Reimagining India: Unlocking the Potential of Asia’s Next Superpower (12 page)

The Bharatiya Janata Party and the leftist parties remain comparatively meritocratic, but a stunning nine out of ten Congress party MPs under the age of forty are hereditary, effectively having inherited a parliamentary seat, usually from a parent. Wealth and heredity correlate closely. Since few lawmakers declare the full extent of their wealth, it is hard to build a complete picture. But the election commission is increasingly organized and assertive, and the affidavits of assets that candidates are required to file along with their nomination papers make interesting reading. Taking the officially declared wealth of MPs as a starting point, fifteen out of the twenty richest MPs in the current Lok Sabha are hereditary, and ten of these belong to the Congress party.

Meaningful democracy and free elections depend not only on people being allowed to turn out to vote but also on a degree of merit-based accountability within the parties themselves. In most political parties, internal democracy barely exists.

The demands of creating an organization that can win elections in each large constituency are substantial. Except in rare circumstances, such as when a disadvantaged local community comes together in an upsurge of popular enthusiasm, it depends primarily on cash. Politicians need money in order to be reelected, and businesspeople need proximity to power if they are to get things done in a country where the administrative and legal systems are often dysfunctional.

As Raghuram Rajan, formerly the Indian government’s chief economic adviser and now the governor of the Reserve Bank of India, pointed out in a speech at the Bombay Chamber of Commerce in 2008, few Indian billionaires made their wealth from innovative businesses such as IT. “Three factors—land, natural resources and government contracts—are the predominant sources of the wealth of our billionaires. And all of these factors come from the government.” The rich need the
politicians, and the politicians need the rich, and in some cases the rich and the politicians are the same people. It is a symbiotic relationship from which both sides benefit—only the nation loses.

To push forward and really make things change, India needs to mandate internal democracy in political parties and prevent them from operating as family fiefdoms; party finances should become more transparent, and some form of state funding has to be considered; candidates who have been convicted of a serious crime, or have charges pending against them and are playing the court system, should be blocked from running for office.

India’s problem is not the individual politicians or even democracy itself—it is a system of governance and administration that has reached a state of chronic dysfunction. The system is paralyzed, and no new leader will be able to reform it without well-intentioned cross-party cooperation in a larger national interest, similar to the grand and historic deal that was put together in 1947.

Yasheng Huang

Yasheng Huang is professor of international management at the MIT Sloan School of Management.

Over the years, in my visits to India and my conversations with Indian scholars and journalists, I have heard a common refrain about Indian growth. Ask why India’s economy performed badly in the 1960s and 1970s, and the answer—usually issued with a deep sigh—is “democracy.” Ask about India’s failure to build sufficient infrastructure or attract foreign direct investment, and the answer is the same. Ask about India’s poor educational and health achievements—democracy again.

But if I ask about the rise of India’s IT and software industry, suddenly the discussion becomes more lively and specific. Typically, the explanation for India’s economic successes is that reforms introduced in 1991 opened India to international trade and competition, allowed partial privatization of the financial system and thus increased the amount of credit available to the private sector, and did away with a host of antigrowth regulations across many different sectors.

Notice a subtle shift in attributions of India’s failures and its successes in this narrative. Its failures are blamed on politics—democracy. Its successes are credited to changes in the economic system. The logic of this narrative shapes how many members of India’s chattering class—and many non-Indian thinkers as well—view China and India. The received wisdom holds that China has an economic advantage over India because it can implement reforms without bearing the burden of India’s messy and lumbering democracy. No wonder, many Indians reason, China’s
economy has boomed and outperforms India’s in the delivery of key social services such as health care and education.

This view is widely accepted—and utterly false. The Indian economy’s historic underperformance and its recent successes have both political and economic roots. The Indian economist Raj Krishna famously described the long stagnation that afflicted India before the 1991 reforms as the “Hindu rate of growth.” But as Arun Shourie, a former Indian politician, observed, India stagnated because of the socialist policies adopted by the Congress party during the Nehru-Gandhi era, not because of anything intrinsic to Hindu religion or culture. India’s economy posted anemic growth rates in the three decades after independence because policy makers in those years embraced the same import substitution and commanding heights, statist economic policies that depressed growth in other developing economies, most notably in the military regimes of Latin America.

In India, unlike the Latin regimes, the military never seized political control. But it is worth noting that the leisurely Hindu rate coincided with India’s slide in an authoritarian direction under Indira Gandhi, who led India from 1966 to 1984. In those years, the Congress party had a lock on political power and governed like a feudal fiefdom. Consider this trenchant indictment of the Congress party rule in that era: “Millions of ordinary Congress workers are handicapped, for on their backs ride the brokers of power and influence, who dispense patronage to convert a mass movement into a feudal oligarchy. . . . Corruption is not only tolerated but even regarded as a hallmark of leadership.”

The critic was none other than Rajiv Gandhi, the biological and political heir of Indira Gandhi herself. During the Indira Gandhi years, the famous Clintonian rule, “It’s the economy, stupid,” did not apply. Patronage and cronyism insulated Indian politicians from the normal electoral consequences of poor economic performance. The electoral successes of the Congress party in 1967, 1971, and then in 1980 were all preceded by
a decline of per capita GDP. In 1974, the year before the scheduled election that Gandhi suspended, per capita GDP dropped by 3.11 percent.

Indira Gandhi’s rule was anything but democratic. She stifled nominating and electoral procedures within her own party, nullified election results at the state level many times by invoking her “emergency” powers, and in 1975 attempted to dispense with democracy altogether by declaring a nationwide state of emergency. The Hindu rate of growth could be as easily blamed on her authoritarian rule as on India’s unruly democracy.

India’s burst of rapid growth after 1991 occurred during a period when the political system became more open and more democratic. The government privatized TV broadcasting, and the Constitution was amended to allow more village self-rule. Indian citizens now enjoy greater access to information controlled by the state. A common critique of democracy is that it galvanizes opposition to painful reforms. But in India, nearly all important legislative reforms have been carried out by coalitions of multiple parties rather than by a single majority ruling party. This is true of the Congress party in the early 1990s, the Bharatiya Janata Party between 1998 and 2004, and the Congress party today. Indeed, the Congress party, in its majoritarian moment under Indira Gandhi, succeeded only in straitjacketing the economy and depressing growth, not in liberalizing the economy and encouraging growth.

Even so, critics of Indian democracy abound. In a recent
New York Times
online essay, for example, Steven Rattner, a prominent American private equity investor, declared that “India is losing the race” against China. China, he noted, is twice as rich as India; it has sixteen subway systems compared with India’s five; GDP growth was 7.7 percent in 2012 compared with India’s 5.3 percent; it invests 48 percent of its GDP compared with India’s 36 percent.

Rattner stressed that he was “hardly advocating totalitarian government.” But he sounded the familiar refrain about the perils of democracy:
“We need to recognize that success for developing countries is about more than free elections.”

But do developing countries that allow free elections do so always and everywhere at the expense of prosperity? Did China really grow faster than India because of its one-party system? Compare two Asian countries—let’s call them Country A and Country B—using GDP data from the World Bank. In 1990, Country A had a per capita GDP of $1,209 (in 2005 dollars adjusted for purchasing power parity) while Country B had per capita GDP of $1,620. By 2011, their positions had reversed: Country A had $3,203 while Country B had $2,423. Which country is India? The answer is Country A, which appears to be the superior performer in this comparison because Country B is Pakistan. A comparison of authoritarian China and democratic India suggests a democratic disadvantage. But a comparison between democratic India and episodically authoritarian Pakistan suggests the exact opposite.

Proponents of the idea that authoritarian regimes enjoy economic advantages over democratic competitors often cite as evidence the success of the East Asian economies, particularly South Korea and Taiwan. But their conclusions are predicated on a deeply flawed reading of the data. The fable that wise government planners, unencumbered by democratic bickering, engineered an “East Asian miracle” can be told only by cherry-picking cases. The reality is that for each East Asian authoritarian success story, there is an East Asian authoritarian failure. Taiwan grew rich but authoritarian Maoist China didn’t. South Korea developed rapidly but North Korea stagnated. Strong one-man rule in Singapore succeeded, but so did laissez-faire Hong Kong. In its totality, the East Asian experience precisely mirrors what social scientists have long understood about the relationship between political systems and economic outcomes: It is ambiguous and indeterminate. Authoritarian regimes are no more successful economically than democratic regimes.

But, one may argue, even if the authoritarian edge is not a general proposition, surely it must be true in the cases of China and India. The conclusion seems so obvious: China is authoritarian and it has grown
faster; India is democratic and it has grown more slowly. But for reasons that have much to do with the vagaries of Chinese economic data, the comparison between China and India is far more complicated than it appears.

Consider Rattner’s claim that China’s per capita GDP is now more than twice that of India. That’s true if one accepts the World Bank data, which show that China overtook India in per capita GDP in the early 1990s. The trouble, though, is that we do not know the real size of China’s GDP before the country embarked on its reform program in 1978. To name just one of the technical discrepancies: Under central planning, the Chinese national income was calculated on the basis of “net material product”; national income accounting omitted the entire service sector. In 1986, the Harvard economist Dwight Perkins estimated China’s GDP per capita in 1985 to be around $500 (in terms of exchange rate conversion). In the same year, India’s GDP per capita was $301. Another study shows that China’s nutritional levels and consumption of durable goods as of the early 1990s were broadly similar to Taiwan’s of the early 1970s. The economists Ross Garnaut and Guonan Ma concluded that GDP per capita for China in 1990 ought to be valued at around $1,000. India’s GDP per capita in that same year was only $370.

It is possible, in other words, that China has always been richer than India for reasons that have nothing to do with politics or, for that matter, economics. Perhaps the crucial difference is geography and thus climate: China is temperate whereas India is tropical. Or maybe it is that China’s population is far more ethnically homogeneous than India’s—a factor many studies have found to be an economic plus. The point is that there are multiple alternative explanations for why China is richer than India. We should not seize upon the authoritarian edge theory in the absence of empirical evidence strong enough to support serious policy implications.

Democracy does no harm to growth, and this is reason enough to favor democracy over its alternatives. Those clamoring for the Chinese political system might do well to reflect on the gruesome statistics marshaled by Steven Pinker in his recent book,
The Better Angels of Our Nature
: In the twentieth century, totalitarian regimes killed 138 million
of their own people and authoritarian regimes were responsible for the deaths of an additional 28 million. Even today, China’s vaunted authoritarian system is fouling the air and water in ways that jeopardize the health of hundreds of millions of its citizens and doing irreparable damage to China’s economy.

Democracies have their failings—some severe enough to have led to unnatural deaths of their citizens. America’s inability to control guns and the shocking revelations about the indifference of Indian police and court toward rape victims are cases in point. But all else being equal, it is far more likely that China will move closer to the political system represented by India than the other way around. In the early 1960s, about 20 percent of the world was democratic; today the figure is around 65 percent. The world is trending the Indian way, not the Chinese. Indians should continue to seek solutions to their problems within a democratic framework and ignore both fellow citizens and well-meaning outsiders seduced by overly simplistic notions about the ability of authoritarian governments to conjure rapid economic growth.

Azim Premji

Azim Premji is chairman of Wipro Ltd.

For thousands of years, stretching back to the time of the great cities of the Indus Valley, India was never imagined as a single entity—nor even as one people with a shared destiny. There were brief periods in which the vision came close: the imperial ambitions of great leaders such as Ashoka (in the third century BCE) and Akbar (sixteenth century CE), for example, or in the ideas of some of our syncretic socioreligious thinkers. But it took the great intellectual ferment of the mid-twentieth century, energized by the struggle for independence from colonial rule and shaped by new notions of modernity, to finally crystallize our loose collective history and shared culture into the idea of India as one nation.