Reimagining India

Unlocking the Potential of Asia's Next Superpower

McKinsey & Company, Inc.

• Editorial: Simon & Schuster
• Año: 2013
• ISBN:
  9781476735320
• Categoría: Commerce
• Categoría: Commerce international

Reimagining India brings together leading thinkers from around the world to explore the challenges and opportunities faced by one of the most important and least understood nations on earth. India's abundance of life—vibrant, chaotic, and tumultuous—has long been its foremost asset. The nation's rising economy and burgeoning middle class have earned India a place alongside China as one of the world's two indispensable emerging markets. At the same time, India's tech-savvy entrepreneurs and rapidly globalizing firms are upending key sectors of the world econ­omy. But what is India's true potential? And what can be done to unlock it? McKinsey & Company has pulled in wisdom from many corners—social and cultural as well as eco­nomic and political—to launch a feisty debate about the future of Asia's "other superpower." Reimagining India features an all-star cast of contributors, including CNN's Fareed Zakaria; Mukesh Ambani, CEO of India's largest private conglomerate; Microsoft founder Bill Gates; Google chairman Eric Schmidt; Harvard Business School dean Nitin Nohria; award-winning authors Suketu Mehta ( Maximum City ), Edward Luce ( In Spite of the Gods ), and Patrick French ( India: A Portrait ); Nandan Nilekani, Infosys cofounder and chairman of the Unique Identification Authority of India; and a host of other leading executives, entrepreneurs, economists, foreign policy experts, jour­nalists, historians, and cultural luminaries. These essays explore topics like the strengths and weaknesses of India's political system, growth prospects for India's economy, the competitiveness of Indian firms, India's rising international profile, and the rapid evolution of India's culture.Over the next decade India has the opportunity to show the rest of the develop­ing world how open, democratic societies can achieve high growth and shared prosperity. Contributors offer creative strategies for seizing that opportunity. But they also offer a frank assessment of the risks that India's social and political fractures will instead thwart progress, condemning hundreds of millions of people to enduring poverty. Reimagining India is a critical resource for read­ers seeking to understand how this vast and vital nation is changing—and how it promises to change the world around us.

chapter one

reimagining

The Rediscovery of India

By Fareed Zakaria

Breakout or Washout?

By Ruchir Sharma

Toward a Uniquely Indian Growth Model

By Anand Mahindra

How to Grow During the Day

By Gurcharan Das

In Search of the Indian Dream

By Anand Giridharadas

Making the Next Leap

By Mukesh Ambani

What I Learned in the War (on Polio)

By Bill Gates

the rediscovery of india

Fareed Zakaria

Fareed Zakaria is host of CNN’s Fareed Zakaria GPS, an editor-at-large for Time magazine, and author of The Post-American World.

Is India even a country? It’s not an outlandish question. “India is merely a geographical expression,” Winston Churchill said in exasperation. “It is no more a single country than the Equator.” The founder of Singapore, Lee Kuan Yew, recently echoed that sentiment, arguing that “India is not a real country. Instead it is thirty-two separate nations that happen to be arrayed along the British rail line.”

India gives diversity new meaning. The country contains at least fifteen major languages, hundreds of dialects, several major religions, and thousands of tribes, castes, and subcastes. A Tamil-speaking Brahmin from the south shares little with a Sikh from Punjab; each has his own language, religion, ethnicity, tradition, and mode of life. Look at a picture of independent India’s first cabinet and you will see a collection of people, each dressed in regional or religious garb, each with a distinct title that applies only to members of his or her community (Pandit, Sardar, Maulana, Babu, Rajkumari).

Or look at Indian politics today. After every parliamentary election over the last two decades, commentators have searched in vain for a national trend or theme. In fact, local issues and personalities dominate from state to state. The majority of India’s states are now governed by regional parties—defined on linguistic or caste lines—that are strong in one state but have little draw in any other. The two national parties, the Indian National Congress and the BJP, are now largely confined in their appeal to about ten states each.

And yet, there are those who passionately believe that there is an essential “oneness” about India. Perhaps the most passionate and articulate of them was Jawaharlal Nehru, India’s first prime minister. During one of his many stints in jail, fighting for Indian independence, he wrote The Discovery of India, a personal interpretation of Indian history but one with a political agenda. In the book, Nehru details a basic continuity in India’s history, starting with the Indus Valley civilization of 4500 BCE, running through Ashoka’s kingdom in the third century BCE, through the Mughal era, and all the way to modern India. He describes an India that was always diverse and enriched by its varied influences, from Buddhism to Islam to Christianity.

Nehru well understood India’s immense diversity—and its disunity. He had to deal with it every day in trying to create a national political movement. The country’s chief divide, between Hindus and Muslims, was to create havoc with his and Mahatma Gandhi’s dreams for a united India. But he was making the intellectual case for India as a nation as the essential background for its national independence. And he had a good case to make. India has existed as a coherent geographical and political entity, comprising large parts of what is modern India, for thousands of years. Despite its dizzying diversity, the country has its own distinct culture. Perhaps that’s why, for all its troubles, India has endured.

Where Nehru and Churchill were both wrong was in their political conception of the nation-state itself. India could not follow the example of the European single-ethnic, single-religion nations that sprouted up in the nineteenth century. The British unified India using technology—the railroad—and arms. That nationalizing trend produced, in turn, a unified national opposition to British rule in the Indian National Congress, bringing together all India’s communities against foreign rule. But all this was a historical aberration. India had existed as a loose confederation for much of its history. Even when there had been a ruler in the national capital, he had exercised power by co-opting vassals, allowing regions autonomy, letting local traditions flourish. It was a laissez-faire nation in every sense. Despite the rise and fall of dynasties, the entry and exit of empires, village life in India was remarkably continuous—and unaffected by national politics. “India has historically been a strong society with a weak state,” says Gurcharan Das, the CEO turned author and philosopher.

Modern India went down a different path. Nehru and many of his contemporaries were deeply influenced by nineteenth-century European nationalism and twentieth-century European socialism. They could not conceive of modern India without a powerful national government. The centralizing impulses were more forceful in the economic than in the political sphere, where local leaders were often strong and autonomous. Even so, by the late 1960s, the Congress started losing ground to regional parties, first in the south on linguistic grounds and then later to caste-based parties in the north. The harder the Congress tried to fight this tendency, the greater the local backlash. This opposition to New Delhi reached its zenith under Nehru’s daughter, Indira Gandhi, who as prime minister attempted an extreme form of centralized rule in the 1970s, dismissing dozens of local governments, hoping to crush or co-opt regional parties. The result was half a dozen violent secessionist movements in the north, south, east, and west, one of which claimed her life in 1984.

Over the last twenty years, India has been moving toward a different model of nationhood. The power of regions and regional parties is now undisputed. Starting in the early 1990s, New Delhi has been overturning the license-permit-quota raj and opening up the economy. The result is an India that is quite different from the one its founders might have imagined—a motley collection of communities, languages, and ethnicities living together in an open political and economic space. Some older nationalists find this new India too marketized, decentralized, noisy, vulgar, and messy, but it reflects India’s realities and, for that reason, it has tremendous resilience.

Now, without central plan or direction, there are forces pushing India toward a greater sense of nationalism than before. Economic liberalization has created a national economy, and technology is creating a national culture. While there has been a proliferation of regional television channels for news and entertainment, there is also a growing set of national programs and media events. From cricket to Bollywood, a common popular culture pervades every Indian’s life. As India grows, its people will discover that there is much that distinguishes them from other Asian countries—and that binds them together.

Economic growth has created one more common element in the country—an urban middle class whose interests transcend region, caste, and religion.

This is already having political consequences. Between 2011 and 2013, millions of Indians took to the streets to protest, first against corruption and then against the brutal gang rape and murder of a twenty-three-year-old woman in Delhi. The people marching came from cities and towns. In the past, mass agitations in India often originated in the countryside, with farmers petitioning for government largesse or some groups—defined by caste or religion—asking for special rights. The recent protests have a different quality: They ask the government to fulfill its basic duties. They seek an end to the corruption that is rife throughout the Indian political and bureaucratic system. They ask not for special government programs for women but rather simply that the police and courts function efficiently so that rape victims actually get the justice they deserve.

Most of India’s wealth is generated from its cities and towns. Urban India accounts for almost 70 percent of the country’s GDP. But almost 70 percent of its people still live in rural India. “As a consequence,” writes Ashutosh Varshney of Brown University, “for politicians, the city has primarily become a site of extraction, and the countryside is predominantly a site of legitimacy and power. The countryside is where the vote is; the city is where the money is.”

The United States is a middle-class society. Most of the country considers itself middle class and politicians cater to that vast group in every speech and policy proposal. In India, politicians have generally pandered to the villager. No party has a serious urban agenda, but all have elaborate rural schemes. Popular culture used to reinforce this divide. Village life in traditional Bollywood movies reflected simplicity and virtue. Cities were centers of crime and conflict, controlled by a small, wealthy, often debauched elite.

This focus on the rural poor has, ironically, been one of the major obstacles to alleviating poverty. For decades the national political parties handed out lavish subsidies for work, food, and energy—among other things—thus distorting all these markets and perpetuating many of India’s basic economic problems. Even after India’s economic reforms started, these patronage schemes continued and this mentality has often taken precedence over good governance, efficient regulations, and fiscal sanity. Policies that actually alleviate poverty by promoting economic growth are often enacted quietly and are even guiltily called “stealth reform” by their advocates. In a broader sense, too much of the political elite still thinks of India as a poor, third-world country, a victim of larger global forces rather than one of the world’s emerging great powers that could and should be governed by the highest standards.

The middle class itself has played into this narrative, traditionally thinking it was politically irrelevant and so adopting an apolitical stance. Its response to India’s problems was to expect little of government. Rather than demanding better government schools, they sent their kids to expensive private academies. Rather than trusting the police, they hired security guards for their homes and neighborhoods. Rather than running for office themselves, they didn’t bother to vote and pined for the authoritarian efficiency of Singapore or, now, China.

But twenty years of strong economic growth have transformed the country. The Indian middle class now numbers more than 250 million; over 30 percent of the population of 1.2 billion lives in urban areas. And these numbers are growing fast. Indian movies are now often focused on this group, seen as young, aspiring, and filled with idealism and ambition.

Globalization has raised the expectations that this new urban middle class has for itself and its government. The opening of the Indian economy has exposed them to a new world—a world in which other countries like India are growing fast, building modern infrastructure, and establishing efficient government. Whereas they used to assume that to get rich one needed political connections, today they can dare simply to have good ideas and work hard. India is still a parochial country—for good reason, given its size and internal complexity—but this middle class sees no reason why its democracy shouldn’t work for them too.

Technology is giving them the power to make their voices heard, even when outnumbered by other interest groups. India is unusual in combining the growth of an emerging market with the openness of a freewheeling democracy. (China has the former but not the latter.) The result has been an information explosion. The country boasts more than 170 television news channels, in dozens of languages. Three-quarters of the population has mobile phones. Texting and similar methods have now become a routine way to petition government, organize protests, and raise awareness. The Aadhaar program (aadhaar means “foundation” in Hindi), spearheaded by India’s tech pioneer Nandan Nilekani, which will give every Indian a unique biometric identity, could have a much larger impact than imagined. Its stated goal is to make it possible for Indians to get the rights and benefits they deserve, without middlemen, corruption, or inefficiency blocking their path. But it could also make it possible for Indians to think of themselves for the first time as individuals, not merely members of a religion, caste, or tribe.

Many foreign observers, particularly Western businesspeople, look at India today and despair. The country simply cannot reform at the pace necessary to fulfill its ambitions for growth and progress. Everything gets mired in political paralysis, and the governing class remains committed to a politics of patronage and pandering. This is all true and deeply unfortunate. But it is a snapshot of today’s reality, not a moving picture of an evolving society. In states as disparate as Gujarat, Odisha, and Bihar, state governments are aggressively promoting economic growth. And this is not simply a story about Narendra Modi, the controversial chief minister of Gujarat. That state of sixty million people has grown faster than China over the last two decades—with three different chief ministers. India itself, for all its problems, has been one of the fastest-growing large economies in the world over that period.

Can the country live up to its potential? If so, it will happen only because of a bottom-up process of protest and politics that forces change in New Delhi. India will never be a China, a country where the population is homogeneous and where a ruling elite directs the nation’s economic and political development. In China, the great question is whether the new president, Xi Jinping, is a reformer—he will need to order change, top-down, for that country.

In India, the questions are different: Are Indians reformers? Can millions of people mobilize and petition and clamor for change? Can they persist in a way that makes reform inevitable? That is the only way change will come in a big, open, raucous democracy like India. And when that change comes, it is likely to be more integrated into the fabric of the country and thus more durable.

I remain optimistic. We are watching the birth of a new sense of nationhood in India, drawn from the aspiring middle classes in its cities and towns, who are linked together by commerce and technology. They have common aspirations and ambitions, a common Indian dream—rising standards of living, good government, and a celebration of India’s diversity. That might not be as romantic a basis for nationalism as in days of old, but it is a powerful and durable base for a modern country that seeks to make its mark on the world.

breakout or washout?

Ruchir Sharma

Ruchir Sharma is head of the emerging markets equity team at Morgan Stanley Investment Management and the author of Breakout Nations: In Pursuit of the Next Economic Miracles.

On the new highway into Ahmedabad, the largest city of the western state of Gujarat, the sun sets red in your eyes, just as it does in the polluted industrial zones of China. The city ranks alongside Chengdu and Chongqing as one of the fastest growing in the world. Factories sprout from the farmlands on its outskirts: Gujarat generates about 40 percent of its income from industry, more like China than India as a whole. The state is home to many of the largest ports in India, just as China is now home to most of the largest ports in the world.

Narendra Modi, Gujarati Chief Minister since 2001, is seen as a can-do autocrat, admired by businesspeople but loathed by human rights activists because of the deadly 2002 riots against the state’s Muslim minority. Now touted as a potential prime minister, Modi has inspired fears among many liberal-minded Indians that he would make the country more like China: more growth oriented but also more centrally controlled and possibly less democratic.

But because of India’s natural social fabric, with its incredible diversity and numerous distinct identities, the future of India looks less likely to unfold on the uniform China model than the looser, pluralistic European model—not the debt-strangled Europe of the last two years but the successful Europe of the postwar years, a federation that brought peace, political stability, and widespread prosperity to a diverse continent.

Since India began to grow at a reasonably fast speed in the early 1990s, it has come to see itself as the democratic world’s answer to China, potentially both prosperous and free. It can still achieve that dream, but to do so it cannot go back to the centrally controlled model that failed to produce strong growth in the early decades after independence in 1947.

For India to become what I have called a “breakout nation”—one that grows faster than rival economies in the same per capita income class, and posts consistently higher growth rates than investors expect for economies in that bracket—it must abandon its tendency to become self-satisfied and make excuses. Ever since India left behind the sluggish “Hindu rate of growth” three decades ago, it has portrayed itself as an ambitious nation, with a growing middle class eager to rise up in the global ranks. But as the poorest of the big emerging markets, with a per capita income of just $1,500, India is hardly overachieving; it is always easier to grow fast from a low base. Since the early 1980s, when the government cut back its monopoly on most imports and started easing rules about who could manufacture what and in which quantities, India has finished each decade with an average GDP growth rate about 1 to 2 percentage points faster than the emerging market average. That is unusually consistent but not particularly impressive—it’s standard for emerging nations in India’s low-income class.

After two strong decades, India’s economy has slowed down this decade, ebbing along with the world economy. Once again, India is floating with the global tide, but this is not inevitable. China, Taiwan, Korea, and Japan have shown that it is possible to grow at a near double-digit pace for three or more decades, regardless of whether the global economy is hot or cold. They did ...