Mishra - Which India Matters - NYT (2013)

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11/14/13 Which India Matters? by Pankaj Mishra | The New York Review of Books

www.nybooks.com/articles/archives/2013/nov/21/which-india-matters/?pagination=false&printpage=true

Jonas Bendiksen/Magnum Photos

November 21, 2013 Issue

Which India Matters?

Pankaj Mishra

AnUncertain Glory: India and Its Contradictions

by Jean Drze and Amartya Sen

Princeton University Press, 434 pp., $29.95

Why Growth Matters: How Economic Growth in India Reduced

Poverty and the Lessons for Other Developing Countries

by Jagdish Bhagwati and Arvind Panagariya

PublicAffairs, 280 pp., $28.99

A man hammering inks and dyes rejected from nearby factories into powder that can then be resold, Mumbai, India,

2006

In 1961, soon after arriving in Japan as the American ambassador, Edwin O. Reischauer held

a public conversation with the Japanese economist Nakayama Ichiro. Their differences of

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perception illuminate many dilemmas of a developing nation like India today. The American

diplomat, a particularly sanguine exponent of Modernization Theory, believed that rapid

economic growth was well on its way to making Japan a Western-style developed nation and

a model for other non-Communist Asian countries. The Japanese economist worried that

economic growth that didnt take account of the social and political changes accompanying it

was unhealthy, and created more problems than it solved.

Like all modernizing countries with large rural populations, such as India and China, Japan

was hobbled by an economy with two distinct sectors: one was defined by modern

technology, a high ratio of capital to labor, and high worker productivity and wages; the other

had all the opposite traits. Rapid, unbalanced economic growth aggravated the innate

inequities of the dual structure, which in Nakayamas vision had serious political

consequences. Countries that develop without drawing large parts of the rural population into

the modern sectors of the economy were prone to social unrest and authoritarian regimes.

Nakayama knew this from bitter experience of the war that Japan, beset by severe internalcrises in the 1930s, had subsequently waged against many Asian countries and the United

States. Accordingly, he was keen to see postwar Japan develop an open, egalitarian, and

pacifist democracy.

Largely due to the macroeconomic approach of Nakayama and his colleagues, which

emphasized labor over capital productivity and technical training for people moving out of

the agrarian economy, Japan achieved sustained growth for close to two decades. Helped

considerably by American procurements during the Korean War and infusions afterward ofaid, investment, and technological innovations, Japan then turned into a major exporter of

goods and capital to East and Southeast Asia. Japan also became an example to the region

with its land reforms, industrial policy, well-designed state intervention in markets,

investments in education and health, which created a skilled and productive labor force, and

economic nationalismthe features that when carefully adopted helped in the remarkable

economic emergence of such countries as South Korea, Singapore, Taiwan, and Thailand.

Most of these developing states in East and Southeast Asia, however, came late to electoral

democracy. Indias own, much greater, challenges in the previous half-century are highlighted

by the fact that this bewilderingly diverse and oppressively hierarchical society set out in the

late 1940s to simultaneously build, without possessing much basis for either, an egalitarian

democracy and a modern industrial economy. Decades of colonial rule had damaged India,

saddling it by 1947 with an underproductive agricultural economy, a weak industrial base, and

extremely low levels of literacy (27 percent for men, 9 for women). Even more urgently

than their counterparts in Japan or South Korea, Indian leaders had to be sensitive to the

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needs of the poor, especially those among the low castes, and improve their capacities to

build the basis for both an equitable society and sustained economic growth.

In the early decades, India did make some gains in heavy industry and agriculture.

Investments in higher education created, among other things, generations of highly skilled

upper-caste Indians, many of whom can be found today in senior corporate and university

positions in the West. Poverty failed to decline appreciably despite Indian economicplanners obsession with growth. As the Columbia University economist Jagdish Bhagwati

put it, looking back in 1985 at his work in the 1960s with Indias Planning Commission, their

basic theme, i.e. growth with a view to eliminating poverty was too optimistic.

ong-term investments in education and public health were needed. But in these primary

tasks, Indias rulers failed disastrously. Their breathtakingly conservative approach to

social services can be blamed, as Amartya Sen has often argued, on the elitist character of

Indian society and politics. Democracy in India, B.R. Ambedkar, the leader of Indias low-

caste Hindus and the main author of Indias constitution, famously warned, is only a top

dressing on an Indian soil, which is essentially undemocratic. Certainly, for people who

claimed to be, and are still often mistakenly derided, as socialist, Indias rulers neither

matched the educational accomplishments of some socialist countries, nor did they help

unleash, like their counterparts in South Korea and Japan, entrepreneurial energies in the

countrys protected private sector, which accounted for the bulk of manufacturing output.

Instead of making the public sector more accountable, they imposed, as Bhagwati has often

lamented, irrational restrictions on business, spawning the license-permit Raj that mostlyenriched corrupt politicians and officials.

The liberalization of the Indian economy in 1991, and successive governments increased

business-friendliness, inspired fresh hopes that Indias extreme inequalities could be

alleviated. Indias economy had grown, moving from a rate of 5 percent in the 1980s to

nearly 10 percent until slowing down dramatically to less than half that rate in recent months.

InIndia in Transition: Freeing the Economy(1993), Bhagwati was among the first to hail

his old college friend Prime Minister Manmohan Singh, then the finance minister, for

leading India to a fresh tryst with destiny. By then Bhagwati had turned into, in his own

words, the worlds foremost free-trader. Claiming to be the intellectual inspiration behind

the 1991 reforms, he declared, We are finally in the spring of hope.

The period after 1991 did manifest some vivid and impressive signs of Indias transformation

by consumer capitalism. Helped by cheap credit, Western brands finally became accessible

to a middle class long starved of them by an economic regime that substituted Indian

products for imports. Many of Indias old corporate families, such as Tata, acquired major

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international companies. The potential size of Indias market1.2 billion consumers

managed to provoke a great deal of hype among hopeful businessmen, boosterish investment

consultants, financial journalists, and day-tripping columnists in the West. (Interestingly,

Chinese commentators and investors as- sessed Indias progress much more soberly.)

Yet today Indias economy manifests more serious impediments to widespread growth than

any of the other Asian economies. Economic growth has been led by the services sectoraloose category that includes information technology, telecommunications, banking, and real

estate and contributes nearly 50 percent to the GDPrather than manufacturing, which has

powered the growth of other East Asian economies. Agriculture, which still employs a

majority of Indias population, remains stagnant. A small, well-educated workforce enjoys

rising salaries, but there have been only very small increases in wages and productivity for

people trapped in the bottom half of the dual economy: agriculture and the so-called

informal or unorganized sector, which employ more than 90 percent of Indias labor

force.

The bulk of Indias aggregate growth, the Cornell economist Kaushik Basu warns, is

occurring through a disproportionate rise in the incomes at the upper end of the income

ladder. By 2010 Indias one hundred wealthiest people had increased their combined worth

to $300 billion, a quarter of the countrys GDP. Recent corruption scandals involving the

sale of billions of dollars worth of national resources such as mines, forests, land, water,

and telecom spectrums reveal that crony capitalism and rent-seeking, rather than

entrepreneurial dynamism and innovation in a free market, are the real engines of Indiaseconomic growth.

Furthermore, to a large extent this growth does not create jobsan alarming fact about an

overwhelmingly youthful country that adds 12 million to the workforce each year and whose

present economic pattern obliges it to move many millions more to urban areas from a

crisis-ridden agricultural sector where hundreds of thousands of farmers have committed

suicide in recent years. According to a widely cited report by Michael Walton, an economist

at Harvard University, the quality and distribution of Indias rate of GDP growth are

structurally disequalizing, i.e., causing more inequality. Its not only that India isnt

overflowing with Horatio Alger stories, as The Wall Street Journalput it. It is also

developing all the ingredients necessary for a Latin Americanstyle oligarchy.

hy Growth Matters, however, is a passionate case for more privatization and

liberalization, and less protection for labor. Bhagwati and Arvind Panagariya, who holds

a professorial chair named after his coauthor at Columbia, claim that India has already been

transformed from a basket case into a powerful engine of growth. They are convinced that

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faster growth and freer markets remain the best remedy for poverty, inequality, pollution, and

ill-health.

A contrasting viewthat there is something defective in Indias path to development

and a very different list of priorities appear inAn Uncertain Glory: India and Its

Contradictions. Amartya Sen and his frequent collaborator, the Belgian-Indian economist

Jean Drze, acknowledge that aggregate economic growth is important for generating publicrevenue, which can be used to reduce poverty. But it is only one of many different concerns

that need attention.

Amartya Sen has never wavered from his belief that, as he wrote in these pages in 1983,

growth rate is a very daftand a deeply alienatedway of judging economic progress. Sen

and Drze warned as early as 1995 that reforms that boost growth, though important, were

not enough to improve the living conditions of the poorest, let alone dismantle caste and

gender hierarchies and generate employment. They have to be supplemented, they wrote,

by a radical shift in public policy in education and health. Brazil, for instance, grew only 1

percent compared to Indias 5 percent from 1993 to 2005 but reduced poverty much faster.

Bangladesh, which is only half as rich as India measured by per capita income, now exceeds

India in, among other social indicators, life expectancy, child mortality, and immunization.

And China, by investing a greater proportion of its revenue in education, health, and nutrition,

has created a more solid basis for economic growthalthough Sen has often pointed out that

under Chinas authoritarian system, in which public criticism is suppressed, such

catastrophes as the death of over 30 million people by famine could take place.

Hoping to present material for informed and reasoned public engagement, Sen and Drze

carefully explain such issues as health care, education, corruption, lack of accountability,

growing inequality, and their suppression in Indias elite-dominated public space. It is only

the poor record and capacity of the Indian government that make one question their advocacy

of urgent state action on behalf of the poor.

The 2011 census revealed that half of all Indian households have to practice open defecation.

Nearly half of all Indian children are underweight (compared to 25 percent in sub-SaharanAfrica), and as Sen and Drze point out, despite a rise in literacy rates, a large proportion

of them learn very little at school. Almost all Indians buy health services from private

providers, exposing themselves to crippling debt as well as quackery. Inequalities have

widened between classes, regions, and rural and urban areas. More worryingly, they seem

unbridgeable owing to the lack of adequate education and public health. Not surprisingly,

poverty declines very slowly in India, slower than in Nepal and Bangladesh, and unevenly.

Calorie and protein intake among the poor has actually dropped.

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Subir Halder/India Today Group/Getty Images

Amartya Sen and Jean Drze, 2009

India today, the historian Ramachandra Guha writes,

is an environmental basket-case; marked by polluted

skies, dead rivers, falling water-tables, ever-

increasing amounts of untreated wastes, disappearing

forests. Meanwhile, as Sen and Drze write, the

largely corporate-owned media, deeply indifferent to

poverty and inequality, and reflexively intolerant of

any remedial action by the government, produce an

unreal picture of the lives of Indians in general by

celebrating the fame and wealth of billionaires and

cricket and Bollywood stars.

Indeed, perennially aggrieved columnists and TV

anchors have a crucial part in the deeper drama in

India, according to the political scientist Atul KohliinPoverty Amid Plenty in the New India(2012).

That drama is one of an elite that expands and is

entrenching itself. Increasingly impatient with the

rules and ethics of democracy, Indias ruling class

today consists, as C. Rammanohar Reddy, editor of

The Economic and Political Weekly, defines it, of

large Indian businesses, the new entrepreneurs in real

estate, finance, and IT, the upper segment of theurban middle classes, the upper echelons among the bureaucracy, and even large sections of

the media.

Whats immediately striking about this class of the relatively affluent is the degree to which

it shares the same interests and beliefs, and its reflexive hostility to government spending on

welfarealthough political parties feel particularly obliged to indulge in such spending

before elections. But the conservative rhetoric about buoyantly self-reliant entrepreneurs

hides the fact that, as Kohli writes, the Indian state since the 1980s has been pro-businessrather than pro-market, responsible both for the dynamic forces at the apex of Indias

economy and the failure to include Indias numerous excluded groups in the polity and the

economy.

This collaborative capitalism, of which Narendra Modi, the Hindu nationalist chief minister

of Gujarat, is the most egregious exponent, consists of the state extending tax benefits to

Indias largest businesses and facilitating their cheap access to national resources of oil, gas,

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forests, and minerals. In turn, the disproportionate control over economic resources,

Kohli writes, enables businessmen to buy politicians, shape decision-making through the

media, and even enter politics themselves.

major voice in the echo chamber of Indias elite belongs to rich and powerful Indians

abroad, especially in the United States, many of whom were naturally enthusiastic about,

and now wish to direct, the progress of the poor country they had to leave in the 1960s and1970s. Their reestablished links with the old country have underpinned the new strategic and

economic relationship between India and the United States. This diaspora has promoted a

friendly image of India, Bhagwati and Panagariya write in their new book, and with their

analysis and advocacykept pressure in favor of continued reforms. Indeed, one of the

most distinguished figures of this impressively credentialed Indian-American elitewhich

includes the venture capitalist Vinod Khosla, Vikram Pandit, the former CEO of Citibank, and

(until his conviction on insider trading) the investment banker Rajat Guptais Jagdish

Bhagwati himself.

Educated at Oxford and Cambridge, together with Manmohan Singh, Bhagwati worked with

Amartya Sen at the Delhi School of Economics before moving to the United States in the

1970s. In the changing ideological climate of Anglo-America in the 1980s and 1990s, he

emerged as a major advocate of free trade and globalization. We were economic theorists,

he recalls in his new book, and later turned to policy analysis that would help transform India

and the world. His pioneering work on trade policy became central in shaping the Anglo-

American assumption, also known as the Washington Consensus, that was the dominantideological orthodoxy before the economic crisis of 2008: that no nation can advance

without reining in labor unions, eliminating trade barriers, ending subsidies, and, most

importantly, minimizing the role of the government. From his perch at Columbia and the

Council on Foreign Relations, Bhagwati has provided intellectual authority and sustenance to

those who think that India, by prioritizing wealth-creation over health and education, can

become a role model for other developing nations.

Adversity in this endeavormanifested by Indias falling growth rate as well as rising

inequality and violenceseems to have made Bhagwati particularly cross with his fellow

Oxbridge-educated Indian economists who are still riding the bus that he and Manmohan

Singh, he claims, have gotten off. They fancied themselves, he writes in one of the books

many polemical asides, as Rosa Parks; in truth they were just intellectually lazy and

unwilling to learn from the ruin they had visited on India and its poor.

The people Bhagwati considers intellectually lazy or dishonest are a diverse lot. In his new

book, he accuses Joseph Stiglitz and George Soros of practicing Jurassic Park Economics

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and derides the works of Dani Rodrik, the well-known economist at the Institute for

Advanced Study, as hollow. He has denounced Oxfam as well as Muhammad Yunus, the

Bangladeshi economist who won the Nobel Peace Prize for promoting micro-credit ventures

among the poor. But no one has impersonated Rosa Parks more vexingly in Bhagwatis mind

than his former colleague Amartya Sen.

Why Growth Mattersprovides further variations on Bhagwatis insistent complaint that Senhas used his prestigious Nobel Prize as a weapon of mass destruction against Indias

potential for economic growth. Much of the book consists of an attempt to mock and

repudiate Sen and Drzes ideas, even where the two are not named; it then deplores what

Bhagwati and Panagariya see as the sentimental liberalism embodied by such institutions as

the World Bank and the World Health Organization.

Were health and education neglected during Indias early decades? Not at all, the authors

assert. Slow growth and limited revenues were to blame. Does India today resemble

Americas Gilded Age in the privileges of its upper classes? The allegation is not

persuasive. What about inequality? When mobility is high, as they claim it is in India, the

poor may react by celebrating the conspicuous inequality. Is India doing worse than

Bangladesh in human development despite its much higher growth? These inferences are

plain wrong. What about corruption? The reforms Bhagwati advocated bid good-bye to

many forms of corruption. Does the decline in Indian calorie consumption, as shown by

WHO statistics, reflect increased hunger and poverty? The decline could be due to a shift

from coarse grains to rice and fruits. In any case, Bhagwati and Panagariya add, withoutsaying how it can be done, malnourished families should be shifting their diet to more milk

and fruits.

There is much about this shadow-boxing that makes one wonder if Bhagwati, moving like

many intellectual elites between the bubble of universities and think tanks and the private

hothouse of professional rivalry, has lost touch with how the other halfor the 99 percent

lives.

Bhagwati and Panagariya dont examine in any depth the nature or likely sustainability ofIndias economic growth, which, based primarily on extractionof natural resources and

cheap labor and foreign capital inflowsrather than high productivity and innovation, seems

to have run up against its built-in limits. They urge India to develop more Chinese-style

low-skilled, labor-intensive industries. They are right to blame mindless regulation for

Indias lost lead over a smaller and poorer country, Bangladesh, of clothing export. But then,

investors keep shifting factories to low-wage countries because of the mobility of capital and

the fierce trade competitiveness that Bhagwati recommends as a sure formula for

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prosperity. His fervent advocacy on behalf of Indias potential clashes with the fact that

globalization can shrink a nations comparative advantage pretty quickly, and, even when

usefully deployed, can entrap late-industrializing national economies in low income.

Why Growth Mattersdoes offer some practicable improvements to Indias poor social

infrastructure, for example, training programs for nurses and collectively insuring residents

of rural regions against major illnesses. But too many of its recommendations seemindistinguishable from the talking points of Paul Ryan: the authors advocate vouchers for

schools and hospitals, and targeted rather than universal health coverage. As for extensive

environmental destruction, the correct way to diagnose this issue is to say that we have a

missing market regarding pollution. How such a market could come into effect and reduce

pollution they do not make clear.

Predictably, Bhagwati and Panagariya propose direct cash transfers for performance of

specific jobs rather than guaranteed wage employment in public works. Exemplifying another

right-wing article of faith, they admire the weakness of labor unions in not only Taiwan,

South Korea, and China, but also Bangladesh, which allows firms to hire and fire workers

under reasonable conditions and maintain a balance between the rights of both workers and

employerswords that would have sounded bizarre even before the collapse in April this

year of a garment factory in Dhaka that killed more than a thousand workers, exposing yet

again the slave-labor conditions of many unprotected toilers in the globalized economy.

ooking back at the conversation between Nakayama and Reischauer, and its echoes in

Bhagwatis disagreements with Sen, it seems clear that for postwar Japanese economists

and policymakers, eliminating poverty and reducing inequality were profoundly political

and ethicalchallenges. Writing in the early 1970s, Reischauer seemed to concede the

argument to his Japanese interlocutor by admitting a broad causal relationship between

imbalanced growth and eventual instability.

Nakayamas implicit argumentthat high economic growth can empower an insular, selfish,

and antidemocratic elite in an unequal societyseems particularly applicable now to a

cruelly stratified country like India, where, as judges of the Indian Supreme Court recentlyput it, predatory forms of capitalism, supported and promoted by the State are pushing the

poor to the wall. This is exemplified vividly by the tribals protesting their dispossession by

mining companies and local governments in central Indiapeople often led by armed

Maoists.

Rising social unrest is making an insecure Indian elite gravitate to such hard-line leaders as

Narendra Modi, whose well-advertised toughness with labor unions and PR-enhanced

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business-friendliness make him the preferred choice of many corporate leaders, economists,

and commentators as Indias next prime minister. Bhagwati, for instance, has described

Modi as a positive role model with an unblemished record of personal integrity. As chief

minister of Gujarat, Modi was allegedly complicit in the killing of over a thousand Muslims

there in 2002 and was barred from traveling to the United States as a result. But he still

embodies managerial efficiency and iron discipline to those disturbed by the political

assertiveness of the poor and the disaffected.

In fact, the political energies of the hundreds of millions of the poor and disaffected are still

underdeployed. Could they lead to a more accountable and responsive state and, in the long

run, to a more egalitarian and democratic India? Sen and Drze seem convinced that the poor

themselves rather than technocratic elites can help remove poverty and inequality by keenly

participating in the public sphere.

This bottom-up democratization may seem like a remnant of modernization theory. And

Sen and Drze offer no clear vision of the economicas distinct from politicalprocess

that would help their cause of equity, and also check environmental destruction. But the poor

in India still have a great capacity to aspire, as the social anthropologist Arjun Appadurai

claims in his new book. And their collective efforts can make the state more accountable

and efficienta possibility that Bhagwati and Panagariya ignore while lamenting the states

incapacity and corruption. In the state of Tamil Nadu, for instance, mobilized lower-caste

groups not only achieved political power. They also, as Sen and Drze have written,

established a social infrastructureschools, health centers, roads, public transportthat isnow envied across India. Sen and Drze also reveal how democracy in its simplest

manifestation, the scramble for votes, can drive successful implementation of welfare

programs such as the Public Distribution System. They see more hopeful signs in the

recent mass agitations against corruption and violence against women.

Many observers of India are generally impressed by the procedures of Indian democracy,

with its routine elections. India, Bhagwati and Panagariya assert, has all elements of a liberal

democracy with the poor and the underprivileged having access to effective politics at the

ballot box. But as Sen and Drze point out, the success of a democracy depends ultimately

on the vigor of its practice. Certainly, creeping authoritarianism of the kind witnessed in

India can make political reform from below seem more urgent than economic engineering

from the top. Educate, agitate, and organize, the disenchanted low-caste author of Indias

constitution B.R. Ambedkar exhorted. Many more Indians will have to exercise these

democratic rights if they wish to transform the profoundly damaging elitist character of

Indian society and politics.

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For a fascinating discussion of the challenges confronting postwar Japanese economists, see Laura E. Hein, In Search of Peace and

Democracy: Japanese Economic Debate in Political Context, The Journal of Asian Studies, Vol. 53, No. 3 (August 1994).

Nakayama suspected that the ruling elites pathology of endless growth had led his country into domestic repression and external

aggression. Reischauer, like all teleological-minded modernizers, was inclined to see Japans aggression as a blip on its way to the

modern world, one caused by bad decision-making and aberrant militarism. Such a view was in line with the American attempt topresent Japan as an exemplar of benign Westernization to non-Communist Asia during the height of the cold war. This

normalization of Japan extended to whitewashing the war crimes of Emperor Hirohito. Many scholars of p re-1945 Japan did not

buy the Reischauer Line, as the evolutionary modernization argument was subsequently called. An early and prominent dissenter

was the Canadian diplomat E.H. Norman, who pointed to the facts of uneven development and widespread poverty in pre-war

Japan. See John W. Dower, E.H. Norman, Japan, and the Uses of History in Ways of Forgetting, Ways of Remembering: Japan in

the Modern World(New Press, 2012).

The debate between Reischauer and Nakayama took place just before economic growth in Japan began to reveal its costs, provoking

a strong down with GNP protest movement. Environmental spoliation and urban overcrowding on a large scale mocked the

original goal of raising living standards. The dualism Nakayama feared did vanish, but it reincarnated itself in gaps between

permanent and temporary jobs, male and female workforces.

A classic account of Japans economic rise is Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy,

19251975(Stanford University Press, 1982).

For an insightful analysis, see the articles in The Political Economy of the New Asian Industrialism , edited by Frederic C. Deyo

(Cornell University Press, 1987), esp ecially the one by Bruce Cumings. A more journalistic and contemporary account is in Joe

Studwell,How Asia Works: Success and Failure in the Worlds Most Dynamic Region(Grove, 2013).

The uniqueness of this experience is best illustrated by the fact that much of Europe introduced universal suffrage and social welfare

programs in the early twentieth century after building a capitalist and industrial economy, const ructing a bureaucratic state, and

achieving a degree of prosperity. Democracy in India, promulgated before the preconditions for it existed, has seemed to hamper

both economic growth and national cohesionone reason why many in the countrys middle classes revere such authoritarian figures

as Singapores Lee Kuan Yew.

Much scholarship has been devoted to the destruction of Indias vibrant eighteenth-century economy by British imperialists. Some

new evidence is p resented in Prasannan Parthasarathi, Why Europe Grew Rich and Asia Did Not: Global Economic Divergence,

16001850(Cambridge University Press, 2011).

Deepak Nayyar argues that Indias economic performance in the 1950s, 1960s, and 1970s was a great departure from the past , and

not much inferior to that of comparative countries. See Deepak Nayyar, Indias Unfinished Journey: Transforming Growth into

DevelopmentModern Asian Studies, Vol. 40, No. 3 (July 2006). For a panoramic account, see Stuart Corbridge, The Political

Economy of India since Independence inRoutledge Handbook of South Asian Politics: India, Pakistan, Bangladesh, Sri Lanka, and

Nepal, edited by Paul R. Brass (Routledge, 2010).

For a full account of the making of this elite that the writer Vijay Prashad calls t wice blessed, first by Indias world-class

institut ions and then by immigration reform in the United States, see Anita Raghavan, The Billionaires Apprentice: The Rise of the

Indian-American Elite and the Fall of the Galleon Hedge Fund(Business Plus, 2013).

Dependence and Interdependence: Essays in Development Economics, Vol. 2, edited by Jagdish Bhagwati and Gene M. Grossman

(Basil Blackwell, 1985).

For a skeptical view of Indian socialism, see Kaushik Basu, The Enigma of Indias Arrival: A Review of Arvind Virmanis


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Propelling India: From Socialist Stagnation to Global Power,Journal of Economic Literature, Vol. 46, No. 2 (June 2008).

The socialist Indian state is commonly blamed for putt ing Indias economy into a prot ective straitjacket, and for a feeble industrial

policy that led to Indias failure to capitalize, along with East Asian economies, on the new openings for world trade in the 1970s.

Vivek Chibber, among others, has argued that Indian industrialists successfully campaigned against state-led development of the kind

South Korea benefited from. SeeLocked in Place: State-Building and Late Industrialization in India(Princeton University Press,

2003).

Bhagwati helped seed the euphoric notioncommonplace now among most commentators on South Asiathat India began to move

out of decades of socialist stagnation after seeing in 1991 the light of free trade and globalization. In fact, growth had started

accelerating in the 1980s, helped by the governments pro-business reforms. Irrational exuberance in the West, and effective

networking at such forums as Davos by Indian politicians and corporate chieftains, account for the breathless and repetitive

descript ions of India as a t iger economy in recent years. There was litt le reason to compare it to Chinas immensely larger, more

productive, and broad-based economy.

The overall share of manufacturing in the GDP has stagnated at 16 percent. It part ly accounts for Indias tiny 1.4 percent share of

world trade, compared to Chinas 15 p ercent.

Despite its serious flaws, China has managed relatively smoothly its structural transformation from an agrarian to an urban, labor-

intensive economy. In India, jobs in manufacturing as well as agriculture have actually shrunk in the previous decade. Theconstruction sector has absorbed many of the disp laced job-seekers, but they will be unemployed again when the real estate boom

ends. See Hans P. Binswanger-Mkhize, The Stunted Structural Transformation of the Indian Economy, The Economic and

Political Weekly, June 29, 2013.

Wages in Chinas manufacturing sector have grown by 12 percent since 2000, compared with 2.5 percent in India. There are also

more workers without social security than before in Indias organized industrial sector. Thus, economic growth has not benefitted

even employed workers, let alone the vast majority of the unemployed and unemployable. See Himanshu, Growth Versus

Redistribution,Mint, July 19, 2013. The social anthropologist Jan Breman, a long-standing observer of Indias uniquely large

informal economy, writes p ercept ively in his new book about the abysmal working conditions of the p oor in Gujarat, a high-

growth state. SeeAt Work in the Informal Economy of India: A Perspective from the Bottom Up(Oxford University Press, 2013).

Basu is a former economic adviser to the Indian prime minister Manmohan Singh. See his Indias Dilemmas: The Political Economy

of Policymaking in a Globalised World, The Economic and Political Weekly (February 28, 2008).

SeeIndia: Economic Development and Social Opportunity (Oxford University Press, 1996), p. 16.

See his essay Press Freedom: Who Is It Good For?, to be published in the autumn issue ofIndex on Censorship.

The measurement and estimates of poverty are vigorously contested. But it is fair to say that by even the most conservative

estimate, the absolute number of poor in India is enormous, and may exceed the entire population of the United States. See Sabina

Alkire and Suman Seth, Multidimensional Poverty Reduction in India between 1999 and 2006: Where and How?, Oxford Poverty

and Human Development Initiative Working Paper No. 60, March 2013. Increasing inequality only slows down the rate of poverty

reduction. See Himanshu, Poverty and Inequality in IndiaII: Widening Disparities during the 1990s, The Economic and Political

Weekly, Vol. 39, No. 39 (September 25October 1, 2004).

See Harsh Mander,Ash in the Belly: Indias Unfinished Battle against Hunger(New Delhi: Penguin, 2012).

The recent floods in Himalayan valleys, which claimed thousands of lives, focused international attention on illegal deforestation,

construction, and mining, and feckless dam-building. The World Bank estimates that environmental damage reduces Indias GDP by

5.7 percent. The figure would be greater if it took into account the loss of livelihoods of millions of Indians who depend on forests,

farms, rivers, coasts, and grasslands. For an eye-opening account of environmental depredation in India, see Aseem Shrivastava and

Ashis Kothari, Churning the Earth: The Making of Global India(Delhi: Penguin, 2012).


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Though, according to a new report by the Asian Development Bank, India spends less than Nepal and Timor-Lesteonly 1.7

percent of its GDP on health, income, employment, and other forms of social protection. As Sen and Drze point out, affluent

Indians p rotesting against the right-to-food bill that would annually cost Rs. 27,000 do not object to t he tax exemption on diamond

and gold import s that annually costs the Indian treasury more than Rs. 57,000 crores a year, or the even more wasteful subsidies on

diesel fuel that benefit the rich. The advocacy by Sen and Drze of social services, and their opposition to Narendra Modi, have

provoked many angry at tacks on them in the corporate-owned media, including the baseless charge of charlatanry. See R.

Jagannathan, Food Bill: Amartya Sens Charlatan Economics Debunked,Firstpost, July 10, 2013.

Such incentives make it harder for the government to raise the revenues needed for public spending. Also, the possibility that they

may not be enhanced, or even withdrawn, provokes Indian businessmen to look elsewhere for greater profits. Indian beneficiaries of

both the old protectionist and new crony capitalist regime such as Birla and Ambani are now putt ing the bulk of their investments

abroad.

The pecuniary logic of the free market is redefining Indias journalism as well as politics. In 2010, Indias leading television

personalities were caught on tape offering their services to business lobbyist s. The managing editor of the Times of India, Indias

biggest English-language newspaper, which pioneered the phenomenon of paid news, recently told The New Yorkerthat we are

not in the newsp aper business, we are in the advertising business. The Press Council of India, a monitoring body, commissioned

and then tried to suppress a report on p aid news. It can be read at www.outlookindia.com/article.aspx?266542. Investigative

reports on corporate-political skullduggery or police brutality are confined to small-circulation magazines such as such as Tehelkaand Caravan. In one of Indias most recent scandals, the government raised gas prices in order to benefit one of the Indias largest

corporations, Reliance, and its global partner, British Petroleum. The corporate-owned media as well as the main opposition parties

stayed conspicuously silent. See Anuradha Raman and Prarthna Gahilote, Lips and Purse-Strings, Outlook India, July 15, 2013.

Briefly, in the 2000s, India seemed to have replaced Japan in the American strategic imagination as an exemplary Asian democracy

with p ro-American elitesone that can be usefully counterposed to authoritarian China.

The intellectual synergy that creates t he elite consensus about reforms in India is now subsidized by conservative American think

tanks such as the American Enterprise Institute, the Cato Institute, and the Peterson Institute, which employ economists and

journalists of Indian origin and ancestry .

Full disclosure: in a speech to the Indian parliament, Bhagwati described my October 2010New York TimesOp-Ed on rising

inequality, farmer suicides, and Maoist insurgency in India as fiction masquerading as non-fiction.

More recently, Bhagwati has compared Sen, unfavorably, to Mother Teresa.

Arvind Panagariya has attempted to prove that malnutrition rates in India are based on faulty WHO methodology and that Indian

children are genetically programmed to be short. See Does India Really Suffer from Worse Child Malnutrition Than Sub-Saharan

Africa?, TheEconomic and Political Weekly, M ay 4, 2013. Also see a rebuttal of Panagariyas argument by several economists in

The Economic and Political Weekly, August 24, 2013.

For a sobering analysis, which claims that Indias economic boom, part of a worldwide expansion before the crisis of 2008, and led

by debt and exceptional flows of foreign capital, was unsustainable, see R. Nagaraj, Indias Dream Run, 20032008: Understanding

the Boom and its Aftermath, The Economic and Political Weekly, May 18, 2013.

As Thomas Friedman put it in his inimitable fashion, if you are a little too slow or too costly...you will be left as roadkill before

you know what hit you.

Even Walmart now calls Bangladeshs working conditions unacceptable. See Jim Yardley, Bangladesh Pollution Told in Colors

and Smells, The New York Times, July 14, 2013. On Indias own unsafe work sites, see the series of articles by Maitreyee

Handique forMint, including Damage Done, But Damages Stay Unpaid, October 8, 2009.

What Went Wrong? inDilemmas of Growth in Prewar Japan, edited by James William Morley (Princeton University Press,


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1971).

An estimated 10,000 to 20,000 armed Maoists are active in one third of Indias districts. The governments resp onse is borrowed

from its counter-insurgency measures in Kashmir and the northeastern states. But the show of brute force in affected parts of central

India by p aramilitaries and p rivate militias makes the s ituation even worse.

For a revealing profile of Modi by Vinod K. Jose, one of Indias best journalists, see The Emperor Uncrowned: The Rise of

Narendra Modi, The Caravan, M arch 2012. Also see Christop he Jaffrelot, Gujarat Elections: The Sub-Text of Modis

HattrickHigh Tech Populism and t he Neo-middle Class, Studies in Indian Politics, Vol. 1, No. 1, (June 2013).

As in p re-war Japan, and many other countries, the elites quest for p ower expresses itself as a preference for a hardline state.

The Future as Cultural Fact: Essays on the Global Condition (Verso, 2013).

For more links between political enlightenment, democratic mobilization from below, and egalitarianism, see Kohlis Poverty Amid

Plenty in the New India, with its comparative studies of West Bengal, Uttar Pradesh, Kerala, and Gujarat.

According to the Planning Commission, poverty rates in rural areas, esp ecially those in states with low growth rates, have declined

faster than in urban India due to increased government spending on welfare programs.

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