Parallax View: People abroad are no longer optimistic about India's prospects

It is always hard to know how foreigners see India.

Certain basic trends are easy to discern: we went from being an international basket case to being seen as a potential economic superpower.

But the nuances are hard to perceive and frequently there is no one view of India, just many different views depending on who you speak to.

 

   I offer this as a word of warning. I’ve spent the last two months travelling and while I have spoken to many people in many different countries to get some sense of how they see India, I cannot claim to have conducted a scientifically significant survey. Nor is it necessarily true that the people I spoke to reflected the views of their countries.

 

   But, for what it’s worth, here’s what I found. There is a general mood of disappointment and gloom over India’s prospects. People feel that the economy has not lived up to expectations. And they are no longer as optimistic about us as they once were.

 

   Some of this has to do with objective factors. The industrial growth rate is much lower than expected. Despite all its tall claims, the government has not been able to get a handle on inflation. It is now resorting to a tight money policy to control inflation. The problem with such a policy is that while it may be effective in lowering the inflation rate by suppressing demand, it also adversely affects growth.

 

   Nor is there much to cheer about company results. Analysts believe that if you look at the earnings declared by India’s major companies then the Sensex does not deserve to go much higher than 18,000. Any rise above that would be speculative and not justified by multiples of earnings.

 

   This is bad news for us. For the last decade, we have become used to the West regarding us as the only alternative to China; as the one economy that can offer an alternative to the power of the Chinese juggernaut. Now, China seems to have left us far behind. The Chinese may have their problems but they are living up to expectations and not disappointing investors.

 

   There are subjective factors that contribute to the mood of gloom and doom. When Manmohan Singh was re-elected, investors believed that he would further liberalise the economy now that he was free of the restraining influence of the Left. In fact, the Prime Minister has demonstrated no reforming zeal. Investors now believe that this government has no commitment to further liberalization.

 

   Further, there is a sense that this government is paralysed. There is no political will to govern, let alone liberalise. India is run by an imaginary Prime Minister who hardly ever intervenes in the serious business of governance and ministers do their own thing. There is an open war between the party and the government. And even within the government, powerful ministers seem to be at each other’s throats.

 

   The subject of land acquisition urgently requires some kind of consensus. The stalling of the Posco project in Orissa – along with Mamata Bannerjee’s actions in Singur – suggest that promises made by state governments to corporations will not be kept. The Posco project represents the largest FDI in India. But if the project cannot be implemented, then other investments of this nature will head directly for China.

 

   There is also a complete lack of understanding of the mood of the Indian middle class. At one level, we are prospering. Nearly all of us are doing much better than our parents did at an equivalent stage of their lives. What’s more, nearly all of us believe that things will get better, that our standards of living will improve and that our children will enjoy lifestyles that are even better than ours.

 

   Why then, ask investors, is the middle class so sullen and rebellious? In China, the prosperity has led to an era of middle- class initiative, optimism and enterprise. In India, on the other hand, we seem to have got angrier as we have got richer.

 

"Because Manmohan Singh has collapsed into a deep stupor and his government has lost control of events, there is a great deal of middle-class frustration."

   I have tried explaining to foreign observers that the basic difference between India and China is one of democracy. The Chinese only want to be rich. Indians want many other things, chief among them is good governance. Take for instance, the contrast between the way we responded to the corruption in the Commonwealth Games and the way the Chinese regarded the corruption during the Olympics.

 

   While we are still beating ourselves up over the CWG mess and the process of bringing the guilty to book will take years, the Chinese had an easy solution. Right after the Olympics, they took the corrupt organizer into custody and then shot him.

 

   This may be okay in China. But India believes in democracy and in the rule of law. We are not prepared to accept a high level of corruption – and China is more corrupt than India – as the price of growth. We are not willing to forgive our leaders for everything as long as they make us rich. In China, leaders are judged purely on the basis of the prosperity they engender. Nobody expects to have any control over them or regards them as accountable to the people.

 

   Foreigners understand the basic argument. But they point out that we have courts and elections. Why then do we need to go outside the system for agitations, fasts and so-called civil society initiatives?

 

   It is not something that is easy to explain. All I can offer by way of rationale is that India and China have chosen different paths. We are a country that cares about individuals and their dignity. We are not a nation that believes in collectives, that treats people as cattle and cares only about the bottomline.

 

   The problem with this explanation is that it is one that Indians have offered for decades. From 1947 to 1992 when our economy languished and our people grew poorer, we always defended our failures by saying that this was the cost of democracy. From 1992 onwards however, we managed to combine democracy with growth and became the intelligent alternative to China: a nation that provided prosperity and dignity.

 

   Western observers believe that we are in danger of abandoning the gains of the last two decades. They believe that a country can survive weak governance if it has a motivated middle class that serves as the engine of growth. But in today’s India, we have a non-existent government and a middle class that seems to have lost the urge to show the world that India can easily equal China.

 

   I told all the Western commentators that I spoke to that this was a phase. The problem, I said, was that the middle class looked to Manmohan Singh to provide visible leadership. Because Manmohan Singh has collapsed into a deep stupor and his government has lost control of events, there is a great deal of middle-class frustration. That accounts for the public anger and the agitations.

 

   The Westerners were not convinced. They thought the problems went deeper. More significantly, they thought we were on the verge of losing it. From now on, they said, it was a one-horse race where China competed with itself.

 

   I think they’re wrong. But I can’t say that I’m not worried by the change in the perception of India. Only three years ago, we had the world’s admiration.

 

   Why are we throwing it all away?