Imagining India

Photo credit: Christof Sonderegger / World Economic Forum

As I make my way this week to Davos via Riyadh and Zurich, it becomes clear that the chill in the global economy has reached the deserts of Saudi Arabia. I attend a panel at the Saudi Global Competitiveness Forum where each speaker outdoes the next in headlining the many risks of the current downturn and predicting the gravest of consequences. ‘Godzilla’ seems to have replaced ‘Goldilocks’ as the defining metaphor for our world markets.

At first, it seems to me that the town of Davos itself is cocooned from the panic. I am staying in the same room at the same hotel, and the same cheery concierge rushes forward to lug up my bag. It is only when I see the glum faces and conspiratorial whispers of the CEO execs  milling around that I realize that this year at least, the celebration  and paeans to the ‘animal spirit’ will be missing.

But even as we deplore the office refurbishments, the private jets and the lavish  parties of what seems to already be a long past, gilded age, it is instructive to note that businesses were not alone in taking a deep and heady drink from the punchbowl. Nations were also afflicted by the same malaise of overconfidence and a relentless focus on the short-term.

The global bubble was an era when the American spent too much and saved too little, while the Chinese saved too much and spent too little. Resource-rich countries invested the windfall profits from high commodity prices into sovereign wealth funds rather than investing in human capital and social development.

The Europeans were secure in their belief that they had a better form of capitalism even as the bottom fell out of their banks. And in India, years of bubble- induced growth allowed the country to take the eye off the ball when it came to desperately needed reforms and social investment.

We were all in it together - businessman and politicians, corporations and nations. So I do hope the Davos Annual Meeting 2009 becomes a place where we focus on what to do for the future rather than finger pointing for the past. One thing has become quickly apparent in my many conversations here - the bursting of the global bubble is forcing countries to address hard questions and realities. Countries will have to tend to basic ‘housekeeping’ concerns, from the health of their domestic markets and rising income inequalities, to the state of their social security nets and the size of their deficits. And to do any of this successfully, our discussions will have to be more about finding solutions than scapegoats.

Photo credit: Dushyanthini K.

With the capture of LTTE’s makeshift capital Killinocchi, and the group in retreat in Sri Lanka, the sectarian war in Sri Lanka seems to be coming to a head. 

The conflict between the majority Sinhalese and minority Tamils is a complex, worrying one, and looking back, language has played a substantial part in it. Its always been difficult to build peace when a country has multiple ethnic populations who speak different tongues. There were many former British colonies that faced this challenge after independence -  Sri Lanka, Singapore and of course, India.

Language is a pretty natural fracture for communities. India had come face to face with this reality early on, when the post-independence government proposed making Hindi the official language. The Delhi government only retreated and accepted both English and Hindi as official languages when massive protests erupted in the South (especially in Tamil Nadu, where riots broke out and students burnt effigies of the ‘Hindi demonness’). Singapore also chose English, a neutral tongue, as the official language over the local Malay, Chinese, and Tamil tongues.

Sri Lanka however, took a very different tack. The government replaced English with the majority language Sinhalese as the official tongue, and marginalised Tamil. Of course, this wasn’t the sole reason for the conflict, but it only intensified it. Language after all, seems to be a core part of our identity - we only need to look to Ireland’s attempts to revive the Irish tongue, the resurrection of Hebrew in Israel, and in India, the early (and successful) fights to have our state borders drawn according to language.  

Photo credit: beagleskin

Today, the day Barack Obama becomes the President of the United States, is an inspiring moment, no matter where in the world we are. For many in the US, this is a landmark for the country’s African-American citizens. For India, there is another connection. The Black Civil Rights Movement and India’s Independence struggle had a common spirit to them, even if they were decades apart - both Martin Luther King and Mahatma Gandhi had adopted the ideas of non-violence and civil disobedience from Henry Thoreau’s 1849 essay, Resistance to Civil Government.

Both MLK and Gandhi inspired millions of people to unite towards demanding fundamental rights that were denied them, and emboldened thousands of ordinary individuals to perform acts of resistance that required remarkable courage. 

I admit, I was moved while watching Barack Obama’s inaugural speech on TV. Obama sees himself as a post-partisan figure, whose election united blacks and whites. His victory certainly does not mean the end of racism in the US, but it is a sign that people can at least occasionally, and at critical moments, overcome tribalism when it comes to race and identity.

In India as well, we struggle against the politics of identity, and we’ve seen pretty intractable vote banks around caste, religion, region and class. Obama’s win is a moment of optimism for people everywhere who hope to move past such politics. It’s why his ‘campaign of hope’ resonated so much across the world.  

In recent days, I read several pieces about the dying newspaper industry in the US, including one regarding the impending demise of the iconic New York Times. Other news articles like this one paint a bleak picture of the book publishing industry in the developed world.

The Indian market is on the other hand, very far from mourning the death of the printed word (a fact that I personally, am grateful for) - we are the fastest growing English language market for book publishers, and we are also the world’s most vibrant newspaper industry. While newspaper circulation numbers are falling in large parts of the developed world, it is growing rapidly here in all our languages, and thriving in all kinds of formats - dailies, magazines, tabloids.

What’s especially interesting is the increasing number of square inches our newspapers now devote to columnists and opinion pieces. More and more, we are more concerned with debating the ideas and issues underlying the news feed. Our television channels show the same trend. And as audience input and feedback has grown - with We the People, online commentary and so on - we are reflecting the spirit of a public square in our media more than ever before. I find this heartening, but I also wonder - is this entirely a good thing? I believe that debate thrives on participation. But is there a point where it descends to chaos, with authority and expertise being lost, and every idea being as good as every other?

Less than two weeks into the year, and we are already immersed in the drama and debate around the massive fraud at Satyam.  I found the Satyam news utterly dismaying - when it comes to the brand that the Indian IT industry has built over nearly three decades, this is a setback, a black eye. India’s software firms have after all,  prided ourselves on our standards in corporate governance and disclosure.

All of us who run companies must really put ethics, corporate governance and running a transparent company at the forefront. If results are bad we should declare that, if profits are low we should declare that - and there is no such thing as too much data being open to the public. We should not be doing anything which imperils the trust the public and our stakeholders have in our companies.

I also interviewed with CNN-IBN on this.

So far, the word for 2009 is “stimulus”. The government has come into the spotlight in the business pages, as different sectors put in appeals for interest breaks and sops. Some of these are likely necessary. But this is also probably a good time to consider the elephant in the room, which has fundamentally held back our growth - the lack of access to India’s economy for many of its citizens, a theme I revisited in my book and in this blog . A piece written by Arjun Swarup in the Indian Economy blog in October, titled  - ‘The Indian Political Business Complex‘ is worth rereading - he discusses the same issue: 
 

With new numbers that show a steeper slowdown for India than expected, the state has sprung into action, with the RBI infusing money into the economy, cutting key interest rates by 1%, and the government planning on easing FDI further. 

And with Moody’s predicting that export growth will continue to slow alongside domestic demand, the government and the RBI are going to pay close attention to our numbers.

But amidst all the doom and gloom, there are predictions that the Indian economy will recover by 2009. I am no pessimist, but I wonder if a year will be enough to brighten up the Indian economy, linked as we are, whether we like it or not, to the health of the global markets. Within our borders, we are faced with additional concerns around generating enough jobs and investment for our growing workforce, and addressing issues of inequality and access. If we do build a recovery in 2009, it won’t be just from our relentless entrepreneurial spirit. We will also need courageous reforms towards ensuring a healthy domestic market.

The biggest steps in 2009 I would hope to be see are ‘back to basics reforms’. The high growth of the last few years was boosted by a huge liquidity bubble. As the global economic crisis spreads, it is clear that India will have to go back to fundamentals - expand primary education, liberalize higher education, build our infrastructure and cities, fully implement the single market and reform our labor laws. The path to recovery in 2009 will be expanding access of opportunity to our young people through these reforms. Else both growth and the reaping of our ‘demographic dividend’ will remain a mirage.

Putting all that aside, I do enjoy articles like this one in the Sunday Economic Times, which quoted ‘ace fortune tellers’ predicting a movie-like ‘happy ending’ for 2009. At least the stars are bright!  

My best wishes to you for the year ahead.

Despite a call for a boycott of the polls, Kashmiris voted in record numbers in the elections. The results and the increased turnout offer a glimmer in a region with a painful history. 

But while militancy has fallen in the state, not much has changed. One of the best news pieces I read on the election sounded a note of both caution and hope. This is a region after all, where the presence of the Indian Army has long undermined civil rights and where the government has offered its hardest edge. The government’s response has allowed the damage in the state to become cyclical: increasing resentment among civilians and sympathy for terrorists, and in turn, more terrorism, and even greater crackdown by the state. 

Terrorism has contributed to J&K remaining under-developed and poor, and the thousands of unemployed young men only add to the militancy. A big part of our response needs to be in pulling the state out of poverty. A minister within the UPA government recently told me of how he has been encouraging Indian entrepreneurs to invest in the state – he believed that development would be key to reducing the violence. I agree – the three Café Coffee Day outlets that opened up in Srinigar come with the small chance of normal life, development and employment. The promise that such investments offer does more to turn people away from militancy than increasing the army presence and gunning down separatists.

I recently had a very interesting conversation with the Harvard economist Dr. Sendhil Mullainathan. Economists have recently been looking at how large a role human behaviour and incentives play when it comes to markets, and how people treat money; this is a big part of Sendhil’s work.

Sendhil’s particular interest is in how the poor, especially in rural India, respond to the lending and savings solutions that banks offer them. Sendhil points out to me, that what the financial sector typically does is take the banking solutions they have for the middle class and offer it to the poor. This does not work well because the way the poor earn their incomes is very different from the salaried class. Indian farmers for example, typically earn a chunk of income every six months or so, after harvesting and selling their crops. 

For these farmers, paying loans on monthly installments, and saving money becomes an extremely difficult thing to do. ‘Its difficult for people to spend a large amount of money they suddenly receive, very carefully,’ Sendhil points out. Its human nature – people who get rare windfalls of cash find it difficult to plan and spend the money in small amounts. The impulse is then to celebrate - what money they receive they splurge, spending on weddings, family events and ‘conspicuous consumption’. Such consumption is especially important for the poor. As recent work on low income communities points out:
 

“Conspicuous consumption…. is not an unambiguous signal of personal affluence. It’s a sign of belonging to a relatively poor group. Visible luxury thus serves less to establish the owner’s positive status as affluent than to fend off the negative perception that the owner is poor. ”
 

As a result, the poor often have little money leftover for monthly expenditures such as schooling for their children, and even food and clothing. 

Sendhil and other economists have been trying to devise specific banking solutions, which for example, allow rural workers to pay out big chunks of their loans at the end of the harvesting season. They are also working on other solutions which help them manage their money better, through micro-insurance schemes and savings accounts that allow large deposits and automated monthly payouts. 

This new focus on human behavior– and tailoring market solutions accordingly – has become a focus for economists across different fields. They argue that people don’t always keep a complete hold on the real value of an asset when they are buying or selling in a market. The truth of that is pretty apparent when I look at our everyday purchase decisions. My friend hankers after the newest mobile phone or PDA - even though he (and many other likely buyers) feel that a part of the high price comes from the hype, and that ten months later once the next version is out, this one is relatively worthless, both to him and on eBay. We are rarely completely rational in our purchases — whether that’s a house, the latest gizmo, or a car loan. 

So new theories around real estate and credit bubbles – which is the root of the global downtown we are now facing– have  focused on how people in real life react to regulation, easy credit, and speculative prices in real estate and the stock market, and how the collective mood, rather than any fundamental numbers, works in sending  economies into upswings and downturns. 

Tying our individual and collective behavior to economic theory is not going to be an exact science. But I am still betting that it will give us some new, powerful insights.

If there’s a place that can be described as ground zero for New India, it is my home town Bangalore. This is not because of  its identity as India’s IT city, or its aspiration to be the ‘Silicon Plateau’ of the world, the next stage after California’s Silicon Valley. What gives the city this promise is that in its successes and its struggles, Bangalore is a microcosm of the new, emerging India.  

Nehru had once called Bangalore ‘India’s city of the future’. For him, the city was untainted, relatively unburdened of the imperialist architecture that dominated the Bombay, Delhi and Calcutta skylines. And for the entrepreneurs entering Bangalore in the 1970s and 1980s, the city – then a hub mainly for the textile and public sector industries – was also untouched in another way. Bangalore was distant from the chaos and politics of Bombay and Delhi, which had limited the rise of firms without the connections and clout to get past the red tape and old boy networks.

For this new breed of first-time entrepreneurs – and Infosys was among them – this city was a refuge. The companies that came here were therefore, disproportionately young and new-industry. The focus of both IT and the textile industry on the international market also meant that Bangalore developed as a city with a global outlook, welcoming to outsiders and strongly aware of international standards and practices when it came to doing business. The city’s firms, especially in the IT industry, have tried to envision a more responsible role for the private sector, focusing on transparency, fairness to their stakeholders, and ethical management. And they made early efforts to expand the role of business within the broader community, by participating in India’s first public-private partnership, the Bangalore Agenda Task Force (which I chaired), which worked to improve the city’s governance systems. 

A different kind of business also attracted a different kind of community – a large proportion of Bangalore’s workers are educated, white-collar, and middle-class. These workers have often either lived or travelled abroad, and have a global outlook, fully aware of best practices when it came to public services, governance and social welfare. 

With these entrepreneurs and workers have come new possibilities, and a potential framework for reforms in India. Civil activism is vibrant and thriving in Karnataka – from MYRADA’s work in microfinance lending to the poor, to Srikanth Nadhamuni’s egovernments Foundation which is working towards technology for urban management and Akshara Foundation’s work in primary education. New experiments in entrepreneurship and government are also seeing success here, from Sriram Raghavan’s Internet community kiosks, to the Bhoomi land reform project led by the bureaucrat Rajiv Chawla. In these efforts, we are seeing a push for positive change that is reshaping the growth of the city. 

Even the struggles that Bangalore faces foretell what India shall encounter as we develop. The whispers of future conflict are right here – as the city faces the influx of millions of migrant workers.  It is telling for instance, that the death of the Kannada actor Rajkumar in 2006 triggered violence across the city, with cars and buses attacked and glass-fronted offices pelted with stones. Rajkumar was an icon for many of the older city, a quieter, less modern and chaotic place, one whose identity was unequivocally Kannadiga. Bangalore today, with its growing migrant middle and working classes, its industries and restaurants that are so obviously cosmopolitan, has become an uneasy melting pot. The challenges of inequality emerging across the country are also all too visible here. Nowhere is the secession of the middle classes as stark as it is here with the walled gardens of corporate campuses and gated communities. And the rapid growth has laid bare the complete inadequacies of our urban governance.      

But this city is exceptional in that it is also relatively young, and has the opportunity to tackle the challenges of inequality and of housing and land shortages that left unaddressed has sharpened inequality so severely in cities like Bombay and Delhi. Bangalore’s entrepreneurs, NGOs and civil activists are fighting for better urban planning and infrastructure, with the support of the city residents. Citizen groups pressure the government towards better environmental practices; a variety of organisations have cropped up to manage waste and sewage disposal issues that the government has ignored. 

We can thus see tentative steps forward to the future as Bangalore searches for better solutions, and attempts to overcome its divisions. Rural politicians have tried to capitalize on the urban-rural divide by championing the ‘common man’ of the rural country while inveigling the city ‘elites’. In recent years however, this pitch has had far less power over Karnataka’s voters, as even our farmers aspire to educate their children, and send them to the city for a better life. The 2008 state elections, the first after delimitation has also increased urban voice. 

Bangalore is where we will have to look closest when we try to predict the long-term success of India’s rise – in how we address our divisions, the tensions of large-scale migration, provide equitable access to education, health and housing, build infrastructure and reform governance. It is our weathervane, when it comes to imagining a new India.

Adapated from an article written for the Bangalore edition of the DNA [15 December '08]