Current Events
The India Myth:
Part I
RAJAN MENON
Over the last two decades, numerous books, articles and press commentaries have hailed India as the next global power. This flush of enthusiasm results partly from the marked acceleration in India’s economic growth rate following reforms initiated in 1991.
India’s gross domestic product (GDP) grew at 6 percent per year for most of the 1990s, 5.5 percent from 1998 to 2002, and soared to nearly 9 percent from 2003 to 2007, before settling at an average of 6.5 percent until 2012.
The upswing offered a contrast to what the Indian economist Raj Krishna dubbed “the Hindu rate of growth”: an average of 2.5 percent for the first twenty-five years following India’s independence in 1947. The brisker pace pulled millions from poverty, put Indian companies (such as Indian Oil, Tata Motors, Tata Steel, Infosys, Mahindra, Reliance Industries and Wipro) even more prominently on the global map, and spawned giddy headlines about India’s prowess in IT, even though that sector accounts for a tiny proportion of the country’s output and workforce. India also beckoned as a market for exports and a site for foreign investment.
The attention to India has endured even though its economic boom has been stymied, partly by the 2008 global financial crisis, with growth remaining below 5 percent for eight consecutive quarters from early 2012 to early 2014. In the quarter lasting from April to June 2014, growth ticked back up to 5.7 percent, but it is too soon to tell whether or not this represents the beginning of a more sustained expansion.
The persistent interest also stems from analyses that portray India’s and China’s resurgence as part of a shift that is ineluctably returning the center of global economic power to Asia, its home for centuries before the West’s economic and military ascent some five hundred years ago. Yet even those who dismiss the proponents of this perspective as “declinists” are drawn to the “India rising” thesis, in part because of the transformation in U.S.-Indian relations during the last two decades and the allure of democratic India as a counterweight to authoritarian China.
For much of the Cold War, the relationship between Washington and New Delhi ranged from “correct” to “chilly.” Nowadays, in contrast, predictions that China’s ascendency will produce an Indo-American entente, if not an alliance, are commonplace.
But is India really ready for prime time?
India has many of the prerequisites for becoming a center of global power, and, assuming China’s continued and unhindered ascent, it will play a part in transforming a world in which American power is peerless into one marked by multipolarity. India has a vast landmass and coastline and a population of more than one billion, faces East Asia, China and the Persian Gulf, and has a wealth of scientific and technological talent along with a prosperous and well-placed diaspora.
But the elemental problems produced by poverty, an inadequate educational system and pervasive corruption remain, and India’s mix of cultural diversity and democracy hampers rapid reform.
For now, therefore, the ubiquitous reports of India’s emergence as a great power are premature at best. There’s no denying India’s ambition and potential, but as for its quest to join the club of great powers, the road is long, the advance slow and the arrival date uncertain.
Prime Minister Narendra Modi of the Hindu-nationalist Bharatiya Janata Party (BJP) may seek to be a reformer, and he enjoys a reputation as a charismatic leader and skilled manager. He is also a proponent of improving ties with the United States and Israel. But he will face daunting obstacles in his bid to push India into the front rank of nations.
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Despite its many blemishes, India’s democracy has increased the country’s appeal in Europe and America and prevented quarrels over human rights from complicating the expansion of economic and security transactions with the West.
This is in stark contrast to the intermittent skirmishes over human rights that have marred the West’s relationship with China and Vladimir Putin’s Russia. In defending the 2005 U.S.-Indian nuclear agreement, the George W. Bush administration (and American experts who backed the deal) noted that India is a fellow democracy.
Barack Obama -- who hosted Modi in September 2014 -- pledges to back India’s bid for a permanent seat on the UN Security Council and invariably invokes the country’s democratic record when he does so.
Yet in East and South Asia, two regions in which India has been most active on the diplomatic and strategic front, its democratic model hasn’t yielded it much influence, or even stature. If anything, the economic achievements of China and Singapore -- and the other Asian “tigers” during their undemocratic decades -- in delivering rapid growth and modernization and improving living standards have made a bigger impression.
India, weighed down by the compromises, delays and half measures necessitated by its democratic structure, comes across as a lumbering, slow-motion behemoth that’s never quite able to sustain whatever momentum it manages to gain on occasion or to bridge the gap between proclaiming reforms and implementing them.
The Indian government, for its part, has crafted sundry soft-power slogans and strategies, among them “India Shining” and the even sappier “Incredible India.”
The latter was not simply rhetorical excess -- though it was that -- or even solely a catchphrase to capture additional tourist revenue. It was also part of a larger effort to increase transactions between India and the West and to recast India’s image.
Yet there’s scant evidence that India is seeking to use culture as a means to create a transnational bloc in Asia, or anywhere else. With all due respect to the late Samuel P. Huntington, who listed “Hindu civilization” among the cultural-religious blocs whose rivalry he believed would supplant the competition and conflict among states, there’s no sign that India plans to mobilize that form of soft power, or that it could if it tried.
Hyping Hindu discourse in a multiconfessional country, one with more than one hundred million Muslims, would amount to jeopardizing internal security to road test a quixotic theory that emanated from Harvard Yard.
Besides, Hinduism is too torn by divisions of class, caste, language and region to make such a strategy feasible; the Hindu diasporas in Asia and Africa, for their part, would have little to gain and much to lose by embracing it. Modi and the BJP will doubtless spice up their rallies with Hindu-nationalist verbiage, but they are likely to find that this tactic, far from mobilizing unity, sows disunity in what is a country of multiple faiths and provokes India’s neighbors, above all Pakistan, while yielding little of tangible value in return.
Nor will the project of “Hindutva” help the BJP extend its base beyond northern India’s “Hindu heartland” and into the country’s southern regions, where its message has much less appeal.
The difficulty with “soft power,” a concept now embedded in the lexicon thanks to another Harvard professor, Joseph Nye, is that it’s hard to determine its effectiveness, or even to figure out quite how it works. Few would deny that a country’s political system, cultural achievements and image can, in theory, add to its allure. What’s much less clear, though, is how this amorphous advantage goes beyond evoking warm feelings and yields actual influence, defined as the capacity to shape the policies of other countries.
Did Americans (or Europeans or Japanese) gain a greater understanding and appreciation of India and begin to take it seriously because of India’s soft power?
Unlikely, given how little the outside world interests the citizens of the United States, never mind that their country is engaged in every corner of the globe on a host of issues and in ways that affect the lives of millions.
Did the greater coverage of India, in part perhaps because of New Delhi’s endeavors on the soft-power front, increase the attention it received from America’s well educated, well heeled and politically powerful?
Possibly, based on the data on tourism, the increased number of courses on India-related topics at universities, and the growing popularity of Indian prose-fiction writers and attire bearing traces of Indian culture. But one can yearn to see the Ajanta Caves, read R. K. Narayan or Arundhati Roy, sport a kurta, or be able to tell one genre of Indian classical music or dance from another without giving so much as a thought to the pros and cons of developing military ties with India, championing its quest for a spot on the UN Security Council, or expanding trade and investment ties with it.
Soft power, apart from being a slippery principle, can only do so much in practice. It simply cannot compensate for the deficit India has in other, tangible forms of power, which remains the greatest impediment to India’s becoming a global power.
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The heydey of central planning and import-substitution-based economic policy, which had extraordinary influence in India, is over. The BJP’s thumping victory over the Congress Party, which itself initiated economic reforms in the 1990s, betokens an even stronger push toward privatization and foreign direct investment (FDI). While the principal aims of India’s economic strategy will naturally be growth and prosperity, the country’s leaders understand the strategic benefits that are to be gained from having the business community of important democratic countries (the United States, Britain, Japan, Germany, France, South Korea and Brazil, for example) acquire a strong stake in India’s market.
Still, to gain substantial economic influence, India’s leaders will have to implement many politically unpopular reforms that are required to restore and maintain high rates of growth, boost trade and attract greater sums of FDI.
These include cutting subsidies for basic commodities, revamping entrenched and rigid labor laws, opening protected sectors -- such as retail, agriculture and services -- to foreign competition, and stamping out tax evasion, which in India is both ubiquitous and an art form.
These aren’t the only steps needed to make the economy grow faster and more sustainably so that the increased resources required to bolster India’s bid for great-power status become available.
Take education.
While India’s progress in educating what fifty years ago was a largely illiterate society has been impressive, there’s much more that needs doing on this front to boost Indian economic power. The countries that are already front-rank economic powers achieved near-universal literacy long ago, while in China, Indonesia and Malaysia more than 90 percent of the population is literate.
In India, the figure is 74 percent.
While that’s a massive increase compared to the proportion in 1947, the quality of Indian schools is uneven because problems such as moribund curricula, substandard classrooms and widespread absenteeism among teachers abound.
The success of states like Kerala, Tamil Nadu and Himachal Pradesh contrasts starkly with the failures of the educational system in others, such as Bihar, Uttar Pradesh and Madhya Pradesh. What might be called the “effective literacy rate” is thus lower than suggested by the national average, especially in rural areas (where about 70 percent of the population still lives) and among females.
Moreover, India’s schools are not producing the skilled labor needed by local and foreign firms at anywhere near the required rate, and too many of those with degrees in science and engineering are not readily employable on account of the poor quality of their training. Indian higher education has a proud history that spans centuries and boasts some venerable institutions, but according to economists Jagdish Bhagwati and Arvind Panagariya, even its elite engineering and management schools don’t make the “top 200” list in global surveys; by contrast, the best universities of other major Asian economic powers have cracked the top 100.
Likewise, vast sums will have to be mobilized (from tax revenues or government-backed, dollar-denominated bonds) to modernize and expand India’s antediluvian infrastructure. The list of pressing needs is long. It includes building or revamping water-management and sanitation systems; bridges, railways and roads; harbors and airports; and power plants (to end chronic electricity shortages and even blackouts).
Fixing India’s infrastructure by building more rail and air networks, bridges and ports won’t be cheap: the price tag is estimated to be $1 trillion. But absent a colossal effort, the drag on India’s growth could amount to 2 percent a year.
Access to computers and the Internet must also be scaled up dramatically if India is to compete successfully in the global marketplace. Despite the publicity India’s prowess in IT receives, society-wide access to information technologies remains unimpressive.
In 2008, according to the World Bank, India had 7.9 Internet users per 100 people. That number had grown to 15.1 by 2013. But by then Guatemala had 19.7, Haiti 10.6, Kyrgyzstan 23.4 and the Dominican Republic 45.9. The figure for China was 45.8, in Germany and France and the United States it was over 80, and in Denmark it was 94.6. Even allowing for India’s mammoth size and population, this dismal comparison speaks for itself.
India faces an even more fundamental problem -- one that makes prognostications about its impending ascent to great-power status sound surreal.
Simply put, the country still lacks the human capital required for acquiring the power and influence commensurate with its leaders’ aspirations.
Consider some pertinent numbers.
India’s per capita income in 2013 was $5,350. By comparison, China’s was $11,850, Japan’s was $37,630 and -- tellingly -- South Korea’s, which was comparable to India’s in the early 1950s, was $33,440. Nearly one-third of Indians still subsist on $1.25 a day or less.
India places 135th out of 187 on the UNDP’s Human Development Index, a composite measure of access to basic necessities.
Similarly, it ranks 102nd out of 132 on the Social Progress Index, which assesses countries’ records in meeting people’s essential social and economic needs.
In UNICEF’s rankings, India (with 48 percent) places fourth in the proportion of children who are stunted and second (43 percent) in the percentage of those who are underweight (“severe” or “moderate”). The handful of Asian countries with worse records includes Afghanistan, Pakistan, Myanmar and Papua New Guinea -- not good company for a country that yearns to be global power.
As Jean Drèze and Amartya Sen demonstrate in a recent book, despite its robust economic growth during much of the last two decades, India lags far behind the other “BRICS” in such measures as citizens’ access to potable water and basic health and sanitation services, the immunization of children and nutrition. Worse, its performance is poor even relative to some of the world’s poorest countries.
In India’s own neighborhood, Bangladesh and Nepal, despite having smaller per capita incomes and slower growth rates, have done better on several key quality-of-life measures.
Among the consequences of having shopworn infrastructure, relatively low literacy rates and a substandard educational system, along with an industrial manufacturing sector that’s small relative to that of its competitors -- all problems that the Asian “tigers,” and China thereafter, overcame -- is that, as wages in China have risen, multinational corporations haven’t relocated to India to the degree one would expect given the size of the Indian market and the low cost of Indian labor. Instead, they have gone elsewhere -- not just because of India’s inadequate human capital and infrastructure, but also because of bureaucratic barriers that hinder business and investment and persist despite the reforms of the past two decades.
These problems help explain why India places 134th out of 189 -- just below Yemen -- in the World Bank’s “Ease of Doing Business Index.”
Not surprisingly, India attracts far less FDI than it needs to boost growth and productivity. From 2010 to 2012, FDI inflows to India averaged $27 billion a year, compared to $119.5 billion for gargantuan China, $55 billion for tiny Singapore and $60 billion for Brazil, a member of the BRICS coalition to which India belongs. Malaysia attracted $10.3 billion and Thailand $8.3 billion -- both far more than India in per capita terms. Yet the former has a population of thirty million (2.3 percent of India’s) and the latter sixty-seven million (5 percent of India’s).
It’s often said that India, unlike China, has the advantage of a relatively young population and will therefore not face labor shortages. What often goes unmentioned is that the largest population increases are occurring in some of India’s poorest states (Madhya Pradesh, Uttar Pradesh and Bihar), not in those (such as Kerala and Tamil Nadu) that have been the best at meeting basic economic needs and in increasing literacy.
These same deficiencies have prevented India from establishing a significant position in global trade. While it does rank fifteenth on a list of the top twenty economies in the dollar value of merchandise trade, its exports and imports combined in 2012 totaled $784 billion. Several countries with smaller GDPs and much smaller populations outranked it, including Singapore, Belgium and the Netherlands. China’s trade, valued at nearly $4 trillion and about on par with that of the United States, accounted for 10.5 percent of the value of all international trade in 2012. The dollar value of India’s trade amounted to one-fifth of China’s and to 2 percent of the global total, even though India has roughly 17.5 percent of the world’s population, about the same proportion China does.
India does fare better in trade in commercial services: in 2012, it ranked seventh in a list of the top exporting countries; but its share was still only 74 percent of China’s (which still lacks a powerful service sector) and 4.4 percent of the world total, comparable to that of Spain and the Netherlands.
Apart from the quantity and complexity of the problems that have to be addressed, India’s democratic system is not conducive to enacting controversial economic changes quickly. Because of their authoritarian political systems, China, as well as Taiwan and South Korea in their non-democratic phases, could push through sweeping reforms that helped establish the foundation for rapid industrialization and economic growth.
India’s raucous, vibrant democracy is rightly admired, but it impedes the implementation of deep economic reform. Creaky coalition governments are common at the center, and headstrong local power brokers (the chief ministers of its twenty-nine states) can be veritable kingmakers. Labor unions are powerful, and militant and caste-based political alliances are impenetrable yet influential.
Then there’s an electorate that’s not shy about registering its displeasure at the ballot box when economic reforms bring pain or when the increased competition from abroad threatens traditional sectors, such as small retail shops, agriculture or industries long shielded by various forms of protectionism.
In principle, Modi, who faces the challenge of overcoming such obstacles, is well placed to do so given his economic track record, his popularity and the BJP’s massive electoral mandate. Modi may style himself as a no-nonsense, business-friendly, results-oriented manager, but he won’t be able to demolish these deeply rooted impediments to reform without a tough struggle.
Running Gujarat was one thing. Acting as India’s CEO will be quite another.
To Be Continued Tomorrow …
[The author is Anne and Bernard Spitzer Professor of Political Science at the Colin Powell School of the City College of New York/City University of New York, a non-resident senior fellow at the Atlantic Council, and a senior research scholar at the Saltzman Institute of War and Peace at Columbia University.]
[Courtesy: The National Interest]
October 25, 2014