s nonviolent struggle for India’s freedom, or even the Buddha’s message of peace. The skeptical Indian temper goes back to the 3,500-year-old “Nasadiya” verse of the Rig Veda, which meditates on the creation of the universe: “Who knows and who can say, whence it was born and whence came this creation? The gods are later than this world’s creation. Who knows then whence it first came into being?” When you have millions of gods, you cannot afford to be theologically narcissistic. It also makes you suspect power.
Both the Chinese and the Indians are convinced that their prosperity will only increase in the 21st century. In China it will be induced by the state; in India’s case, it may well happen despite the state. Indians expect to continue their relentless march toward a modern, democratic, market-based future. In this, terrorist attacks are a noisy, tragic, but ultimately futile sideshow.
However, Indians are painfully aware that they must reform their government bureaucracy, police and judiciary — institutions, paradoxically, they were so proud of a generation ago. When that happens, India may become formidable, a thought that undoubtedly worries China’s leaders.

---Gurcharan Das is the author of “India Unbound.”