India: The Decisive Decade

IMGXYZ663IMGZYXOn March 28, 2007, the Carnegie Endowment hosted Pramit Pal Chaudhuri, Bernard Schwartz Fellow at the Asia Society, New York, and Foreign Editor of The Hindustan Times.  His talk, entitled “India: The Decisive Decade,” was moderated by Visiting Scholar Frederic Grare.

Chauduri highlighted the existence of a huge arc of poverty in a rising India, and drew attention to the lagging pace of economic reforms in states such as Bihar and Uttar Pradesh. While the governments in the western states continue with the reform process, no matter which political party is in office, this is not the case in some of the eastern states. However, Chaudhuri conceded that though the pace was slow, things are starting to move in the right directions even in eastern states like Bihar, pointing to the recent Nitish Kumar government which has embarked on the reform process. At the same time, he lamented that some states like Jharkand and Chattisgarh were not showing any positive developments.

Chaudhuri maintained that it was difficult to get the reform process to proceed more rapidly in states such as Uttar Pradesh, Bihar and West Bengal. However, Orissa was the real success story. Orissa, under Naveen Pattnaik, has managed to carry out some of the most difficult reforms such as fiscal reforms, unlike other states that hold unenviable fiscal deficits. Having also successfully implemented administrative reforms, Orissa is now extremely well placed to fully exploit its large coal and iron-ore reserves; not surprisingly, Orissa attracts almost one-third of the net FDI to India today.

Arguing that political space and acceptance of reforms is expanding in India, Chaudhuri pointed to the fact that the poor are voting in larger numbers- a phenomenon that reflects their desire to participate in the Indian economic success story. In addition, states are attempting to pick up best practices and lessons from the successes of other states- the examples of decentralization in Madhya Pradesh under Digvijay Singh, and the handling of agrarian dissent over land procurement and displacement for industrial purposes in Orissa under Pattnaik were outstanding examples.

Chaudhuri suggested that electoral trends at the central and state level are diverging- what happens at the center no longer has a big impact in the state elections, and vice versa. He lamented that there is no clear pattern that would suggest that reforms would survive with changes in government at the state level- a crucial requirement for the reform process to advance unhindered by political uncertainties. 

Pointing to the appalling state of physical infrastructure in India, Chaudhuri found Manmohan Singh’s government’s approach to developing public-private partnerships to bridge the infrastructure deficit to be effective and pragmatic. Under such partnerships, he explained, the government would take the initial risk and put in the seed money, and then let the private sector take over. Even though over $250 billion and $150 billion have been pledged by the public and private sectors, respectively, for infrastructure in the next 5-6 years, Chaudhuri argued that the deficit would be reduced even faster if the state governments were to take the lead as well.

During the discussion, Chaudhuri emphasized that corruption was declining due to the collapse of the License Raj and the introduction of legislations such as the Right to Information Act. He reiterated the effectiveness of the public-private partnership and proposed the extension of the model to include the education sector as well. Private colleges, he argued, were crucial in fulfilling the needs of the burgeoning Indian corporate sector. On agricultural reform, he held that the central government needs to build up the agrarian infrastructure further, and that the intermediaries between the farmer and the market needed to be removed. Rapid urbanization has led to the further development of second and third tier cities in India as attractive alternatives to the traditional metropolitan cities like Delhi and Mumbai.

On domestic electoral politics, Chaudhuri affirmed the view that coalition politics is here to stay and argued that future electoral results, not unlike the past few elections, would depend on how many successful coalitions the national parties (the BJP and the Congress) could build. He wrapped up the discussion by firmly stating that demography posed a big risk for India, highlighting that the problem of agricultural unemployment and the Herculean task of accommodating around 800 million people into the Indian work force in the coming decades.

This summary was written by Anirudh Suri, Junior Fellow in the South Asia Program at the Carnegie Endowment.