2009: another tipping point for India?

2009: another tipping point for India?
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First Published: Sun, Dec 27 2009. 09 47 PM IST

Updated: Sun, Dec 27 2009. 09 47 PM IST
With the benefit of hindsight, one can safely hazard that 1984 was the tipping point of India’s modern political and economic history. It saw the successful transition of political power in the country’s oldest party to the next generation under the most testing circumstances. The new order that took charge of the country’s policymaking machinery then accelerated the discourse on economic liberalization and set the stage for the big burst in 1991. In fact, Outlook magazine devoted its issue of 19 October to brilliantly detail the reasons why it was the year that changed India.
Looking back at 2009, it would seem, taking a long view of the future, that the country is, 25 years later, at yet another watershed; a string of events and initiatives undertaken years ago came to a head in the current year. To be sure, whether or not 2009 does turn out to be a tipping point would largely depend upon how India seizes the opportunity at hand even as it quells the challenges. There are several reasons to justify the claim that 2009 has all the portents.
First, it marks the beginning of a new political era. L.K. Advani joined Atal Bihari Vajpayee as the top leadership of the Bharatiya Janata Party exited; the general secretary of the Communist Party of India (Marxist), Prakash Karat, virtually signed off his stint at the helm after being part of a resolution that caps the tenure to a maximum of two terms. Most importantly, it was the anointment of Rahul Gandhi as the leader-in-waiting after he led the Congress party to an unexpected 200-plus seats win in the 15th general election. With the Opposition in total disarray, it is not clear whether it is Gandhi’s Midas touch alone that has endured as the Congress party has gained with every electoral show of strength ever since.
Second, it also marks the beginning of the transition to smaller states; Telangana is unlikely to be the last. Political expediency is nudging Mayawati to press for a further division of Uttar Pradesh and elsewhere activism is generating similar momentum. This need not be a bad thing, as some commentators have pointed out—it would, for one, lead to a greater political representation of diverse regions in India.
Third, the year was the first evidence of India growing up to sup with the “big boys”, as it were. What was initially a perception has turned out to be a fact: At the inconclusive climate change negotiations in Copenhagen, India turned its back on a constituency—represented by the developing nations that come under the bloc of Group of 77 countries—that it has nurtured over the last six decades and joined hands with the richer nations. This did not happen overnight and was in the making over the last few years. But it got the impetus in UPA 2.0, and happened, coincidentally, at a time when the ruling world economic order suffered its worst setback since the Great Depression and when China was leaving its singular footprint on global polity.
Fourth, the year saw the Congress-led United Progressive Alliance, or UPA, formally setting the stage for two crucial pieces of tax reform in the country. While the direct tax code would, among other things, freeze rates over the medium term and simplify laws—removing the arbitrariness of the revenue collection machinery—the transition to a uniform single goods and services tax regime will not only lead to a lower tax incidence (and hopefully lower prices for consumers such as you and me), but most importantly economically unify the country as never before. The benefits of a common market are self-evident in the economic success of the European Union; at present, given the myriad tax regimes, at times the movement of goods across states is the equivalent of that across countries. And of course, the economic glue would work to counter any political efforts to secede.
It is apparent, then, that India is poised at a critical crossroad. The final outcome will be an obvious net of the opportunities and challenges. The latter will consist of managing the external and internal pressures—including the need to evolve a development strategy that would be more inclusive to address growing aspirations as well as eradicating poverty among 500 million Indians.
Time will tell whether the rear-view mirror of history did indeed flag 2009 as yet another turning point.
Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics. Comments are welcome at capitalcalculus@livemint.com
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First Published: Sun, Dec 27 2009. 09 47 PM IST