The Myth of the New India
(The New York Times, July 6,
INDIA is a roaring capitalist success story."
So says the latest issue of Foreign Affairs; and last week many
leading business executives and politicians in India celebrated as Lakshmi
Mittal, the fifth richest man in the world, finally succeeded in his hostile
takeover of the Luxembourgian steel company Arcelor. India's leading business
newspaper, The Economic Times, summed up the general euphoria over
the event in its regular feature, "The Global Indian Takeover": "For India,
it is a harbinger of things to come — economic superstardom."
This sounds persuasive as long as you don't
know that Mr. Mittal, who lives in Britain, announced his first investment
in India only last year. He is as much an Indian success story as Sergey
Brin, the Russian-born co-founder of Google, is proof of Russia's imminent
In recent weeks, India seemed an unlikely
capitalist success story as communist parties decisively won elections
to state legislatures, and the stock market, which had enjoyed record growth
in the last two years, fell nearly 20 percent in two weeks, wiping out
some $2.4 billion in investor wealth in just four days. This week India's
prime minister, Manmohan Singh, made it clear that only a small minority
of Indians will enjoy "Western standards of living and high consumption."
There is, however, no denying many Indians
their conviction that the 21st century will be the Indian Century just
as the 20th was American. The exuberant self-confidence of a tiny Indian
elite now increasingly infects the news media and foreign policy establishment
in the United States.
Encouraged by a powerful lobby of rich Indian-Americans
who seek to expand their political influence within both their home and
adopted countries, President Bush recently agreed to assist India's nuclear
program, even at the risk of undermining his efforts to check the nuclear
ambitions of Iran. As if on cue, special reports and covers hailing the
rise of India in Time, Foreign Affairs and The Economist
have appeared in the last month.
It was not so long ago that India appeared
in the American press as a poor, backward and often violent nation, saddled
with an inefficient bureaucracy and, though officially nonaligned, friendly
to the Soviet Union. Suddenly the country seems to be not only a "roaring
capitalist success story" but also, according to Foreign Affairs,
an "emerging strategic partner of the United States." To what extent is
this wishful thinking rather than an accurate estimate of India's strengths?
Looking for new friends and partners in a
rapidly changing world, the Bush administration clearly hopes that India,
a fellow democracy, will be a reliable counterweight against China as well
as Iran. But trade and cooperation between India and China is growing;
and, though grateful for American generosity on the nuclear issue, India
is too dependent on Iran for oil (it is also exploring developing a gas
pipeline to Iran) to wholeheartedly support the United States in its efforts
to prevent the Islamic Republic from acquiring a nuclear weapon. The world,
more interdependent now than during the cold war, may no longer be divided
up into strategic blocs and alliances.
Nevertheless, there are much better reasons
to expect that India will in fact vindicate the twin American ideals of
free markets and democracy that neither Latin America nor post-communist
countries — nor, indeed, Iraq — have fulfilled.
Since the early 1990's, when the Indian economy
was liberalized, India has emerged as the world leader in information technology
and business outsourcing, with an average growth of about 6 percent a year.
Growing foreign investment and easy credit have fueled a consumer revolution
in urban areas. With their Starbucks-style coffee bars, Blackberry-wielding
young professionals, and shopping malls selling luxury brand names, large
parts of Indian cities strive to resemble Manhattan.
Indian business tycoons are increasingly trying
to control marquee names like Taittinger Champagne and the Carlyle Hotel
in New York. "India Everywhere" was the slogan of the Indian business leaders
at the World Economic Forum in Davos, Switzerland, this year.
But the increasingly common, business-centric
view of India suppresses more facts than it reveals. Recent accounts of
the alleged rise of India barely mention the fact that the country's $728
per capita gross domestic product is just slightly higher than that of
sub-Saharan Africa and that, as the 2005 United Nations Human Development
Report puts it, even if it sustains its current high growth rates, India
will not catch up with high-income countries until 2106.
Nor is India rising very fast on the report's
Human Development index, where it ranks 127, just two rungs above Myanmar
and more than 70 below Cuba and Mexico. Despite a recent reduction in poverty
levels, nearly 380 million Indians still live on less than a dollar a day.
Malnutrition affects half of all children
in India, and there is little sign that they are being helped by the country's
market reforms, which have focused on creating private wealth rather than
expanding access to health care and education. Despite the country's growing
economy, 2.5 million Indian children die annually, accounting for one out
of every five child deaths worldwide; and facilities for primary education
have collapsed in large parts of the country (the official literacy rate
of 61 percent includes many who can barely write their names). In the countryside,
where 70 percent of India's population lives, the government has reported
that about 100,000 farmers committed suicide between 1993 and 2003.
Feeding on the resentment of those left behind
by the urban-oriented economic growth, communist insurgencies (unrelated
to India's parliamentary communist parties) have erupted in some of the
most populous and poorest parts of north and central India. The Indian
government no longer effectively controls many of the districts where communists
battle landlords and police, imposing a harsh form of justice on a largely
hapless rural population.
The potential for conflict — among castes
as well as classes — also grows in urban areas, where India's cruel social
and economic disparities are as evident as its new prosperity. The main
reason for this is that India's economic growth has been largely jobless.
Only 1.3 million out of a working population of 400 million are employed
in the information technology and business processing industries that make
up the so-called new economy.
No labor-intensive manufacturing boom of the
kind that powered the economic growth of almost every developed and developing
country in the world has yet occurred in India. Unlike China, India still
imports more than it exports. This means that as 70 million more people
enter the work force in the next five years, most of them without the skills
required for the new economy, unemployment and inequality could provoke
even more social instability than they have already.
For decades now, India's underprivileged have
used elections to register their protests against joblessness, inequality
and corruption. In the 2004 general elections, they voted out a central
government that claimed that India was "shining," bewildering not only
most foreign journalists but also those in India who had predicted an easy
victory for the ruling coalition.
Among the politicians whom voters rejected
was Chandrababu Naidu, the technocratic chief minister of one of India's
poorest states, whose forward-sounding policies, like providing Internet
access to villages, prompted Time magazine to declare him "South
Asian of The Year" and a "beacon of hope."
But the anti-India insurgency in Kashmir,
which has claimed some 80,000 lives in the last decade and a half, and
the strength of violent communist militants across India, hint that regular
elections may not be enough to contain the frustration and rage of millions
of have-nots, or to shield them from the temptations of religious and ideological
Many serious problems confront India. They
are unlikely to be solved as long as the wealthy, both inside and outside
the country, choose to believe their own complacent myths.