India’s economy gets real

India’s economy gets real

A few years ago, a private airline started operating a flight from Delhi to Shimla, a few miles from my village. The brisk descent in a small turboprop aircraft isn’t for those with a fear of flying. The runway on a table-top mountain seemed particularly short last week, when the plane, breaking free of the fog over Delhi, came down to a wintry Himalayan mist.


The airline was subsequently bought by Kingfisher Airlines Ltd, one of the New India’s iconic corporate brands. Owned by Vijay Mallya, a man fond of horse racing and swimsuit calendars, Kingfisher simply ran out of money earlier this year, reflecting more broadly the troubles of most private airlines in India. They are struggling despite the favour shown to them by the government, which has systematically denuded the publicly owned Air India Ltd.

The flight to Shimla was among those affected by Kingfisher’s drastic cost-cutting. So, a few weeks ago, I found myself back on the road to Delhi with a couple of friends who had been visiting me in the town of Mashobra.

In the 1990s, the drive would take eight hours. In 2009, it took about 11, and this autumn it took almost 12. Stretches of the road, especially those near small cities, resembled four-lane highways anywhere in the world. Elsewhere, passing through roadside settlements, the road shrank to a single lane; and here the queues built up, the air grew thick with dust and exhaust, and road rage erupted out of even the air-conditioned vehicles. Construction sites were everywhere; but few signs existed that the highway was on its way to completion. Piles of concrete beams had been there long enough to allow grass to sprout from their moldy surface. There was rust on the girders. The paint on the signs surrounding the sites had faded; and, most significantly, hardly anyone was working there.

Conceived at a time of confident prosperity, the roadworks seemed to have been quietly abandoned; and people like myself, who could afford to travel by air, had not noticed and were unaffected. The metaphor of highways has been deployed frequently to describe India’s potential, most famously by Thomas Friedman, who claimed in 2005 that India “is like a highway full of potholes," but “off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo."

Like many other popular metaphors about India—tiger, elephant, cellphone—this one isn’t wholly mistaken. Indian highways rank highly among the infrastructure projects crucial to sustaining the country’s rapid economic growth, which is threatened by inflation, declining industrial production, a weakening currency and corruption scandals that implicate some of India’s most well-known politicians and businessmen. The question that Friedman asked in 2005 has grown more urgent: “Is that smoother road in the distance a mirage or the real thing?" Or, to put it differently: Did the perennial gap between illusion and reality somehow widen imperceptibly in the New India?

The answer to this question seemed obvious on the half-built highway to Delhi. The most conspicuous sights along the roadside were the placards for shiny new private educational institutions. They seem—if you have never been inside one or met any of their alumni and looked only at the (misspelled) signboards promising professional success—to be hectically preparing the basis for India’s “demographic dividend": an overwhelmingly youthful population that will soon become producers and consumers in the global economy.

In actuality, while most state-funded schools and colleges are barely functional, private education in India is largely a money-making racket. In September this year, a study of schools in the biggest states discovered that India’s peers in adult literacy are Afghanistan and Papua New Guinea.

Hundreds of millions of poorly educated and unemployable youth increasingly find themselves drawn to some peculiar forms of entrepreneurship. Twice on the highway from Shimla to Delhi, we were flagged down by groups of young men collecting “taxes."

I have often come across these soft forms of banditry on the country roads of Uttar Pradesh and Bihar, two of India’s poorest and most populous states. The only difference here was that the young men seemed better educated, more resourceful and authoritative. Bleak employment prospects and a general social breakdown —of morality no less than law and order—were pushing them into crime. Their brazen modus operandi in one of the country’s richest regions hinted that India’s “demographic dividend" was more likely to boost crime rather than gross domestic product. For most of the previous decade, many Indians have been spellbound by a vision of imminent national greatness, oblivious to the basic fact that no country without a substantial manufacturing base and skilled workforce has ever become an economic superpower. A sense of unreality as profound as those that overwhelmed the central planners of Mao Zedong and Nikita Khrushchev came to dictate discussions of the Indian economy.

Businessmen, just like the government, deceived themselves, according to Rajiv Kumar, the secretary-general of the Federation of Indian Chambers of Commerce and Industry. “We became complacent," he told the Financial Times this month, “as we started believing in the myth that in India there were structural reasons that would keep growth above 7% for good."

Of course, businessmen are obliged to talk up their prospects; boosterism of this sort helps money to circulate. However, the shattered illusions of New India implicate more deeply those journalists and commentators who made a fetish of aggregate national wealth, using a few success stories to generalize wildly.

There were those who deliberately avoided a sober reckoning with Indian reality; but there were also many—including myself—who did not probe them enough. It explains why such a feeble ideological fantasy—of an inexorably rising India—could have beguiled so many people for so long.


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Pankaj Mishra is a Bloomberg View columnist, based in London and Mashobra, India. The opinions expressed are his own.