India is emerging as an important economic & political force on the world stage while remaining an intensely religious, spiritual and, in some ways superstitious society – unusual by the standards of many countries.

India’s economic engine is not principally powered by its factories or the manufacture of physical products but by its competitive service industries. India’s service sector has an economic weighting that gives it more in common with mature developed economies, such as the US or Britain.

India produces more engineering graduates than America. But it has only 24 PCs for every 1000 people, & fewer than 3 broadband connections. China has 3 times that figure. Indians do not use much software — they bought only $1.6 billion-worth last fiscal year — & when they use it they do not pay for it. India’s path is idiosyncratic. The skills demanded by its industries are those of a much richer country.

India’s exports of its own software – or licensing of its own intellectual property (IP) amounted to about $450 million last year, a tiny fraction of its service exports. India writes software, but rarely owns the result. India makes drugs, but copies almost all of the compounds. Indians invest in just enough know-how to exploit the rest of the world’s discoveries. Indians enjoy some of the world’s cheapest medicines.

India must go beyond renting out IQ & start creating IP. The so-called “body-shopping” model — dispatching Indian engineers to work on the site of an American or British client first established itself in 1978 after IBM quit India. At that time, it was easier to export an Indian programmer to an American computer than it was to import the machine to India. But India’s traditional fear of multinationals has eased in recent years.

India could resolve not to invent another thing, & still prosper mightily. It does not even have to catch up with he world; it has much to gain merely by catching up with itself. A report by the World Bank (“Unleashing India’s Innovation”) cast its eye over thousands of Indian enterprises – makers of drugs, foods, car parts & textiles, as well as metal bashers & garment weavers. In each industry it found a thick clump of unproductive companies operating far behind the industry’s vanguard. In garment making, for example, the bank found a few highly productive companies, in which the value added per worker was over 600,000 rupees in 2004. But in over 60% of the industry, that figure was less than 100,000 rupees. Even ignoring the very best firms the bank still found a leading group in each industry that was about 5 times as productive as the average firm. It calculates that India’s national output could be 4.8 times bigger than it is if only enterprises were” to absorb & use the knowledge that already exists in the economy.”

But India is not on autopilot to greatness.

The country was partitioned in 1947, sparking riots that killed up to a million people & triggering the movement of twelve million.

In India things happen when you least expect them. And vice versa. It is a constant source of both delight & frustration.

Most Indians remain proud of their nuclear status, since it proves they can accomplish technological feats without much help or encouragement from outside. In contrast , most of Pakistan’s nuclear technology comes straight from China. It also puts India in the same league as the major players, not to be confused with aggression. India has no unfinished business. India’s emergence as a stronger economic & military power over the next generation is much likelier to add to, rather than subtract from, global stability.

In the last 30 years India has been through a 19 month spell of autocracy, it has lost 2 leaders to assassination, it has faced separatist movements in Punjab, Kashmir, Assam & elsewhere, it has switched from a closed economic regime to an open(ish) economy. It has moved from secular government to Hindu nationalist government & back again, it has gone from single party rule to 24 party rule, from anti-nuclear to nuclear, from undeclared border wars with Pakistan to a lengthy peace process. It has also moved from a virtual bankruptcy to a lengthy boom. By any normal barometer, India appears to be highly unpredictable.

Between 1947 & 1989 India had just 6 prime ministers. Between 1989 & 2004, it had seven.

The grim statistics (written in 2006) :

  • Almost half of India’s women are illiterate.
  • A third of the world’s chronically malnourished children live in India.
  • Average life expectancy lags behind China.
  • 750 million Indians live in 680,000 villages, almost half of which lack access to all-weather roads.
  • Countless children are not in reach of effective primary healthcare centres or competent elementary schools.
  • India’s average growth rate of just over 3.2% between 1950 & 1980 has been labelled the ‘ Hindu rate of growth’ since it was barely higher than the country’s population growth of 2.3%. ( But it was a sharp improvement on the average 1% growth in the first half of the century under the British.)
  • In 2001, more than a third of India’s rural households depended on non-farm income for their livelihoods.
  • Gurcharan Das, former head of Procter & Gamble India wrote:”In my 30 years in active business in India, I did not meet a single bureaucrat who really understood my business, yet he had the power to ruin it.”
  • Almost a million Indian infants die of diarrhoea each year. India has 60m chronically malnourished children, 40% of the world’s total. In 2006 some 2.1m children died in India, more than five times the number in China.
  • India’s last instance of mass starvation occurred in the early 1940s under the British when millions died of hunger. The country’s record since independence stands in striking contrast to that of China, where up to 30 million perished during Mao Zedong’s “Great Leap Forward” in the late 1950s.
  • The proportion of Indians living below the official poverty line fell from more than 40% of the population in the 1980s to under 26% by 2001. But that still means that in 2006 almost 300 million Indians can never be sure where their next meal will come from. ( The statistics are varying: According to the World Bank, in 2005 some 456m Indians, or 42% of the population, lived below the poverty line.)
  • India’s failings have nothing to do with a lack of resources. Poorer countries such as Bangladesh & Botswana, have better human development indicators than India. New Delhi has enough funds not just to develop & maintain an arsenal of nuclear warheads but to embark on a race with China to send an unmanned space mission to the moon — something that both countries hope to achieve by 2010.
  • India spends less on primary healthcare as a proportion of GDP than almost any other developing country.
  • Up to 47% of India’s children who are under 5 years old are ‘chronically malnourished’ by UN standards.
  • India spends almost as much on defense than on all its anti-poverty programmes put together.
  • Up to half of subsidised food is stolen, & almost half of those who gain access to what is left do so fraudulently.
  • The backlog of suits in the courts amounted to 27 million cases in 2006. To remove a judge from the Supreme court, you need a 67% majority of votes in parliament, precisely what is needed to amend the constitution. Almost $75 billion is tied up in legal disputes. This is roughly 10% of India’s GDP in 2006.
  • About 2000 innocent Muslims were killed by Hindu militants in Gujarat in 2002.
  • Mumbai suffered its worst flood in decades after receiving a record 947 mm of rainfall in a single day.
  • Fewer than one in ten Bihari households have electricity; only one Bihari in ten can afford a scooter; and life expectancy is the lowest in India, with the average Bihari living 15 years less than a Keralite.
  • Kerala has a life expectancy of 74 & a literacy rate of over 90% compared to 70 years & 90% for China.
  • Indira Gandhi declared a state of emergency in June 1975 & abandoned democracy for 19 months. Indira shut down India’s independent media, imprisoned up to 100,000 political opponents & bypassed almost all the procedures of constitutional government during this period. It was India’s only real taste of autocracy in the modern era.
  • Some 65% of Indians live on agriculture, which accounts for less than 18% of GDP.
  • India is worryingly violent. A Maoist insurgency in eastern India, which Mr. Singh has called “the greatest internal security challenge we have ever faced” is an obvious ill omen.
  • Roughly 14m Indians are now being added to the labour market each year. Half of India’s people are under 24 & 40% under 18.  They cannot all work for Infosys. By one estimate, which may be optimistic, only 20% of job-seekers have any sort of vocational training.
  • About 27m Indians will be born this year (June 2009). Almost 2m of them will die before the next general elections. Of the children who survive, more than 40% will be physically stunted by malnutrition. Most will enroll in school but they cannot count on their teachers showing up. After 5 years of classes, less than 60% will be able to read a short story & more than 60% will be stumped by simple arithmetic.

The good statistics:

  • The fact that India’s middle classes speak fluent English has given India a huge competitive advantage over China in the services sector, where the ability to converse in the world’s business language makes a large difference.
  • India’s reserves of foreign exchange in 1991 were less than 1$ billion; by 2006 they had climbed to $140 billion. ( $ 316billion at the end of May 2008). This is as good a barometer as any of India’s new found spirit of confidence.
  • India’s software sector clocked up a milestone in 2003 when it earned more dollars that year than the entire cost of India’s oil imports.
  • Measured by quality if not quantity, many of India’s home-grown private sector manufacturers are considerably more impressive than their counterparts in China. In this respect India finds itself higher on the ladder than one would expect it to be. It is just that most of its population is standing at the bottom.
  • In the next 20 years the proportion of dependents to workers will fall from 60% to 50% of the population. This will give India’s economy a large “demographic dividend”.

In terms of scale, India can be measured only against China. In 2005 India employed just seven million people in the formal manufacturing sector, compared to more than a hundred million in China.

India has a culture of pluralism. China is also diverse, but it has one script, one official language & very little religious division. India has 18 official languages, several different scripts & deep religious & caste divisions.

Less than 7% of India’s dauntingly large labour force is employed in the formal economy, which Indians call the ‘organised sector’. That means that only about 35 million people out of a total of 470 million have job security in any meaningful sense; and only about 35 million Indians pay income tax, a low proportion by the standards of other developing countries.

Of the 35 million Indians with formal sector jobs – which are, to some extent, registered, monitored, measured & audited – 21 million are direct employees of the government. These are the civil servants, the teachers, the postal workers, the tea-makers & sweepers, the oil sector workers, the soldiers, the coal miners & the ticket collectors of the Indian government’s lumbering network of offices, railway stations, factories & schools.

This leaves 14 million working in the private ‘organised’ sector. Of these, just over a million – or about .25% of India’s total pool of labour – are employed in IT, software, back-office processing & call centres.

About half of India’s population is lower caste, in one form or other. If you add 150 million Muslims & the tens of millions who live outside their home-language area, more than half of India’s population is officially classified as ‘minority’.

Tamil Nadu is the most urbanised state in India, with almost half of its people living in towns. ( Bihar is the least urbanised with fewer than 10% living in towns.) 90% of Tamil Nadu’s 60 million people are literate, compared to just half of Biharis.

The RSS has between 2 & 6 million members, depending on whom you ask. Even the lower number would make the RSS the second largest political movement in the world after the Chinese Communist party. The RSS was founded in Nagpur in 1925 by K.B. Hedgewar, a medical practitioner. Whereas Congress was dominated by lawyers & journalists, the RSS was dominated by those with a scientific background. Both groups were almost exclusively Brahmin in their formative years. MS Golwalkar, perhaps the most influential Hindu nationalist of he twentieth century, was a zoologist; Balasaheb Deoras, the odd one out was a lawyer; Rajendra Singh was a physicist; and KS Sudershan is an engineer. Mr. Tupkary the editor of the RSS journal says:

“India was a developed society long, long, long before it was colonised by Muslims & Europeans. We had a developed economy thousands of years ago. We had demassified oil production, we had sophisticated medicine & science. We had a very high standard of living. Civilisation was born in India at least ten thousand years ago & from India it spread to the rest of the world. Hindustan is a microcosm of the universe. It contains every contradiction & tendency. Now history has turned full circle. Once again India is in a position to help the world.”

Christianity has been present in India since the first century AD, whereas Islam has been present since the eight century. The British learned the hard way that imposing its religious bias upon India’s population could be dangerously counter-productive. This is one reason why fewer than 3% of Indians were Christian in 1947 after more than 200 years of British rule ( and most come from communities that had converted to Christianity long before British rule began.) In contrast more than a third of Vietnam was Christian when the French left the country in 1954, less than a century after they had colonised it. An estimated 70% of the Indian Christians come from Dalit or Adivasi (tribal) backgrounds. But, instead of escaping their caste, they simply add another prefix: “Dalit-Christian” or “Dalit-Muslim”. In many cases including in Goa, Dalit Catholics have separate churches & separate cemeteries.

In practice only about 2 % Muslim men have more than one wife.

When a religious group objects to a book, a film or a piece of art because it allegedly offends their beliefs, New Delhi is quick to ban it. Salman Rushdie’s novel Satanic Verses was banned in the late 1980’s by Rajiv Gandhi because it supposedly insulted The Prophet Mohammed. A few years later the same author’s The Moor’s Last Sigh was banned because it lampooned Bal Thackeray, a Hindu nationalist leader in Mumbai. Barely a month goes by without some book or film being banned or censored. In the India of today the rights of everyone to freedom of expression are junior to the rights of priests & mullahs to protest on behalf of communities that have neither elected nor appointed them. India is certainly a plural country. But pluralism is not the same thing as liberalism.

New Delhi is one of the world’s largest metropolises, with a population of 15 million. It adds another million people every 3 years. It is India’s largest or 2nd largest city, depending on where you draw the boundaries. The other contender is Mumbai, which is governed by one of the most inept Congress administration in the country. Partly as a result of the contrasting qualities of the two, New Delhi has overtaken Mumbai as a magnet for new investment in the last few years. It is also the wealthiest part of India, with an average personal income that is double the national average In the 1990s few Indians would have hesitated if asked where they would prefer to live. Their answer would have been Mumbai. Now the answers would be more evenly split. Some credit for that should go to Sheila Dikshit. In March 2004 she opened the first 18-kilometre stretch of the New Delhi metro, a mostly underground rail network that, by the time it is completed in 2015, will have 225 stations covering almost every corner of India’s sprawling capital. Infrastructural leaps such as this can transform a city.

In some parts of India, particularly in the southern states, the sex ratio remains healthy at roughly one to one. Gujarat has fewer than 900 girls to every 1000 boys; Punjab has fewer than 800.

“Are you going to kill your daughter?” asks a television advertisement in Gujarat. Among the orthodox Jains of Gujarat, the ratio has fallen to 848 to 1000. These people have a religion that says that you cannot even harm a fly & yet they are killing off 15% of their daughters.

One of the principal accusations leveled at Muslims is that Islam discriminates against women. Yet Gujarat has a worse gender ratio than many Islamic countries, including Pakistan & Bangladesh.

Bollywood is expert at having its cake & eating it. It shows you some flesh but it always ends by disapproving such behavior. Mainstream cinema in India owes more to the catwalk than the drama school.

The rest of the world could learn a lot from India, among which tolerance, the management of diversity & the rooting of democracy in a traditional society loom large. Most people who sample Indian food, music, dancing, literature, architecture & philosophy acquire a lifelong taste for all things Indian. If world trade were to be conducted in purely cultural products then India would have a thumping annual surplus.

When India achieved independence many foreigners saw its diversity as a weakness. As we have seen, in some respects India’s social divisions do impose a cost on the governance of the nation. But diversity is also India’s greatest strength. Nowadays intellectual fashion has swung around to India’s point of view. The remarkable project in Europe to build a continental union of many races, nationalities, religions & languages was born as an idea only a few years after India came into existence as a nation. It has taken many centuries of bloodshed & slaughter – the like of which India has never experienced – for Europe to reach this conclusion. India can teach Europe, South-east Asia & other parts of the world a great deal about how to keep  a multinational, multi-ethnic entity together without imposing uniformity on its people or denying them basic freedoms.

There are 4 critical problems that India faces in the coming decades:

1. Challenge of lifting 300 million people out of absolute poverty & of providing the remainder with a more secure standard of living.

2. Overcoming the dangers of rapid environmental degradation.

3. Heading off the spectre of an HIV-Aids epidemic.

4. Protecting & strengthening of India’s  liberal democracy.

What to do?

  1. Improving agricultural yields.
  2. Liberalising India’s retail sector.
  3. More all-weather roads must be built to link villages & towns.
  4. Fewer that 50% of Indian births are assisted by trained midwives or doctors compared to 97% in China.
  5. Water harvesting to be improved as more than 70% of India’s rainfall runs off into the sea.
  6. Boost its tourist industry. At just 2.5 million visitors India had fewer tourists than Dubai or Singapore.
  7. India still has the most complicated tax system in the world.
  8. Indian managers spend 15% of their time dealing with government inspectors which is double that of China.
  9. Less than 10% of the population has life insurance.
  10. Fewer than 2% of Indians own their own vehicles. Yet India’s cities are already clogged with traffic.
  11. Every Indian needs a Delhi Metro.
  12. Only half of India’s village households have a power connection.
  13. The quality of air & water in India is declining as rapidly as the economy is improving. About an eighth of premature deaths are caused by air pollution.
  14. In 1900 a third of India was covered by forest; now it is a sixth.
  15. India is a paradox: it has an impressive democracy that is peopled, for the most part, by unimpressive politicians.
  16. There are an estimated 10-15 million illegal Bangladeshi immigrants in India already, and many more will come if Bangladesh cannot achieve stable, long-term economic growth. India must offer these countries an incentive to maintain social stability by giving their exporters generous access to India’s vast domestic market.