33 highlights
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So it breaks my heart to have to suggest to todayâs rising generation that this crisis is different than others we have weathered, that the walls are closing in again, and the opportunity set for India is shrinking, perhaps for a very long time.
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The post-lockdown economy will simply not have enough demand to consume what can be produced.
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But if India remains stuck in a middle-income trap, people will soon stop asking if it could be the next China. My generation already has.
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Amid this turmoil, they underestimated the shadow on their lives of the mid-â60s economic crisis, when after a bad drought, India devalued the rupee by 37% because that was the World Bankâs condition for assistance.
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The promised funds didnât arrive in full. Indira Gandhi, too new to power to be in control, took a sharp pro-Moscow turn and rejected the capitalist path that South Korea, almost as poor as India back then, was choosing for itself.
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India remained agrarian and poor, led by a tiny English-educated urban elite. At the top of the order were bureaucrats with the power to say ânoâ to any expansion in the private sector. The economyâs speed limit was 3.5%, pejoratively described by scholars as the âHindu rate of growth.
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After the Soviet Union disintegrated in 1991, our politicians ran out of their anti-imperialist excuses.
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Dewang Mehta sported a luxuriant crop of hair â it was a wig â and went around selling a puffed-up story to global corporations that their computers were going to crash at midnight on the new millennium because of the Y2K bug. Outsourcing of code-writing, at a fraction of what it cost in the West, began in earnest.
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Unlike China, which was saving more than half of its national income before the 2008 global financial crisis, India lacked the capital to sustain a liberalizing economy through messy cycles of coalition politics, let alone to build the roads, power plants and other basics of missing infrastructure
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The state, we hoped, would shrink as an economic player, and become a more robust referee.
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Now that the government was retreating from being a producer, it had to give land, energy and commodity rights, wireless spectrum and other concessions to the private sector and procure â on behalf of the public â electricity, roads, ports, telecom services and jobs. The opportunities for corruption swelled, and a nexus of businesses, politicians and criminals coalesced to exploit them.
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Praful Patel, the then-aviation minister, gave me an interview at the newly modernized Delhi airport, which was going to replace the shambolic terminal that used to frustrate and embarrass us. The private consortium that had won the 60-year management contract wangled a passenger fee to cover a big part of the cost of the upgrade â after snagging the project. âThis important condition should have been known upfront to all the bidders at the time of bidding,â the governmentâs auditor noted.
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Indian Supreme Court cancelled 122 telecom licenses. The governmentâs auditor said that the granting of those licenses had cost the country $23 billion. This debacle was soon dwarfed by what the auditor said was a $42 billion scam in allocating coal mines to private firms. Those were also scrapped.
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In our impatience for growth, we ignored the warnings of scholars such as Indira Hirway that Modiâs capital-intensive âGujarat modelâ was built on generous subsidies to businesses, and that the state was slipping in poverty reduction, human development and hunger removal.
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As Arvind Subramanian, then Modiâs chief economic adviser, would argue later in a book, sacrifice, âas a necessary condition for achieving a larger, loftier objective,â resonated with the population because it harked backed to Mahatma Gandhiâs strategies during Indiaâs freedom struggle.
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âSab chor hainâ now defines most interactions. Homebuyers donât trust builders to deliver homes; financiers donât trust property developers to repay loans. The government doesnât trust either the builder or the lender. Nobody trusts politicians, though Modi, like all strongmen leaders, can elicit any response he wants from the public.
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True, some bottlenecks have eased. After failing to double in size in the four decades before 1991, the national highway network has quadrupled since then.
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From less than 65,000 megawatts in 1990, power generation capacity has surged to almost 375,000 megawatts.
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A further doubling by 2030, without setting up any more polluting coal-fired plants, is possible, thanks to investor interest in solar and wind power.
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Bag a concession from the state, inflate costs, pay bribes, get financing from dominant state-run banks, fleece consumers, siphon off funds into private accounts in Singapore or Switzerland. This, with some variation, was the business model.
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The IL&FS Group, an infrastructure financier-owner-operator Iâve tracked since I was a newspaper intern in Delhi in 1992, enriched a small cabal by taking everyone â its partners, consumers, capital providers and regulators â for a ride.
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Workers are liberally rewarded only in a bloated public sector, much of which ought to have been privatized long ago. Because it wasnât, taxpayers have to keep alive debt-addled firms such as Air India Ltd.
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The push toward higher wages should have come from higher farm productivity, which would have raised the price of migrant labor coming to cities. India missed this page of the East Asian playbook and failed to create a permanent urban working class.
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At least 10 million jobs are needed annually â matching Chinaâs rate between 1990 and 2014 â to raise the participation rate toward the world average of 66%. But the post-pandemic developed world will nurse a massive unemployment hangover.
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Four out of five women in Indian cities werenât in the workforce even before Covid. China, Bangladesh and Sri Lanka are all doing better.
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Perhaps digital capitalism favors âwinner take allâ monopolists. Rather than bemoan the concentration of economic power, maybe I should look at the bright side?
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But there are questions: One, how will supply-side reforms fill the demand gap? Two, when will the broken financial system be made whole? Finally, will the narrow elite running India by proxy agree to compete fairly, or will it simply hijack the direction and pace of reforms for its own advantage, leaving a majority of people behind?
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In economist Albert Hirschmanâs framework, the âexitâ from India option was only for a minority. Others had to stay, and it was their âvoiceâ that kept alive Indian democracy.
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Whyâs the public not angered by it all? In the dirt-poor, northern state of Bihar, almost as populous as Japan, Modiâs Covid lockdown forced migrant workers to return, fearful and jobless. Yet while interviewing voters before elections for the state legislature, Bloomberg News reporters found no dent in Modiâs appeal. Peopleâs ire was reserved for his coalition partner, the state chief minister. And even he managed to retain power thanks to the prime ministerâs boundless popularity.
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Whether thereâs money in the account, running water in the toilet or the means to replace the empty gas cylinder isnât something for which people blame him. Not when he has a bigger civilizational agenda, like building a temple for Ram, the Hindu God, in the same place where a mosque once stood until it was razed by Hindu mobs in 1992.
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Itâs the poor, over-populous northern states that matter disproportionately in Indian politics, and it is there that Modi has managed to shift the Overton window, supplanting material prosperity â which no party has delivered since the â90s â with chest-thumping nationalism and an atavistic yearning for a pre-Islamic past.
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For many of my generation, our long-cherished hope for a better, greater India is all but gone. We wanted to trade some of our democratic chaos for a little bit more growth. We ended up with less of both.
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Sadly, I donât see northern Indiaâs economic pessimism â or its caste enmities, religious hatred and deep-seated misogyny â making way for a less toxic, more aspirational politics.