Terms of Engagement
A Country Unto Itself
There’s no place like India. Which is precisely why its politics and economy are such a contradictory, beautiful mess.
NEW DELHI — India does not reconcile contradictions so much as inhabit them. Is there one god? Three? Gods? Without number? Yes, yes, and yes. Visitors are instructed to leave their Cartesian logic at passport control. This is contrary to my all-too-binary nature. But after two weeks in Delhi talking to people about the wrinkled, lumbering, battle-scarred pachyderm that is the Congress Party, I have begun to accept that it may be precisely Congress’s capacity to live blithely with contradiction that accounts for its astonishing persistence (that, and the Gandhi family name).
The other day, I went to speak to Meenakshi Natarajan, a parliamentarian and one of the party’s bright young stars. Congress, she explained to me, had lost its way when it embraced economic liberalism in the 1990s but now had reached the right balance: growth-oriented policies to generate surplus to spend on massive schemes for the poor. Now, this makes no sense: A paternalistic welfare state, unless it sits on an ocean of oil, will eventually stop generating the growth that funds its generous outlays. And yet this is pretty much what the Congress has done since gaining power in 2004. If Congress has any prospect of winning the elections next year, it will be thanks to what the party calls "inclusive growth."
The budget speech which P. Chidambaram, the deft finance minister ("Harvard-educated," as the papers here like to note), gave earlier this week would have fit right in at, say, the 1984 Democratic convention, when U.S. liberals were beholden to its various special interests. He began by talking about the projected 12.5 percent increase in spending over the last year on Scheduled Castes — or untouchables, as they used to be stigmatized — and so-called Scheduled Tribes. Then the minister detailed new spending on women, on children and minorities, including a new bank for women. He had, he said, set aside $2 billion for a program to distribute food to the poor — a plan which even some party officials thought might better be put off in the name of fiscal discipline. Chidambaram had goodies for every one of India’s needy groups. The speech took almost two hours, in part because he had so many gifts to distribute.
And yet the speech also satisfied the business community, which wanted to see government investment in infrastructure as well as a commitment to reducing the deficit, which is now 5.3 percent of gross domestic product. Chidambaram appears to have crafted a growth-oriented budget which would generate surplus to spend on schemes for the poor. I still don’t understand how he nailed this double-somersault so cleanly; it may have had something to do with an extremely aspirational growth projection which assumed an increase in tax revenue equal to the expenditures he proposed. In that case, of course, the miracle will vanish soon enough, though hopefully not before the 2014 elections.
Congress Party officials will tell you that their policies are "pro-poor," an expression which denotes not only the redistribution of wealth from haves to have-nots, as in most welfare states, but the use of direct state programs to supply food, work, power, fertilizer, and other essential goods to the poor as well as the middle-class. To put it simply, the Congress is a socialist party at a time when the West has abandoned socialism. But the government also commissioned Raghuram Rajan, a former senior official with the International Monetary Fund, to write the government’s Economic Survey, which called for precisely the kind of reforms in labor market and land acquisition which party regulars stoutly resist. The survey came out the day before the budget speech. As Shekhar Shah, director of the independent National Council of Applied Economic Research, notes, it’s impossible to imagine Barack Obama’s Treasury Department issuing a major report so completely at variance with his own views.
You don’t have to be a socialist to see the validity of India’s welfare schemes, like the National Rural Employment Guarantee Act, which provides day labor to Indian farmers during idle periods. The rising tide of urban economic growth does not lift the boats of the rural poor in India. The same is true with India’s incredibly elaborate system of "reservations," which provide slots at universities and in government jobs for disadvantaged groups like Scheduled Castes and Tribes. In a system in which hierarchies are as deep-rooted as they are in India, social mobility will not come about simply because of the pull of economic opportunity. But India’s welfare schemes are wildly wasteful. Rajiv Gandhi, Indira Gandhi’s son and India’s most technocratic prime minister, famously asserted in the 1980s that only 15 percent of welfare payments actually reached the poor; the rest went to bureaucracy or "leakage" — i.e., theft. Absent the sort of reform which the pro-market wing of the party advocates, this sort of bureaucratic statism will kill the golden goose of economic growth.
The "pro-poor" vision is the heart and soul of the Congress. "We give voice to the voiceless," Meenakshi Natarajan said to me, quoting Nehru. Rajiv’s widow, Sonia Gandhi (he was assassinated in 1991) is a committed socialist; their son and heir apparent, Rahul, is deep-dyed in the Congress tradition. And many Congress officials think the party went astray when it liberalized the Indian economy in 1991. You can still get into arguments with them about whether GDP growth even matters. And whatever its merits as economic policy, pro-poor policy works very well as politics: scarcely anyone doubts that Congress won in 2009 thanks to programs like the employment scheme. There’s a reason why Chidambaram found room for the food security program.
But the amazing thing about political life in this country is that many Indians are convinced that India is sui generis. The fact that something works or doesn’t work elsewhere tells you nothing about India, because no other place is like India. I often get into arguments here where I find myself defending, say, India’s admittedly corrupt and patronage-ridden democracy on the grounds that things are no better, and perhaps worse, in Brazil or Indonesia. "Brazil!" someone will sneer. "The whole population of Brazil could fit into UP (Uttar Pradesh, which has 200 million people)!" And woe be unto him or her who thinks to compare India favorably to Pakistan — as if that hive of pathology bears comparison to the world’s largest democracy. No, India can only be judged a success or a failure in comparison to itself.
So, how is India doing compared to itself? India suffers from a bad case of Greatest Generation envy, since Jawaharlal Nehru and his team of rivals really were great men who delivered India safe and more or less sound through the storms of Partition and the threat of fragmentation. But even leaving nostalgia aside, Indian politics, as I wrote last week, seems to have lost its capacity to represent national aspirations, and seems to be slipping into a phase of regionalism and of weak central government. So in that respect at least, not so great.
The economy, however, is another matter. India has been a far, far better place since it left behind Nehru’s infatuation with state control of the "commanding heights" of the economy. The budget now available to India’s central planners — yes, India still has a central planning commission — is 15 times greater than it was 20 years ago. That buys a lot of help for the poor, as well as for everyone else. Congress had to be dragged kicking and screaming into the late 20th century. Still, the party has been in power for 14 of the last 20 years.
The auguries for 2014 look very bad for the Congress — though it’s not quite clear just who they look good for. Somebody else is likely to have a chance to try their hand at running India’s economy; possibly a party more unambiguously committed to market-oriented policies, like the right-leaning (and Hindu nationalist) Bharatiya Janata Party. Maybe they’ll prove that what works in other places works in India too. On balance, I doubt it.