Voting for India’s 16th parliament commenced on 7 April, with votes to be counted from 16 May. The process takes over a month because Indian security forces have to move from place to place to prevent any outbreaks of electoral violence.
Many people have now heard about Narendra Modi and many are concerned about the possibility of his becoming India’s Prime Minister. Modi, currently the Chief Minister of Gujarat state, is considered to have directly supported a massacre across Gujarat of hundreds of innocents (mostly Muslims) in 2002 by militant extremist Hindutva groups, of which he is a senior leader.
Modi incited his followers by declaring within hours of a train coach being set on fire by a mob that the ‘attack’ was pre-planned by ISI, the Pakistani intelligence agency. He then authorised steps that aggravated passions and also enfeebled the police response. His ideological commitment is to India becoming a “Hindu” nation, a position inconsistent with India’s Constitution. A key party leader of his party, BJP, wants to disenfranchise Muslims.
The polls are pointing to the BJP coming to power. The ruling coalition led by Congress is certain to lose a large number of seats given its (well-deserved) reputation for corruption. A new party, the Aam Aadmi Party (common man’s party) led by Arvind Kejriwal, burst on to the scene in December 2013 in Delhi on the back of an anti-corruption movement, but has since lost its mojo through mindless protest and demonstrated inability to govern. So BJP faces very little opposition.
But while BJP (or a coalition it leads) will almost certainly form government, it is unlikely to muster the two-third majority required to change India’s Constitution to convert it into a Hindu nation or disenfranchise Muslims. The question, then, is whether the world will see any major policy change as a result of these elections.
Policy change is highly unlikely. The election manifestos released by major competing parties display a firm belief that government knows best. A rights approach (creating a ‘right to food’ or ‘right to work’) is deemed sufficient by Congress to address chronic problems. BJP’s economic policy is seemingly more liberal (its claims of ‘minimum government, maximum governance’) but it continues India’s strong laws against free speech and believes in government-managed health and education as well as in socialist welfare programs and subsidies. Unlike the Congress, it also opposes FDI in retail. And no party intends to change India’s outdated colonial governance system or free the people from bondage to excessive government regulation.
India, which started with a liberal (Ambedkar) constitution, became a self-declared socialist republic in 1976. After consequent near-bankruptcy, a wave of liberalisation occurred in the 1990s, foisted by the IMF upon India. The world mistakenly thought that India had abandoned socialism. But neither major party has any intention of abandoning a government-led economy. Consequently, India’s economic performance continues to disappoint. Of global FDI of around $1.46 trillion in 2013, India received $28 billion – less than 2 per cent. While growth increased momentarily in the naughties, it has slid back. The risk of its currency collapsing remains high due to high fiscal deficits.
Angus Maddison, an economic historian of repute, showed in a definitive study that India was the world’s wealthiest country in 12 of the past 20 centuries and the second-wealthiest in six of the remaining eight. So why does India continue to perform so poorly?
First, India’s governance system is inconsistent with modern learnings on public policy. Despite having produced Arthashastra – the world’s oldest treatise on economics – 2500 years ago, India has no credible school of economics and public policy. As a result, Indian migrant workers are welcomed as some of the most honest and diligent across the world, but corruption remains rampant in India. The heavy hand of lowly paid politicians and bureaucrats seeks bribes at every step. Enterprise is choked.
Second, India’s social tensions pose an ongoing challenge. Urban dwellers want to keep rural migration at bay, instead of strengthening local government that can plan better cities. Caste and religious pressures tug in different directions. Hypocrisy prevents rational discussion about human trafficking, AIDS and prostitution. India remains a house divided against itself.
Finally, Indians have a continuing (although diminishing) cultural disdain for the entrepreneur. Deirdre McCloskey points out that innovation requires a high level of social regard for enterprise. But India’s Brahminical culture ranks manual labour lowly and ‘capitalists’ are objects of scorn.
So should we care about India? More importantly, can we do anything about India’s performance?
We would care if we knew that making a few policy tweaks and increasing freedom in India can rapidly increase its GDP, boosting global demand. Demand from 1.2 billion Indians on a growth trajectory can sustain Australia’s economy for many decades to come, even as China’s growth inevitably slows as it matures. In that sense, Australia needs India to do well.
But how can anyone help?
Small steps could help. One, Australia can help establish a world-class school of public policy and governance in India. Two, Australia can help Indian governments adopt a cost-benefit policy process used by the Productivity Commission to defeat bad policy.
Mainly, of course, an endogenous demand for liberty and good governance will need to ultimately emerge from within India. India needs its own liberal party. Even as the challenges to reform India’s governance remain high, the dividends to the entire world of India abandoning socialism will be huge.
Sanjeev Sabhlok, a former senior Indian civil servant, now works in the Victorian Department of Treasury and Finance. He is author of Breaking Free of Nehru (2008) and founder of Swarna Bharat Party, India’s national liberal party.