Shine on

The decline of the NDA will not bring an end to India's economic progress, argues Salil Tripathi

Thursday May 13, 2004

If you travelled around India in the last few months, you would have been struck by large posters of happy Indian farmers admiring lush, waving crops, or yuppies talking confidently on their mobile phones, with a slogan at the bottom saying "India shining".

It was meant to reinforce the message, not very subtly, that India had finally emerged as an economic power, and the credit for that should go to the government of Atal Bihari Vajpayee.

Macroeconomic indicators certainly indicated that India was, at one level, shining. The economy had grown at around 8% for the last few years, a rate which, if maintained, would mean the Indian economy doubling within a decade. Growth in the 1990s had indeed lifted millions of Indians out of poverty.

Foreign reserves, once so depleted that India had to offer its gold reserves as security to the Bank of England in order to get balance of payment support, stood at more than $100bn (£57bn). More companies from the UK and the US were scouting around sites in Indian cities to set up offshore back offices.

Politically, the opposition Congress party appeared to be devoid of ideas, led by Sonia Gandhi, an apparently lacklustre leader who would never be able to escape the phrase "Italian-born" next to her name. Relations with Pakistan too had improved: not only did India send a cricket team to Pakistan, it won the Test series 2-1.

That week, India went into elections, with analysts convinced that the governing National Democratic Alliance would return to power easily. As the elections progressed, exit polls indicated that it might get a bit more choppy, but that the NDA would emerge victorious.

Today Mr Vajpayee resigned, his coalition having lost significant support across many parts of the country. Some of the analysts who misread the polls are concluding that this was a vote against the "India shining" campaign.

India is actually whining, they said, arguing that farmers in rural India were turning against urban India; they were not mesmerised by the progress. The Congress party, whose allies will include left-leaning parties, and possibly even the Communist party, had promised free electricity in Andhra Pradesh (the state where a crucial NDA ally, Chandrababu Naidu, lost office as chief minister). So is it back to regulations and licences, subsidies and giveaways?

Not exactly. This argument is part of an older debate, of India vs Bharat, of an upwardly-mobile, outwardly-leaning, growth-oriented India, against an apparently slower-moving, left-leaning, immersed-in-itself Bharat, or old India, which, as the cliché goes, lives in its villages.

But that is simplistic: if that were true, Vajpayee's Bharatiya Janata Party should have won handsomely in the cities, which have benefited from the outward orientation, and the Congress, which is claiming to have rediscovered rural roots, should have done better in villages.

Instead, big cities like Bombay and Delhi have rejected the BJP, and in many rural regions, the BJP or its allies have won. Divining the Indian electorate is never an easy task, particularly since 1989, when the Indian polity began to fracture and the dominance of the Congress party ended.
And it should be remembered that the growth in the Indian economy in the last decade had its origins in 1991, when the Congress was in power. And it was a Congress prime minister - Narasimha Rao - and his finance minister - Manmohan Singh - who devised the blueprint of Indian economic reforms.

There were may hiccups along the way, but the foundation was laid: it allowed Indian businesses to plan without the government looking over their shoulders; to set up factories when they wanted; to raise capital when they wanted; to expand overseas when needed.

It also allowed foreign businesses to own majority stakes in their Indian subsidiaries, or set up wholly-owned companies in India. Sectors like information technology, financial services, business process outsourcing, pharmaceuticals, and automotive components boomed, generating thousands of jobs, spreading prosperity beyond the big cities.

Mr Rao left office in 1996 after the Congress lost its majority, which brought two coalitions to power. The BJP effectively gained power two years later. In those seven years, none of these governments deviated from the master plan of economic deregulation.

That is why the defeat of the NDA should not mean the end of India's economic liberalisation. India's information technology boom did not begin with Mr Vajpayee, nor will it end with his defeat.

Even if the Communist party joins the new government at the centre, it is unlikely to roll back the reforms: in the state that the Communists have ruled uninterrupted for nearly three decades, West Bengal, the state government wants economic growth and jobs, even if the investors are foreign businesses.

The real challenge is for the new Indian government to ensure that the prosperity that has been generated in the last decade increases, and that more Indians benefit from it, by broadening the base of reforms, to include those that are left out of the process so far. That will mean empowering those whose expectations have been raised, and who are impatient for change.

· Salil Tripathi is a former correspondent of India Today and the Far Eastern Economic Review.