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History Table of Contents
1997 Summer Conference
Summer Conference 1997
Canada and the Asia-Pacific Promise: Hope, Hype and Reality
The Strategic Centre of the World: Economic Dynamism
and the Search for Stability in East Asia

Kathleen Cox,
Journalist and Consultant, New Delhi and New York

Before I start, I thought I should explain where I'm coming from. I'm from Delhi. I've lived in Delhi permanently since 1991; and since 1985 I have lived there at least six to nine months of each year. It is my home.

I also think you should know a little about the business of writing a guidebook on India. It sounds like a simple job, but, in fact, it's extraordinarily difficult work. My mission is to discover why, not just what's happening there. I have to know why!

There's a wonderful Sanskrit word in India that's very valuable to know, "maya." Maya means illusion. And it's very handy when you're writing a guide book because just when you think you know why something is happening, you realize it's illusion. And that is very true about India.

We in the West, in particular, do not understand this country. Because of what I do — tourism is a major foreign exchange earner — I've had access to important people on the state level. And I'm very familiar with many of the key people in power today. They appreciate tourism, they want the dollars. So, I've had interesting access.

It's important to know India is hierarchal. I've had some very interesting inside experiences that are fairly unusual.

Also, because I live there, I really am coming from a point of terrible isolation. My speech is really from the inside. And India is still looking inward. I want you to remember that.

I want to make one comment about the speech last night [by Ross Munro]. I'm not a political expert, but I want to say I think India did not choose the wrong side. If I remember correctly, it chose non-alignment. In a way, it won the booby prize. The United States ended up pushing India into the Soviet camp.

Now, I'd like to speak specifically of the India I know.

Hope, hype, reality.

When we speak of India as an emerging global power, many people express their doubts. This is a country where people pray hard for electric power, working telephones, running water. Until recently, they have not been Praying to their government. The Hindu devout most likely Pray to Ganesha. He's the [elephant-headed] God who removes obstacles. A lot of us, myself included, would say he's been very slow to respond.

As for hype, most everyone dismisses whatever hype they hear about India. And why not! The country needs billions of dollars just to create an adequate infrastructure. And until it does, India's economy will have the vibrancy of a slow-burning cake of dung.

Reality? Just mention India and the eyes glaze over at the thought of its poverty and illiteracy, which affects a staggering percentage of India's soon-to-be billion-plus population.

The bottom line? To most people, India suffers from unending, and even worse, expanding problems.

To turn to the specific topic before this panel, India doesn't fit conveniently into the Asian model. It's economy is obviously not yet dynamic. More importantly, when we look at contemporary India, the focus must be made with a wider lens.

We must consider not just the state of its economy, we must consider the state of its nation.

India worries, as it should, about issues of governance that can have a destabilizing effect on this country with its diverse and enormous population.

India. It's always dragged into some version of a phrase that attempts to consolidate Asia into the collective family of tigers. Only a fool would equate India with a tiger. India is an elephant.

And now let me remind you of just a few characteristics of this particular beast: The elephant is huge, hard to make move; but once it starts plodding forward, it's just as hard to make the elephant swerve off course. The same is true with India's economic reforms.

In 1991, a financial crisis of such magnitude that the country had to pawn its bullion — actually ship it out of the country as collateral — finally forced this elephant to stir. Even then, it required heavy prodding with international agency sticks to get the elephant to shake off its slumber and move forward.

Lumbering along. Yes, this defines India's reform. But as with the elephant, there will be no turning back — no matter what confused mix of parties make up the central government. This is the beacon of truth that shines out of post-1991 India.

Even the stalwart Communists know that their country will stagnate if it doesn't become globally competitive and globally integrated. Old-line Communists and would-be isolationists may fight against the multinationals, but they all know that their country must attract a major chunk of foreign investment. It must be hard for those guys to live with this new thought.

Another thing about the elephant. It never forgets. This inability to forget gives rise, in the case of India, to a towering ego. Just celebrating the age of 50, India as a nation is a child in the context of the modern age; but it is a child born of ancient civilization. To understand this distinction is paramount to understanding present day India.?India is proud of the fact that it is the birthplace of some of the world's most important religions and greatest thinkers.

India doesn't think of itself as young; and it also doesn't like being minimized; reduced to a small player on the world's stage. India was deeply disappointed when it lost what it believed was its rightful Asian seat on the United Nation's Security Council in 1996.

Slow but determined. An unflagging memory that leads to pride. These two characteristics explain the importance of India in the Asian arena. And while the title of this session mentions exclusively East Asia, let me make a final point about the elephant and the tiger.

The respected tiger is given a wide berth in the jungle; but given a choice, the tiger would choose to avoid an encounter with the elephant. The outcome of that match could be the tiger's loss. That's why India does matter: it is quietly powerful. It cannot be diminished in any analysis of any part of Asia.

And here's where I really disagree with last night's speaker. India's size, its resources and the advantage that comes with a government that allows a wide range of participation from its own people can develop as a strong rival to China.

India, though, must be considered on its own terms as it moves toward global integration. Its reforms are milestones because they go beyond economics. India has broken through its long stagnant, so-called Hindu rate of three or four per cent growth, because it has made profound ideological changes that break apart Nehru's pact with socialism.

Until 1991, India accepted Nehru's belief that it would find strength and social uplift through a huge government-controlled public sector.

Today, most of these government-run units are financial drains that create a huge sucking sound that cries for disinvestment, privatization and outright closure.

But this is no easy task in any country, let alone in India, where about 250 state-owned firms account for one-quarter of the total gross domestic products and 70 per cent of the employment of the organized industrial sector.

In Nehru's India, the government controlled nearly everything but your family. The government manipulated economic growth through licensing and tangled it up in bureaucratic red tape. During this time of the Licence Raj, industrialists were not just told what to make, but how many of a particular item they were permitted to make.

If you wanted to make toothpaste, too bad! You might just have to make spark plugs. But those lucky enough to get a licence were delighted that they had the right to make something. Pre-reform India also outlawed the import of nearly every single consumer product and the severely-limited number of imports permitted weighed in with some of the world's highest tariffs.

So, independent India was set up, consciously or sub- consciously, to look inward and to reinvent bad versions of every conceivable wheel. The domestic manufacturers who benefited from this highly-restrictive licensing system were prohibited in large measure from developing an export market.

According to the World Bank, India's share of world trade, which stood at two per cent in the 1950s, plummeted to less than half of one per cent by the late 1980s.

But import embargoes had a plus side, at least for India's manufacturers. It gave them a captive domestic market. Of course, their customers had little choice but to pay dearly for a lot of junk.

Extravagantly inward thinking and economically backward; that was the India that fell from grace in 1991.

India's latest and ongoing changes are monumental. And while its coddled industries have been terrified of foreign competition, they are understanding the need the restructure.

Management gurus are as popular as swamis. Management consultancies are finding lots of new clients. The recent visit by Bill Gates was a mega event that overshadowed even the visit of an Asian head of state and Michael Jackson. India's healthy companies will survive.

The country is developing an export market; and while numbers for India's domestic market are wildly inflated, the market is huge and consumers are finally getting choice, the beginnings of quality and a measure of satisfaction.

Economic reform, though, is still just a small part of the extraordinary change and immense rethinking that is currently taking place in India.

Think about this: India is weathering the decline of the Congress Party, which reigned in some configuration during 44 of India's 50 years of national existence. India is now learning to function in a new age of short-lived, coalition governments.

Also, perched like a vulture's claw on its back is a frightening and destabilizing factor — one that India must address and handle with skill and care; internal stability that will not be resolved in the foreseeable future by economic reforms.

While everyone tends to draw comparisons between India and China, frankly we would be smarter when we consider stability if we looked West and compared India with the former Soviet Union.

The USSR was a land of culturally and linguistically distinct people, where the glue that held them together was a false glue; a strong central government. When the USSR broke apart, wise Indians saw their own country's reflection fragmenting inside that shattered mirror. And now, within the remains of Russia, they see a scary, new vision that could be a nasty harbinger of what could go wrong in India.

It boils down to this: If you don't give people good governance, there could be nothing left to govern. And good governance for India means striking a reasonable comfort level between a stable central government and autonomy within very different states.

Luckily, enough wise souls sit inside India's present United Front Government and within the Congress who are pushing for increased states' rights to appease the different needs of India's diverse population.

This, by the way, is one area where economic reforms are a catalyst — initiating the devolution of power from the centre. Individual states are creating competitive packages to pull investment away from other states.

But, while this is healthy, it is just a beginning. India's states need more power and leverage to respond to their own constituencies and to appease unrest that does exist throughout India; unrest that all too often leads to communalism and casteism — a volatile mix that fuels the passion of fanatics.

India must successfully prove that it isn't a land of separate and unequal communities, but a nation secure and intact.

Wise thinkers also realize that law and order is threatened by the absence of unbiased and independent systems that can and will enforce accountability.

It is encouraging to see the Fourth Estate and a handful of politicians at least address with passion the need to institute regulatory bodies that can create a framework for transparency, fairness and accountability — not just within the economic arena, but within the government and every level of the government.

While many current anti-reform thinkers in India say economic liberalization has unleashed a lot of fiscal mischief, I disagree. Corruption in India did not come of age in 1991; it thrived long before then. I believe that reforms have just made it easier to detect the dirt.

Judicial activism is also moving into high gear in India. Often prompted by public litigation, this is further proof that traditional Indian apathy is slowly sliding away. The people of India want the country to clean up its image. They want governmental accountability and transparency. They want their basic rights, good health, good education and the freedom to pursue their dreams. They want quality in their lives.

Let me conclude by saying that India's engine of economic reform has many stops to make along its route to accommodate diverse, and not necessarily complimentary passengers. It has to watch the land mines that could appear suddenly; land mines that have nothing to do with the country's economy.

The Congress Party could suddenly pull the rug yet another time from under the United Front government. A religious conflagration could erupt in Varanasi over yet another disputed Moslem mosque.

But given all of this, India is a young, sloppy, but living democracy. It's doing a lot better than most people think. It's never going to be a Singapore tiger, but don't underestimate the country. It's plodding forward.

There is room for hope and that isn't hype. It is reality.