Subj: Asia's Quiet Miracle (of India)
Date: 6/9/2003 11:15:05 AM Pacific Standard Time
From: email@example.com http://online.wsj.com/article/0
THE WALL STREET JOURNAL ONLINE, JUNE 9, 2003
ASIA'S QUIET MIRACLE
By BRUCE GILLEY
As it nears the end of its fifth year in office as the head of a coalition government, India's Bharatiya Janata Party is preparing to put its mandate on the line in national elections due by October 2004. Little surprise that the party has recently shown signs of backing down on some planned economic reforms in areas like taxation, foreign investment and privatization. Cabinet rifts and a series of antireform strikes have chastened the government against moving too fast at the risk of considerable political loss.
Yet those in the chambers of commerce and business press engaged in a reactive bout of hand-wringing need to check themselves. Almost unnoticed by the outside world, India over the past two decades has witnessed an economic transformation of staggering proportions. It is a transformation that has cut poverty to 20% of the population today from something like 40% a few decades earlier (estimates vary), while adding nine years to the life of the average Indian. Most important, it is a transformation that has been achieved through open processes of reaching a fair and consensual policy, which in the lexicon of the dissatisfied is now being disparaged as "politics."
The democratic nature of India's economic miracle, as frustrating as it is to those who like the stroke-of-a-pen changes of authoritarian countries like China, has ensured that reforms are more just and therefore more enduring. Inequality has remained moderate while opportunities have expanded for all. By bemoaning the incremental nature of India's economic reforms, critics are liable to undermine the very foundations of the country's stirring success.
As the columnist Paranjoy Guha Thakurta wrote in Business Today magazine in late May: "While it may be very fine to wax eloquent about the need for so-called economic reforms, unless a political consensus can be arrived at, all such attempts are bound to falter if not fail." That would be a tragedy indeed.
Of course, the BJP is far from being above recrimination in its handling of recent economic reforms. Its reform of the power-generation sector and its attempts to reduce the dangerously high annual public-sector deficit (now 11% of gross domestic product) have been plagued by ineptness and corruption.
But most of the criticism has focused instead on issues where reform has been delayed precisely because the losers are not reconciled to change. Reforms in agricultural support, small-scale industry restrictions, labor laws and privatization have been delayed because of the interests affected.
India's reforms have moved forward by minimizing opposition, not bulldozing it. That may have meant a pace that many find frustrating. But the important result, notes a recent paper by Harvard's Center for International Development, is that "India's political system is more than ever in consensus about the basic direction of reforms."
Economic reforms in India began haltingly in the mid-1980s and then accelerated sharply in the early 1990s. Easy reforms in areas like licensing, exchange rates and banking came first. In the period from 1985 to 2001, real per-capita GDP in local currency terms grew 3.9% a year, four times the rate of the previous three decades, marking an unprecedented gain for the average Indian. India's Human Development Index, as measured by the United Nations Development Program, rose by 23% between 1985 and 2000, the same as in much ballyhooed China.
The BJP, true to its nationalist roots, began life espousing Gandhian policies of self-sufficiency and small industry, known as swadeshi. It first won office in 1998 because of growing disaffection with reforms and with elitist secularism. The coalition led by the BJP represents a poor people's movement that threatened reforms.
Yet when it came into office, the BJP sensibly embraced reforms as the best hope for the poor. It was, and is, the only party with the legitimacy to push the reforms forward, since it has a foot in both the elite and populist segments of India's fractured society. The fact that it is criticized not only by right-wing ideologues in India , but also by influential left-wing intellectuals and unionists for selling out to "liberalism," shows just how successfully it has walked the middle way in its efforts to move forward through consensus.
Low inflation, strong foreign-exchange reserves and healthy agriculture and services sectors underlie the changes. The information technology sector continues to boom despite the global IT bust, now accounting for 3% of GDP and 15% of exports. There is no vast underclass of disaffected farmers and workers threatening to overturn the reforms, or even the political system, as there is in China. Indeed, the BJP-led coalition includes many of the parties that represent those groups.
If India's voluntary and female-empowering population-control policies continue to surprise with their success, per-capita GDP gains could outstrip those of the first decade and a half of reforms. As University of Michigan scholar Ashutosh Varshney told a conference in the U.S. in April: "Progress has been, and will remain, gradual and steady."
For those inclined to discount the gains under the BJP because of the communal violence that has erupted on its watch, a little perspective is key. The rise of the BJP was supported by India's poor, who could be organized using the symbolism of Hindu revivalism. It was a response to the failures of the elitist Congress Party to address the country's developmental problems in more than four decades of rule. Communalism was already on the rise when the Congress began reforms in the mid-1980s (highlighted by the 2,700 killed in anti-Sikh riots in 1984). Yet the economic reforms that the BJP continues to push forward may be the best solvent for these passions. Moreover, on their own, the reforms have life and death implications in a country like India . Infant mortality began to fall in the late 1970s as a result of the country's agricultural boom, but the decline accelerated once economic reforms began. Taken on its own, the fall in infant mortality between 1985 and 2001 saves about 800,000 lives a year today. If the decline continues as targeted by the state through 2007, another 600,000 children a year will be saved.
The BJP has emerged as India's strongest party (along with its allies, it won 40% of the popular vote in the 1999 elections) precisely because it more closely reflects Indian society than any other party. It is more national, and cuts across the various identity-based (region, caste, religion, ethnic group, etc) parties. And it is more nativist and populist than the highbrow Congress. Much of the "instability" of post-1998 Indian politics is because of the growing inclusion of more people in democracy, a natural result of a process that leads to a more healthy polity. Five years out, India is still in this initial process of democratic deepening.
Post-1947 India has been a whipping boy for impatient reformers of all colors, from the left and right. In his 1966 book, "Social Origins of Dictatorship and Democracy," the Harvard scholar Barrington Moore, Jr. berated India's "peaceful change" and called for "coercion on a massive scale" to solve the country's development challenges. Fortunately, the post-1985 economic reformers ignored such advice and stuck to the country's great democratic tradition. This is not just for idealistic reasons. The country's more enlightened industrialists are also quick to point out that they prefer reforms that will not face another poor people's movement. As Narayanan Vaghul, former chairman of the Industrial Credit and Investment Corporation of India told a conference in New York in 1999, just after the BJP announced its bold economic reform plans, "Unless the common man in the street is able to identify himself with the reform process, we will find that the reform is going to be very difficult."
India's reforms are not just an economic issue. The country is forging a proudly democratic model of economic reforms. It is the kind of model that many developing countries, despairing that they do not have the dictatorship of China to force through difficult reforms, can hope to emulate.
The BJP government should be kept honest and chided when it falls down. But the politics that it plays are mostly the politics of balancing interests and views that, if not addressed, might threaten the entire movement. Those who criticize the consensual nature of India's economic reforms risk undermining Asia's quiet miracle.
Mr. Gilley is a doctoral student in politics at Princeton University and the author with Andrew J. Nathan of "China's New Rulers: The Secret Files (New York Review of Books, 2002).
Updated June 9, 2003