Dark days for India

The world’s largest democracy is now suffering from the world’s largest blackout. No one who knows India should be surprised. The country has long been choked by a bureaucracy that is still living in Jawarharlal Nehru’s socialist neverland of the 1950s. Overstaffed and under-motivated, India’s giant bureaucracy has rightly earned a reputation for being a mass producer of red-tape and little else. And it is complemented by a complex political system comprised of national and regional parties that has made it as difficult to pass legislation quickly through the parliament as to have it executed once passed.

As a result, India, despite its decade-and-a-half of impressive growth, remains stymied when addressing essentials for long term prosperity. These include, but are certainly not limited to: updating the electricity grid that has in the past few days left twenty states and 700 million people without power; upgrading a road network that is choked with too few driving lanes and too many vehicles ranging from camel carts to overstuffed buses; and fighting an illiteracy rate that still hovers around the 25 per cent mark.

And then there is the corruption. India seems to be plagued by corruption on a scale to match its size. In 2010 India ranked 87^th on the world corruption index. Yet instead of cleaning up corruption, the government seems to have made it worse: India dropped to 95^th on the 2011 index.

Billions have been lost in a multiplicity of scams that have kept India’s office of the Comptroller and Auditor General (CAG) working non-stop. Prominent among these have been the so-called IGI Airport scandal in 2012 that, according to a CAG report in May, lost the government some $29 billion by leasing land to a private company at a bargain rate; various other recent land scams that total in the tens of billions; and the 2010 "2G spectrum" scam involving radio frequency allocation that cost the government anywhere from $5 to $32 billion and resulted in the arrest of A. Raja, then-Indian Minister of Telecommunications.

It should therefore come as no surprise that foreign investment in India has slowed to a crawl. Yet it could not come at a worse time for India. The country has been hit hard by the impact of the Euro crisis on its exports and has watched the rupee sink to its lowest level ever against the dollar.  

Moreover, it is sad indeed that many businessmen and investors prefer to deal with authoritarian China than with democratic India. At least in China, they say, things get done, however brutal the government might have to be to get them done.

It was not all that long ago that econometricians were predicting that India’s gross domestic product could overtake that of China by the mid-to-late 2040s. Those predictions presumed a level of steady growth built on the efforts and successes of India’s rising and expanding middle class. But that growth will be impossible to sustain if India’s executive and legislative branches do not change the bad habits that are the legacy of the immediate post-colonial era. Unless change takes place, India will remain a nation with two systems — a booming private sector and a hidebound public sector, with serious consequences for the country’s long term prospects.

There is little that outsiders can do to help India reform itself. Foreign meddling is especially unwelcome in New Delhi. Nevertheless, friends of India should not shy away from prodding their interlocutors, whether in the private or public sectors, to clean up the mess that stands in the way of a true long term Indian economic boom. For at the end of the day, a buoyant Indian economy not only would be good for India, but for her friends and partners throughout the world, not least of which is the United States.