Future of India's development threatened, unable to surpass China

[Chinese Century]

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In 2006, Foreign Affairs, among many other periodicals, proclaimed India to be “a roaring capitalist success story.” This story, we are now increasingly told, is over. The rate of growth in India’s gross domestic product has slowed to slightly more than 6 percent from the peak of about 10 percent that once excited fantasies of India overtaking China. The rupee is plunging. Standard & Poor’s downgraded India’s credit rating to “negative” from “stable.” The next stage is “junk,” if it loses its BBB- grading.

Corruption and India’s threat of retroactive taxes on companies, most notably the government’s attempt to recoup as much as $3.72 billion from Vodafone Group Plc, the U.K.-based telecommunications company, on its 2007 acquisition of an Indian company are scaring away foreign investors. India’s own captains of industry are looking for more opportunities abroad.

Still, is it premature to bring down the curtains on the “India Growth Story”? To be sure, foreign investment in India sparked a retail credit boom -- and visions of hundreds of millions of middle-class Indians achieving the purchasing power and consumption patterns of their European and American peers. Total GDP grew, even though employment had no corresponding increase, and a terrible agrarian crisis caused by high indebtedness, drought, failed crops and international competition -- which compelled some 200,000 farmers to commit suicide -- didn’t rapidly boost mass consumption.

Fragrant Cliches

The glossy services sector, such as information technology and back-office operations, boomed. The rise of financial services -- and its accompanying foreign and local business media staffed with innumerable short-termist analysts and reflexive boosters -- also helped make India appear to be “the story of unusual national advancement,” as Amartya Sen put it recently, making “an alleged reality out of what is at best a very partial story.”

Some fragrant cliches came to be lavished on the chronicle of “India Rising.” This is how it went: Since its introduction in 1991, free-market capitalism has been liberating India from the darkness of “socialism” and a mindless regulatory regime (aka, the License-Permit Raj), sparking a consumption boom that is lifting hundreds of millions out of poverty and making India a superpower in our newly flattened world.

This account of India’s past always mystified those who actually knew the country before and after 1991 -- a place very far from socialism, as I have pointed out in a previous column, and even further from free-market capitalism. For India in the previous decade witnessed what Raghuram Rajan, formerly the chief economist of the International Monetary Fund and now an adviser to Indian Prime Minister Manmohan Singh, calls “the Resource Raj.” This is a polite euphemism for crony capitalism, whereby, in the Financial Times’ gloss, “an alliance of well- connected industrialists and public officials…carve up the permissions and licenses that have in the past underpinned India’s growth.”

Looking around my own village in Himachal Pradesh, I could see that economic growth and the related change in consumption patterns were due mostly to real-estate speculation by the already rich and powerful. In the absence of industrialization, adequate education and employment, and indeed plucky entrepreneurship, the main source of capital was land, almost invariably acquired illegally by a nexus of businessmen and politicians.

No Horatio Algers

My experience was admittedly very narrow. But, magnified many times, this was also the “success story” of economic growth heavily dependent on easy access to and privatization of national resources; information technology, which still employs only 2.5 million of a workforce of more than 400 million, played a tiny role. There are very few Indian Horatio Algers. Many of the country’s long-established companies, often assisted by foreign partners, maintained their dominance with their unmatched ability to acquire mining leases, infrastructural contracts, property-development rights and mobile-phone spectrum.

A series of scandals beginning with the Commonwealth Games fiasco in 2010 and peaking with a reportedly $210 billion coal- mining racket exposed the influence of business over politics and, more alarmingly, the media. The larcenies of “socialist” India suddenly seemed small-time compared with the massive plunder of public money and resources under the auspices of free-market capitalism.

Caught red-handed in many instances, the government froze, shamefully aware of betraying its left-wing rhetoric. Heavy electoral defeats -- punishments by the poor for intolerably high inflation -- have further impaired its policy-making mechanism, which was always prone to eccentric behavior. Desperate to reassert their power, some bureaucrats and politicians have taken to prosecuting corporate offenders in the lucrative sectors -- telecoms, coal, power and gas -- that are most tainted by corruption scandals.

Detailing the woes of India’s business barons, the newsmagazine India Today recently expressed shock at seeing high-profile businessman Mukesh Ambani being harassed by the government. “If that is the fate of Mukesh Ambani, India Inc. ought to be very scared,” the magazine said.

So it should be after the easy run enjoyed in the previous decade by well-connected corporations. Could it be that, as the Financial Times wrote, “India’s democracy is responding to the administrative inefficiency and impropriety of the old system, albeit slowly and imperfectly?” Will India’s oligarchs be reined in by politicians who draw votes by posing as protectors of the weak?

Falling Behind Bangladesh

We shall see. In the meantime, a politically shell-shocked government is unlikely to risk appearing too business-friendly. Faced with widening fiscal deficits and probably a balance-of- payments crisis, the government seems, as in the Vodafone case, to have resorted to shaking down foreign corporations.

The government is clearly betting that as Western economies flounder, foreign corporations seeking a decent return have no option but to invest in India, agreeing to pay taxes that are, in the end, a small fraction of their revenue. It may be proved right: Ikea Group is again in play in India after the single- brand retail sector was opened to foreign companies. Vodafone shows no signs of pulling out.

In any case, those who noticed how India, in the previous decade of record GDP growth, slipped behind Bangladesh in life expectancy, child survival, fertility and immunization rates and allowed Nepal to catch up were never much swayed by the histrionic narrative of an inexorably rising country.

One must remain wary of yet more giddy distortions of India’s multifaceted reality. As Robert Zoellick, the outgoing president of the World Bank, points out, India’s shrunken growth rate of less than 7 percent can only cause envy in European and American hearts. Incremental reforms in agriculture, education and public health will do more to shape India’s future than the moods and whims of foreign investors today. Certainly, the story of India must be wrested back from the cliche-mongers, who, having once circulated the most garish fantasies, seem now to be peddling melodramatic despair.


Tales of India

[R0H1T]

STUPID & FUNNY FROM CN

Future of India's development threatened, unable to surpass China

[Shinigami]

the real title is this

Tales of India’s Economy Twistier than Kama Sutra

Also, as i have mentioned a hundred times before, you guys are also in big trouble. you just dont know it yet.
because chinese official stats are altered

Marc Faber: Chinese Government Statistics Are Fake | ValueWalk

Chinese government statistics are fake for the most part and if Chinese economy is slowing down there will be more money printing in China. the Chinese government economic figures are meaningless, because they are manipulating most of the economic data, which confirms that there is no economic growth in China this year in fact China’s production of steel, cement and electricity as well as the volume of its exports and car sales are stable or declining compared to last year, which is incompatible with the growth announced by the government he explained

NO ECONOMIC GROWTH Thats 0% growth.

[scorpionx]

Definitely some of the reformitive steps have been blocked by regional politics for shortsighted publicity but those hurdles will be overcomed soon as development is our main political agenda.

[Android]

CC title should exactly the same as mentioned in artcle changing title is against forum rules your self created title shows you opened this thread for sole purpose of trolling
so you are reported

[Martian2]

Also, as i have mentioned a hundred times before, you guys are also in big trouble. you just dont know it yet.
because chinese official stats are altered

You forgot something important. China has $3 trillion in foreign exchange reserves. Also, China consistently runs an annual $200 billion+ foreign trade surplus.

In summary, China has financial strengths that India lacks. The two countries are not comparable.

CC title should exactly the same as mentioned in artcle changing title is against forum rules your self created title shows you opened this thread for sole purpose of trolling
so you are reported

I don't agree with you. He never pretended that the thread title was the title of the article. The thread title is a reasonable summary of the contents of the article. The link is clearly located at the bottom of the posted article.

Finally, the actual article title ("Tales of India’s Economy Twistier than Kama Sutra") makes no sense. The OP (i.e. original poster) acted correctly to place a title that is understandable.

[ZABASHO]

with the number and type of posts Chinese Century puts up, its more like he/she thinks "Chinese Century" will be threatened by India's development. Too bad you don't get the concept that is either gonna be an Asian century or none at all

[Rusty]

Hope things improve for India. It can't be a galactic super power with a "junk" rating.

[Supply&Demand]

Hope things improve for India. It can't be a galactic super power with a "junk" rating.

And may be u should think about ur economy..or u cant be the Islamic super power u dream of every single day!

[Impasse]

Hope things improve for India. It can't be a galactic super power with a "junk" rating.

hmm the one like yours? I really hope we improve because i can't see my country to become replica of our neighbors.

[Bombay Dude]

Typical White Abdul's Propoganda.

[FairAndUnbiased]

the real title is this

Tales of India’s Economy Twistier than Kama Sutra

Also, as i have mentioned a hundred times before, you guys are also in big trouble. you just dont know it yet.
because chinese official stats are altered

Marc Faber: Chinese Government Statistics Are Fake | ValueWalk



NO ECONOMIC GROWTH Thats 0% growth.

However, imports and exports cannot be faked because they're recorded by both importing and exporting countries.

Then we have the fact that exports and imports are growing much slower than the overall economy due to the financial situation.

Yet exports and imports are still growing at 8% a year.

the real title is this

Tales of India’s Economy Twistier than Kama Sutra

Also, as i have mentioned a hundred times before, you guys are also in big trouble. you just dont know it yet.
because chinese official stats are altered

Marc Faber: Chinese Government Statistics Are Fake | ValueWalk



NO ECONOMIC GROWTH Thats 0% growth.

However, imports and exports cannot be faked because they're recorded by both importing and exporting countries.

Then we have the fact that exports and imports are growing much slower than the overall economy due to the financial situation.

Yet exports and imports are still growing at 8% a year.

[bindaas]

Hope things improve for India. It can't be a galactic super power with a "junk" rating.

BBB is not junk rating. But Pakistan have junk rating even worse than Bangladesh.
now Pakistanis predicting about other's junk rating.

[SinoChallenger]

They can't even surpass sub-Saharan Africa, nevermind China. They're just a third world hole with monkeys running amok and human / animal feces everywhere. They can only starve 1+ billion daily to continue as #1 weapons importer in the world.

[Diamond_Gold]

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with the number and type of posts Chinese Century puts up, its more like he/she thinks "Chinese Century" will be threatened by India's development. Too bad you don't get the concept that is either gonna be an Asian century or none at all

How's that (refer to the bolded)?

I could see almost every chinese work hard for their goals, but for the indians, I see only most people doing cheap talks rather than doing the actual hard work.

Yeah, maybe indians can build ivory castle just by providing lip services.