Wall Street Journal, May 3, 2004
(Copyright (c) 2004, Dow Jones & Company, Inc.) NEW DELHI -- Next Monday, India's general elections -- which began on April 20 -- will finally conclude. In an exercise that was both staggered and staggering, 670 million Indians will have had the opportunity to vote at 700,000 polling booths via 1.1 million voting machines -- with all this, the greatest democratic show on earth, supervised by 5.5 million stateofficials.
But there is another impressive number this time around. The economy has grown at 8.1% in 2003 -- 10.3% in the last quarter, surpassing China for the first time -- and not surprisingly, the ruling National Democratic Alliance, led by the nationalist Bhartiya Janata Party (BJP), capitalized on this feel-good factor with a highly successful "India Shining" ad campaign. The opposition Congress Party retorted with "India Whining," and as if to prove it my mother phoned to say, "How is India shining when my house is in darkness because of a power cut this evening?"
Whether India is shining or whining, what makes this election different is a shift in rhetoric from religion and caste to the economy. Amidst the usual scramble for seats and alliances, politicians in urban constituencies have been forced to learn Economics 101 in order to debate economic reform with an increasingly sophisticated urban voter. The stridency of Hindu nationalism seems to have died, and even dark talk of Congress leader Sonia Gandhi's Italian origins lacks conviction. The turning point was last December, when four major state elections were decided on economic issues - much to everyone's surprise. Thus the slogan "Bijli, Sadak, Pani" or "Electricity, Roads, Water" has entered the political lexicon, having replaced "Mandir, Masjid, Mandal" or "Temple, Mosque, Caste." If this is an enduring trend, then we may be looking at the most dramatic change in the Indian political mindset in 50 years.
The BJP claims that its policies are responsible for the fine economic performance and the changed mood; Congress argues that the economy grew faster under its man, Narasimha Rao, who was prime minister in the '90s. Both are right (and wrong). The reality is that India, in a sense, has been shining for over two decades, its GDP having grown at an average annual 6% real rate, making it one of the fastest growing major economies in the world over a 23-year period. While its growth is slower than China's, it is almost double the Indian growth rate of the previous 30 years, and double the rate at which the West created its Industrial Revolution. More recently, India's population growth has also begun to slow; in 1998 it was down to 1.7%, compared to a historic 2.2% growth rate. And literacy has begun to climb -- it reached 65% in 2000 compared to 52% in 1990, with the biggest gains among women and in backward states. Almost 170 million Indians have risen out of destitution since 1980 as the poverty ratio has declined to 26%. Finally, India may have at last found its competitive advantage in its boomingsoftware and business process outsourcing services to the world.If its economy continues to grow at this rate for the next few decades -- and there is no reason why it should not -- then a majority in the south, west and northwest should be middle class by 2025. The poorer Eastern states should get there by 2050. Had India's GDP growth continued at the pre-1980 level, Indian incomes would only have reached American per-capita income levels by 2250; but at the current rate India will reach it by 2066. It is thus increasingly possible to believe that India will finally be able to conquer its age-old worry over want and hunger. The amazing thing is that all this growth is happening alongside the most appalling governance. In the midst of a booming private economy, Indians despair over the simplest public goods -- good behavior from the cop on the beat, honest justice from the lower judiciary, or for a government schoolteacher to actually show up in a village school in Bihar. Hence, it is the public sphere that is "whining." So, also are the unreformed sectors of the economy, such as electric power. The contrast between power and telecom is obvious to everyone. After a successful reform program, India is in the midst of a telecom revolution that is as profound as China's. Its telephones have grown from five million in 1990 to 60 million today and they are growing by two million a month. Yet power reforms have failed, and no wonder my mother whines about power cuts. (Like most Indians, however, she is not aware that legal reform has now set the stage for a similar power revolution over the next five years.)
More and more Indians hold ideology responsible for their past economic failures rather than poor management. They blame Nehru's and Indira Gandhi's socialism without realizing that even that socialism could have delivered more and did not have to degenerate into "License Raj." It is this failure of quotidian implementation that makes institutions weak. Indians admire their army, the Supreme Court, Reserve Bank and the Election Commission. (Curiously, except for the Election Commission, these are the institutions that Americans admire most in their country.) So they know it is possible for India to have good institutions, and that India will not truly shine unless there is a vigorous reform of institutions. It is easier to explain India's economic rise after 1991, when Mr. Rao's government opened the economy, dismantled controls, lowered tariffs and taxes and broke public-sector monopolies. And the economy responded with three years of 7.5% growth. But how does one explain the jump in the '80s? And here Indians don't give enough credit to Rajiv Gandhi. Although modest, his reforms seem to have had an impact. The real miracle, however, is that all the governments after Mr. Rao's continued the reforms, albeit in a slow manner. Yet in spite of an elephantine pace of reform, India is one of the fastest growing economies in the world. So the lesson is that if you consistently reform in one direction in a democracy, it adds up. This "adding up" has enhanced confidence, which is at the heart of "India shining."
Where has this self-assuredness come from? I traveled widely across India in 1995 and discovered that the nation's mindset had changed in the '90s. Many Indian minds had become decolonized. This mental liberation is a powerful force in national regeneration. A changed attitude to English illustrates the new mindset. Ever since the British left we have heard constant complaining against the English language, and then in the '90s it suddenly disappeared. Quietly, without ceremony, English became one of the Indian languages. English lost its colonial stigma, oddly enough, around the time that the Hindu nationalists came to power. Hindi-language protagonists lost steam because they lost their convictions -- their own children wanted to learn English. Based on present trends, India will become the largest English-speaking nation in the world by 2010, overtaking the U.S.
When I was growing up, it mattered how you spoke; you could speak rubbish but you had to do it with the right accent. Today, young Indians in the new middle class think of English as a skill, like Windows. This is why a confident "Hinglish" (Hindi mixed with English) is spreading, encouraged by flourishing private TV channels and supported by advertisers. A new cultural confidence has emerged. Perhaps, it is due to the reforms, which have been reducing the intrusive power of the state, making Indians more self-reliant. Pop stars like Daler Mehndi display an exuberant nonchalance, as do the young Bollywood heroes. So do the fiction writers in English, the fashion designers, the beauty queens and the cricket stars. Indians seem to have lost their hypocrisy toward making money and getting rich.
Last month, Kiran Mazumdar became the richest woman in India when her biotechnology company went public and her personal net worth crossed $500 million. To some Indians this is the true shining India, and they point to the many multinationals that have set up R&D centers in India in recent years, including GE, Microsoft, IBM, Texas Instruments, Cisco, Intel, General Motors, and Motorola. Supplementing them are Indian companies like Wipro and Infosys, both with a billion dollars in sales, who provide customers with R&D services. Some Indians attribute the explosive growth in R&D labs to their Brahminical heritage, arguing that they are conceptual people and that the knowledge age plays to their advantage. They explain that Indians have wrestled with the abstract concepts of the Upanishads for 3,000 years.
We are past the halfway mark in the election, and the exit polls seem to suggest that the ruling BJP coalition is likely to win by a narrower margin than expected earlier. If these polls turn out to be right, it will mean that the winning side will have to horse-trade to bring in coalition partners. This will weaken the government and diminish its ability tocontinue the reforms. That might slow the rate of growth.
The most popular word in the Indian election lexicon is "anti-incumbency," and this awkward word is being used to explain why the voter is not keen to return the ruling party with a bigger majority, especially at a time when the economy is shining. This, I think, goes back to poor governance on the ground. Despite strong growth, Indians are unwilling to forgive bad governance and this is the weapon they use against incumbent politicians.
They don't re-elect them.