Eastern giant in line for trouble

Pessimistic observers found paradise in India of the 1940s and 1950s. They saw the skeletal millions, the toxic religious hatred, the corruption at every level of society and government and the brutal, medieval social customs. They reacted with gloom: India would not hold together for long, let alone build a stable, prosperous democracy.

Under Nehru, India's democratic structure had lots of idealism. But by the late 1960s, few moves were barred in Indian politics; flagrant and even barbaric corruption was the norm. The hardiest optimists withered. Industry was crippled by a vast number of industrial licences and quotas.

This was supposedly to avoid capitalist exploitation, though only slothful, corrupt bureaucrats thrived on the system. And yet Indian rulers showed shockingly little concern for a famished populace's education or healthcare. India spent less on these, in percentage terms, than almost any other nation. Indian governments seemed bent on having the worst of both socialism and capitalism, with the virtues of neither.

Impatient critics furiously urged on New Delhi rival programmes of salvation. Give land to the peasants, make the people literate, give them healthcare, kill the holy cows, mobilise the masses in good Maoist style to build public works! Such was (and is) the left-wing cry. Free industry from the licensing regime and see India boom! So shrilled the free marketeers. At first India was constantly derided for not being as socialist as China, and later, beginning in the 1980s, for not being as capitalist as China.

Then came the most unexpected development. Early in the 1990s, the licensing jungle was cut back. Tariffs on imports were sharply reduced. The economy responded powerfully, becoming one of the world's fastest growing. An impressive software-exporting sector emerged from nothing. Now India is the place to find technical manpower and sell consumer goods to a middle class growing by tens of millions every year. The press and the corporate analysts, Indian and foreign, say that a few more free-market reforms will make India a superpower within decades.

Edward Luce of the Financial Times is impressed by India's economic rise. Yet, as his title indicates, he finds it troubling. He makes little of the physical sensations of the place; this is no book for sights and sounds and smells, which is a pity because its sparse imagery can be very good. There are some amusing portraits: that of Sri Sri Ravi Shankar, a Hindu TV evangelist of orchidaceous flamboyance who warns his giggling admirers of the dangers of being "too good" and recommends taking the occasional bribe; and of Laloo Prasad Yadav, who until recently presided over the boundless misfortunes of the large state of Bihar, taking time out to teach a cow to nod on command.

Luce describes India's strengths in arresting detail. India's steel plants push aside Japanese and American competition. It has private hospitals that do the most complex surgery at a fraction of Western costs, drawing patients from the industrialised world. It already has companies in the software and drugs sectors that are world beaters. And this is the merest beginning.

In comparison with China, India is way behind in dealing with malnutrition, but since independence, it has never known a large famine, whereas Mao's despotic whims caused the largest famine in history. India lags behind China in literacy, but Indians can read what they like. Indian economic growth is several percentage points behind China's, but it may be more solidly based; moreover, its banking system is far more solvent. India attracts far less foreign investment than China, but it uses that capital more efficiently. The political system in New Delhi is unable to put though the most necessary measures, such as building modern transport facilities, but this indecisive political order has, thus far, been far less vulnerable to popular unrest than China's autocracy.

Yet Luce's detailing of India's chronic failings produces a forbidding picture. Even when government stores have enough stocks to provide each malnourished family with a tonne of grain, India is unable to distribute food efficiently. In some provinces, up to 80 per cent of government-subsidised grain fails to reach the needy due to official corruption. Despite an oceanic overabundance of manpower, low and semiskilled employees form a far smaller proportion of the Indian industrial workforce than in China. This is because Indian labour laws in large factories are among the strictest in the world; not even constant absenteeism is enough to have an employee sacked. The labour unions fight ruthlessly to keep these laws. They have the backing of powerful political parties that governments dare not offend. So the only way to erode Indian poverty seriously - through mass industrial employment - is blocked. The unions also insist on government subsidies for disastrously inefficient state industries rather than funding for badly needed transport infrastructure.

The oddity of India's economic advance, Luce points out, is that while other nations became developed through industrialisation, India's industrial sector remains small. The services sector is the one that is expanding rapidly. So India's economic successes belong to a minority middle class rather than the masses. Indeed, in terms of nutrition, Indian children are worse off than their counterparts in sub-Saharan Africa.

Despite all the boasts about the country's being the world's largest democracy, people tend to vote into power those who favour their particular caste.

It all amounts to the absence of any obvious way to bring prosperity to the mass of Indians. Luce is too seduced by the fashionable picture of sure Indian superpowerdom, drawn up by projecting forward high economic growth statistics. Here some international comparisons would have helped. Fast economic growth, especially if it excludes the masses and is accompanied by weak government, can lead to severe political crises. Luce does not explore seriously the possibility that India could be heading for major social upheaval. He says Indian parliamentarians are unimpressive. According to him, the political class needs to unleash the potential of industry more and make education and healthcare a priority. All true - yet the chances of its failing to do so are very high. This is enough for us to conclude that India's future will be violent and troubled, even if the country holds together - hardly the material for a rousing success story.

Radhakrishnan Nayar is a writer on international affairs.