“Jharkhand boy shakes the world” declared Indian headlines last week—and no, they were not referring to the captain of our pulverized cricket team, but to the Ranchi-born Deven Sharma, the giant-thumping head of Standard & Poor’s, which had just delivered its stinging assessment of the quality of America’s debt. Lines of causality were, of course, being jumbled a little here by excitable copywriters. The flap of the butterfly’s wing does not actually cause the tsunami. Still, there has been some reason for Indians to feel self-congratulatory in these topsy-turvy weeks.
Topsy-turvy indeed: a moment when China scolds the US for its excessive social spending, and raises concerns about whether London is up to holding the Olympics; when the UK devolves into looting and riot; when debt crises send markets into panic; when the machinery of government is paralysed. The current situation in Europe and the US makes India look like stability itself.
India may not be quite the Chinese scold to America’s woes, but it is hoping hard to stay insulated from the worst of the turmoil in the US and Europe. The country’s economic policy managers and spin doctors have been stressing that the Indian economy remains largely driven by internal factors, that India remains in a better position than most to manage the uncertainties ahead.
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Just 20 years ago, it was our own economy that was plunged into turmoil. It was India that seemed poised to default on its obligations—our government had to Fedex almost 50 tonnes of Reserve Bank of India gold out of the country to reassure creditors. We came out of that crisis smelling of roses—and set to work creating a mythology. In retrospect, we decided there was some special Indian magic which got us out of the special Indian mess we had created.
Certainly, Indian entrepreneurship and inventiveness, in combination with astute management of the economy, played a central part in the remarkable economic expansion since 1991. This succeeded in planting a necessary self-belief and optimism across Indian society—a vital, positive force in shaping the horizon of possibility.
But the fact is that our own growth story over the past two decades coincided, until recently, with an unusually clement global climate. India was not the only success story of the 1990s. Globalization in general was working well, fostering a period of exceptional sustained growth in the global economy, driven by the US. We were among the main beneficiaries. But we weren’t alone among nations in assuming that such a mild, welcoming international economy would be a permanent climate—into which we had merely to transplant ourselves, and then watch ourselves grow.
World view: India’s participation at the World Economic Forum in Davos is a step towards exposing ourselves to the international economy. Tomohiro Ohsumi/Bloomberg
Our good fortune has nourished a kind of insouciance among both our business and political elites. Among the Indian business elites, a sense took hold that they would be able to manage, grow and expand, despite the mess of our politics. Because they could look and reach outwards, the domestic dysfunctions of India’s politics and institutions could be surmounted.
Among the political elites, a different view spread: that they could continue to pursue their own partisan and personal interests, make their deals and double-cuts, and the economic goose would still continue to lay golden eggs.
The outcome was a distinctive, divided attitude that has come to mark our public life. A deep cynicism about politics washes over everything, yet somehow it has managed not to corrode a happy confidence, even a bit of a swagger, about economics. When it comes to economics, we’ve become, like our cricketers, a little Australian. Yet the unravelling of the 1990s global economic dispensation has underlined just how contingent it has been.
We’ve told ourselves that we have managed our international exposure wisely. We comfort ourself that we’ve remained insulated from some of the more random currents that feed and confuse global flows of opinion and capital. And these are not false comforts. For there are indeed structural elements internal to our country— demography, savings and investment rates—that could enable India to sustain high levels of growth for some time to come.
But if the subtext is that, 20 years after 1991, we can manage by going it alone, we’re bumping into the territory of Chekhov’s vital lie. We have to see our future squarely in relation to the world. Our growth will depend on more exposure to the international economy—on putting ourselves further and deeper into the world.
For some foreseeable time—at least the next 20 years—that means positioning ourselves in a world and in a global economy that is likely to be steeped in uncertainty. Already wealthy states are likely to become increasingly defensive as their people age, their growth stutters and their payouts mount. And more and more, large, fast-growing states will feel entitled to ignore existing norms and to make up rules as they go along. This unruly global economy will have no particularly favourable dispensation towards us.
Seen from this perspective, to think of economic reforms simply in domestic terms—as a taking forward of the internal economic reforms set in motion two decades ago—is far too limited. To sustain India’s economic growth will require working with a more ambitious and expansive agenda. The reformist economic imagination will need to do more than encompass a wish-list of further domestic reforms, important as they undoubtedly are. It will also need to think about strategic engagement with the global economy, in all its tangled, causally elusive, confounding ways. It will need to embrace its structures, its primary actors, and its generalized uncertainty.
While we will continue to feel the effects of global economic trends, it is also now the case that we are actors within it—and upon it. We’re no longer free-riders. Instead, we’ll have to figure out how we can help make the world economy more stable, and how we can turn its idiosyncrasies to our advantage. This will require us to think as much in political as in economic terms.
Here, the deep, historically sanctioned split between our political and economic imaginations is a disabling handicap. Merchant and prince, financier and king, have always kept a proud imaginative distance from one another across the long sweep of our history—a segregation of wealth and power that marks us out from the societies of the West, as it does from those of China and Japan. Now, we shall have to find ways to bring these two classes closer in outlook, and in ways that are more constructive for our national project than the merely mutual corruption that now links them.
Reconstituting our economy, making it fit for toughening global conditions, will need political leaders and market entrepreneurs to put their heads together: to devise a calculus of risk and opportunity for India as a whole. This sounds like a tall order, given the increasing fragmentation and particularization of our society, as all pursue self-defined interests with little connection to a national vision. But if we don’t manage it, if we don’t see the economy in strategic as opposed to selfish terms, we’ll remain an underachieved nation.
A more strategic conception of our reform agenda for the next 20 years would recognize several pressing matters. In the first instance, it’s apparent that the world’s rich economies will increasingly become defensive. It will be up to us to press for an open global order: open not only for the movement of capital and goods, but also of people—which in many ways is our richest resource (there are many, many more Jharkhand boys waiting to flutter their wings).
A more strategic economic conception will mean figuring how to leverage our economic engagements so that they yield access to the technologies and investments that we need—and that presupposes that we have some coherent assessment of, and agreement about, what these needs might actually be. A more strategic conception will also require more determinate views about future global currency regimes and how to maximize our interests. And a more strategic conception would also mean working more actively to influence and shape the character of international financial organizations.
These are tasks for government brains, no doubt; but, given today’s extremely complicated division of economic knowledge and expertise, private capital’s finest minds must work with policymakers. To negotiate a more complex economic future, old Indian dichotomies need to be put aside, for good.
Sunil Khilnani is the author of The Idea of India.
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