India’s tightrope act on economic growth

India’s tightrope act on economic growth
Comment E-mail Print Share
First Published: Mon, Apr 30 2007. 12 04 AM IST
Updated: Mon, Apr 30 2007. 12 04 AM IST
With hundreds of political parties, religions and languages, thousands of castes and subcastes, 3 million elected officials, 20 million government employees and 670 million voters, “there is never a dull moment in the great Indian political circus,” as one newspaper here recently put it.
India's survival as a pluralistic, democratic, united nation depends on a perilous high-wire act of Prime Minister Manmohan Singh as he attempts to balance the conflicting demands of a high-tech knowledge-based economy and India's low-tech farm-based impoverished masses.
Lean too far to the right, by boosting the middle class without fulfilling promises of “inclusive growth” for the 600 million rural and poor majority, and Singh—and his Congress-led coalition—risks the kind of electoral drubbing that toppled the previous government three years ago.
But lean too far to the left—by allowing Communist parties to continue blocking reform of bloated government bureaucracies, archaic labour and investment laws and subsidies for food and fuel—and India risks missing its goal of $15 billion (Rs61,500 crore) in annual foreign investment.
Proceed too fast, with rising inflation that recently hit a two-year high, and Indians angry over soaring food prices will exact their revenge, as they did in dealing the Congress stunning defeats in recent municipal and state elections.
But proceed too slow, by failing to create enough jobs for the 10 million Indians entering the labour market every year, and the country risks a potentially destabilizing “unemployment explosion” in the coming decades where perhaps 30% of Indians—some 200 million—are jobless.
As Singh and his coalition walk this tightrope of economic development, several dangerous distractions threaten to knock them off balance. The country's overcrowded and crumbling roads, railroads, ports and airports are already blamed for slowing economic growth by perhaps two percentage points. But while people here celebrate the Capital's new state-of-the-art subway and a network of expressways linking major cities, New Delhi lacks the hundreds of billions of dollars needed to resolve India's infrastructure crisis.
India's only hope will be cost-sharing partnerships with the private sector, such as airport projects in New Delhi, Hyderabad and Bangalore and the $5 billion infrastructure fund recently launched by Citigroup, Blackstone and India's Infrastructure Development Finance Company. The crown jewel of the Congress poverty eradication programme, a jobs programme that guarantees every rural household 100 days work building roads, dams and other projects, also faces hurdles.
In a country of rampant corruption, it's uncertain whether cash payments for unskilled manual labour will indeed uplift the needy or, like so many similar efforts, enrich the greedy. Meanwhile, dozens of ethnic and tribal separatist groups across the country's remote northeast states wage decades-old rebellions against Indian rule. The bomb that greeted Singh's visit to Assam this month was the latest reminder why a region rich with oil, gas and coal remains the poorest in India. Most ominous, though, is the Maoist insurgency, now active in half of India's 28 states.
Last month, a day after police gunned down 14 people in West Bengal protesting the creation of special economic zones on rural lands, Maoists retaliated by murdering 55 police. Such is New Delhi's development dilemma. Do nothing, and the impoverished flock to the Maoists. Proceed with manufacturing-based economic zones, and displaced farmers flock to the Maoists.
And yet, Indians display an exuberance for the future, that, given their remarkable progress in 60 years of independence, doesn't seem so irrational. So while western observers may lament the slow pace of Indian reform, democracy's greatest show on earth goes on with New Delhi moving ahead the only way it can—keeping its balance and taking one careful step at a time.
Comment E-mail Print Share
First Published: Mon, Apr 30 2007. 12 04 AM IST