India stumbles

I’ve learnt a little about India since 2006; enough to understand the size of the opportunity, and the problem, its complexity, the talent of its people and how little I really know about them.

My first proper look at India was through the prism of UK policy. Organising David Cameron’s visit here in 2006 gave me an unusual perspective. Here (and here) are a couple of articles I have written about David’s chances of achieving a “strategic relationship” with the world’s largest democracy – my second piece, written for the British Chambers of Commerce, is called ‘Join the queue”.

Since 2006 I have returned as an entrepreneur looking to ride the Asian Tiger, first in November 2008 (shortly before the 26/11 terrorist attacks on Mumbai) and subsequently in 2009 and again – third time lucky – this month. Now I have a (minute) stake in the country’s future perhaps I have a slightly more rounded view.

What has impressed me this time has been the mood of anger about the India’s political stasis. Business people shake their heads at the culture of corruption; in Delhi and the state capitals most politicians retire rich. One half of the Congress-led Cabinet is reported to have undergone stomach stapling surgery to tackle their obesity, meanwhile the UN estimates that malnutrition kills children under 5 at a rate of 4 per minute. India has almost twice as many underweight children as sub-Saharan Africa. These statistics bewilder a well-educated and industrious middle class which aspires to US living standards; and which also wants to see India take its place as a world power.

One of the biggest obstacles to India fulfilling her potential is its woefully inadequate transport, power and urban infrastructure. The consensus seems to be that the government lacks a sense of urgency in tackling what some estimate is a $1 trillion problem. One banker blamed India’s sprawling civil service: rather than providing an unstoppable forward momentum, and helping ministers prioritise, the machine tries too hard to play the government’s tune, amplifying its strengths and its weaknesses. The tune on infrastructure seems to be procrastination; senior officials exploit their fleeting responsibility for infrastructure projects by filling their boots.

While India’s GDP growth was pushing double digits, (it grew 10.4% in 2010) there was a sense that no problem was too big, that progress was inevitable. But the political crisis in the Eurozone, and the US slowdown, is beginning to contaminate India (although she is better insulated than many growth markets). India’s growth rate is expected to drop to around 7.5% in 2011 and fall further in 2012. Most families are struggling with rising food prices – The Economist estimates that over 65% of Indians living in rural areas live on less than $1 per day. “We think our cities are badly run,” a Delhi-based journalist told me, “you should see our rural areas”. Poor eastern states like Chhattisgarh, Orissa, and West Bengal – dubbed India’s ‘outlands’ (the Booker winning author Aravind Adiga calls them ‘the darkness’- are proving fertile recruiting grounds for maoist Naxalite rebels fighting an insurgency campaign which prime minister Manmohan Singh (who turned 79 earlier this week) has called the “single biggest internal security challenge ever faced by our country.” But, explained the journalist “don’t blame the maoists, blame the government”.

In August another hunger strike by Anna Hazare, a social activist and leader of India Against Corruption attracted tens of thousands of supporters to the Delhi Maiden (park) where Hazare had set up camp; earlier the Mumbai Taxi Men’s Union had pulled its 30,000 members off the streets in support. An “I am Anna Hazare” campaign spread across India’s cities and stores sold out of Hazare’s trademark topi, or cap. The government caved in, agreeing to to strengthen its anti-corruption programme. But Hazare’s campaign has left Manmohan Singh looking tired and out-of-touch, and the prime minister is bogged down by a string of embarrassing corruption allegations concerning Congress and the Cabinet. Rahul Gandhi, only son of Sonia Gandhi, the Congress president (known to the ruling party’s supporters as “High Command”) is expected to replace Singh as Congress leader in time to fight the 2014 general elections, but commentators wonder about he has the ambition and aptitude this daunting role requires. The opposition BJP is looking increasingly perky, but its electoral chances are hampered by perceptions that it is anti-poor and anti-muslim.

Does all this mean India is on the brink of social chaos? I don’t think so – at least no more than usual for a pluralistic, multi-ethnic and multi-lingual continent of 1.2bn people currently experiencing rapid but unevenly distributed rates of economic growth, industrialisation and urbanisation. There are some good reasons why India is unlikely to experience social upheaval on the scale of rebellions in Egypt or Tunisia:

  • Despite corruption, and the dynastic impulse among politicians and voters, India remains a working parliamentary democracy. Media coverage is relatively free and non-deferential; India’s news channels bring nightly scenes of shouting politicians, and (less frequently) arrests by anti-corruption investigators. The safety valve is clogged and noisy but – for the time being – open.
  • The status quo continues to offer Indians a ladder to prosperity. The ladder may be creaking, but India’s 500 million workers still see opportunity for themselves and their children. As long as India maintains a rate of growth high enough to reward hard work with a decent rise in income levels, the country’s wealth creators should keep working – and climbing.
  • If growth slows, India is too big and too divided by geography, religion and ethnicity for a single leader, or cause, to carry a national movement of those who feel left behind. Violent insurrection might – in extremis – be conceivable at a state level; for example, if Naxalites got close enough to a major town or city. Indeed, increased levels of localised violence look likely given the trend of Naxalite recruitment and activity. But a sudden upheaval on the scale of the arab spring does not look possible.

In the end it all comes down to the economy. “I still remain very optimistic” an expatriate businessman told me. Economists expect India’s GDP to double by 2020. With the outlook for the US, UK and Europe looking flat, India’s growth rates of 7% are attractive to global investors. The high value of gold and land has left Indians who own either (and many millions own both) feeling much better off. Business in rural and small town India is vibrant as landed farmers invest in new machinery and buy more consumer goods. As long as they keep buying, India’s growth rates should ride out the slow-down in the global economy, and India should continue to suck in more than its fair share of global capital. This virtuous circle should buy the politicians time (and funds) to transform India’s roads, railways, ports and power stations; and get their own house in order – making India’s society more capable, stable and confident in the process. Thus runs the optimistic outlook, and it is do-able – if not probable. But it isn’t guaranteed.

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