Business Page –  All roads lead to Mumbai (Bombay)

Sunday, March 5th, 2006

Introduction:

Even the most optimistic astrologer from a nation which takes almost every major decision only after consultation with astrologers of whatever level of credibility, could not predict the incredible changes which have been taking place in the world's largest democracy and one of its oldest civilisations. Ms Arundhati Roy, the civil rights activist better known for her book The God of Small Things for which she won the Booker Prize, wrote a short while before the remarkable transformation of her country that "India had lost its innocence." Shemust be experiencing adjustment problems with the unabashed pro-western [read American] attitude of the new generation of Indians benefiting from American outsourcing which makes India the country of choice of international investors and the envy of the rest.

It is a remarkable country in many ways. With a majority Hindu population, it is constitutionally secular, has a Muslim President, a Sikh prime minister and a Christian as head of its ruling party. Centuries of war and invasion did not end with independence on August 15, 1947 but was accompanied with bloodletting, the partition of the country with the birth of the Muslim state of Pakistan and the death of one of its greatest citizens - Mahatma Gandhi, the champion of non-violence killed at the hand of a Hindu fanatic.

The British Raj and before:

It is also a fascinating country. Colonialism left India with a dislike for international trade and a distrust for international investors. The India of the British Raj was conquered not by a political state but its trading arm, the British East India Company that controlled the large swathe of a sub-continent with a population of more than twenty times the British population. Indeed it was not until 1858, more than 250 years after it had arrived that India (and that would include what is now Pakistan and Bangladesh), was brought under the full control of the British government proper.

But even before then, India had been invaded and ruled by Muslim tribes from Central Asia, whose contributions, including the building of one of the wonders of the modern world and political and governance systems, are often overlooked or contrasted with the negative roles which they played, including at some points the not-too-subtle and forced conversion of Hindus to 'the faith.'

The record of the British Raj, the term used to describe the period of British control of the sub-continent, wreaked disaster on the culture, livelihoods and development of the people and by the ruthless pursuit of power and riches, scarred a people almost for life. According to Jeffrey Sachs's book, The End of Poverty, India had no per capita growth during close to three hundred years from the year 1600 to 1870, and in the seventy-five years thereafter to independence saw per capita growth of 0.2 per cent!

Independence and after:

At independence, the country had a literacy rate of less than 20% and life expectancy of just over 30 years. Industry was practically non-existent with the country serving merely as the producer of raw materials for the British factories. Of a population of hundreds of millions the majority were mere peasants and house serfs while the country's entire commercial life was under British control. Post-independence has not been a smooth ride although significantly there has not been a famine since that time, despite failures of the monsoon with its mixture of blessings of water for farming, and floods.

How did such a country develop into one that was described as the star of the show at the 2005 World Economic Forum in Davos, Switzerland to which it sent a dream team not of its more recognisable Bollywood faces, but of three ministers of the central (union) government, three regional chief ministers and a host of business persons and academics? Indeed, of the 244 scheduled sessions, twelve featured India and sixty featured Indian speakers. Only this week, India received the US President for a three-day visit, the high point of which was the conclusion of a historic agreement that effectively brings India out from the nuclear cold. That agreement which has to win approval in the US Congress underlines India's importance as a growing economic world power although it is certainly helped by India's geo-political role as seen by the US as a balance to the growing threat of China in Asia not only as an economic superpower but as a military power as well.

Lessons:

The story is one that offers many lessons to the rest of the developing world, where India was for decades a leader, not least because it was led by such internationally recognised figures as Nehru, Indira Gandhi and members of her clan. The era of the Non-Aligned Movement in which Guyana was a small but key player was certainly good for India's international image even as it pursued an internally-focused path of economic development with a strong flavour of state participation in industry and commerce. There was a heavily regulated economy accompanied by a pervasive need for licences for most imports, exchange controls, and a strong bureaucracy.

The era was also marked by an emphasis on education at all levels, with universities and institutes of technologies going up around the country. That emphasis is now allowing India to reap huge benefits even from the graduates who, unable to find work at home migrated overseas, took up some of the top positions in prestigious firms, sending back vast sums and developing linkages with businesses back home. The benefit also comes from those who stayed home and are the nucleus of the world-class information technology businesses that are now the face of India.

'Hindu' growth rate:

Education and health were also priorities for the immediate post-independence governments that had to confront a debilitating caste system, the legacy of centuries of colonialism and demands for social and political justice from the majority that were poor, landless and hungry. For the first two decades of an independent India, the economy grew by about 3.5 per cent, dubbed by critics and pessimists as the 'Hindu' growth rate.

Things started to happen during the later stage of that period with the successful Green Revolution that resulted in a remarkable increase in agricultural production, while the rest of the economy showed only modest improvement. But the world was moving faster than India - steeped in history, tradition and culture - appeared capable of matching, and the country soon found itself unable to compete in an increasingly open and liberalised world economy.

Perhaps it was the time when India indeed needed to lose its innocence, or more grandly when Nehru's famous words "tryst with destiny" might have aptly applied. In came current Prime Minister as the Finance Minister in 1994, Dr Manmohan Singh, a British trained development economist who set about, in the mode of a Desmond Hoyte under Guyana's Economic Recovery Programme, to dismantle the licensing system and to liberalise the economy. It would be easy to say the rest is history and leave it at that, but the story of the rise of the Indian economy and its influence in the world is a triumph of faith, competence, democracy, an independent and competent judiciary and how the success of the decade of development has set the stage for what many are now predicting would be a century of China and India, a century when Asia will once again become the centre of the world.

The gains of the last decade of the previous century, however, did not translate equally for all the people, and while poverty which was once the poster child of India has fallen quite dramatically - it is now below 30% for the first time in centuries - the more recent growth has been in the cities, (some of which are so beaming with confidence that they are going back to their original names), while the rural areas and states have lagged. The current government is committed to electricity for all, universal access to health, education and opportunities, that is witnessing the erosion of the privileges of the upper castes.

The current Finance Minister has redefined another date with destiny, setting the year 2015 when the targets of the Millennium Development Goals are to be achieved. Unlike our own government which budgets on the optimistic, wishful side, the Indian Finance Minister uses in his projections the lower end of the range of 7% growth in real GDP while hoping to achieve the higher number of 10 per cent.

Ties that bind:

And to stem the inevitable drift from rural India to the cities, India is once again embarking on another Green Revolution, but this time more technology-driven and with projected yields that are comparable to the best given the circumstances of nature and geography. Such an emphasis is not without political motives, however, as the previous government which presided over the decade of development was thrown out of power by the rural masses, dissatisfied with what they perceived as the disproportionate attention to the cities with their predominance of services, technology and manufacturing, and the growing middle class.

It is easy for anyone, and more so someone with historical ties to India, to become overly positive about that country. The Beatles did and enriched their own and the music of the anglophone world as a consequence. Bill Gates did and strengthened his own company. It is a favourite of Bill Clinton and its succession of often fractious coalitions at the centre competing with regional governments that range from Communist to everything else is an exemplar of democracy at work. Sixty years of uninterrupted democratic rule over a poor country of more than one billion people alone wins it the admiration of the world.

More to be done:

But there is still so much more that it can exploit that is genuine Indian. While Indian restaurants can be found in most major cities, its cuisine still does not appear on the menu of international chains; its tourism potential is still to be realised; its gift to the world of music and Yoga has still only been received by select groups even though the Church in the US is now marketing Christian Yoga; its unique brand of philosophy, its medical facilities that dollar for dollar can compete with the best that America can offer, its craft and textile and its furniture and linen can all be successfully packaged as marketable products internationally. Where else in the world does a major public infrastructural work come in under budget and three years ahead of schedule?

The new deal with Bush should be a major fillip to a country which despite having close to 18% of the world's population has less than one per cent of its known oil and gas reserves. The manufacturing sector which has seen a dramatic rise in the production of parts and components for the world's auto industry, the printing industry and leather goods would benefit immensely from cheaper and more readily available power.

Problems:

But that does not mean that India does not have major problems. Its relationship with its two nearest neighbours, China and Pakistan, though not currently hostile can hardly be considered friendly; Maoists still engage soldiers in pitched battles and retreat into the hills and forests; Indian Kashmir with a Muslim majority challenges the twin commitment to autonomy and defence of border integrity; India still has only a few companies that can be considered truly global and its dream of a seat on the Security Council of the United Nations is still to be realised. Will its new wealth soon lead to the discarding of Indian values and the things that have in fact made that country great? Just look at some of the trash that passes for Indian films. Would the increasingly powerful American culture displace the centuries of tradition which Topol so plaintively yearned for in Fiddler on the Roof?

Guyana:

Can Guyana for which India clearly has a soft spot benefit from the lessons and ties to India? The evidence suggests that we underestimate the potential benefits of any such relationship for why else would we appoint Mr Ronald Gajraj, a ministerial discard who showed before the Chang Commission enquiring into his ties to criminal elements that diplomacy is certainly not one of his strong points. That India would have accredited him is a disappointment for a country which during the decades after it gained independence was a leading country when it came to international diplomacy.

Can we not learn from the high quality judiciary, the press and the manner in which political parties which compete vigorously at the state level are willing and do work at the centre? India has proved that competitive politics does not require confrontation, division and perpetual strife. Can we not learn from its Saint who even before Christ spoke of the importance of "good rulers who observe ethics, commit no crime and walk the path of honour and courage"?

Next week we look at the financing of the Berbice Bridge and the improper scramble to fund it.