India rising

Bill Steigerwald
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Posted: Apr 06, 2007 12:00 AM

Until she became the Edward R. Murrow Press Fellow at the Council of Foreign Relations in New York City, Manjeet Kripalani was India bureau chief for Business Week magazine for the last 10 years. Based in Bombay, she reported on the many political and socioeconomic changes globalization has brought to the underdeveloped country of 1 billion people, 28 states, 16 official languages and six major religions. I spoke to her April 3 by phone from New York.

Q: What should every American know about the reality of India today?
A: I would say India is the country of the future. The center of gravity has shifted from the West to the East. It is now concentrated in Asia. The economies are growing in their own way; they are creating new ways of being. They are, for instance, creating new business models that are coming out of both India and China and some parts of Southeast Asia. A lot of the manufacturing is focused in Southeast Asia and in China. A lot of the new innovative models of service businesses are coming out of India. This is changing the way the world thinks about development and business. So everybody -- Pittsburgher and American alike -- really should be paying very close attention.

A lot of these changes have happened because America has taken the lead. American companies have been at the forefront of globalization. They are the ones that have actually brought the new ideas and change to Asia and India. But India, more than China and other parts of Southeast Asia, has created its own models that work for its own markets.

For instance, there’s a cellular phone company called Bharti, which, like most of India’s cellular operators, sells its phone calls for between 1 cent and 2 cents a minute. Those are the lowest rates of anywhere in the world. It was possible because of innovations made by these companies for their local markets. And these were innovations that multinational companies were not interested in making because they are not interested in low-cost models for low-cost markets. ... Companies like Bharti have created this astonishingly low-cost cellular phone call, and what it has done is it has given a big boost to the Indian cellular phone market. It’s now the fastest growing in the world and it’s changed the life of ordinary Indians.

Q: What is India’s greatest success story of the last 20 years in terms of its development?
A: India’s democracy and its economic development model have been its greatest success story.

Q: India used to have a very heavy-handed government -- a lot of regulation and a strangulation of the economy. Has that changed?
A: Well, it’s just deepened. The government continues to hold sway over a large part of people’s lives. But more and more, it is ceding space to the private sector. The private sector is now stepping into areas that the government is not able to control. Democracy has also been important. Because of India’s multiethnic, multireligious, plural political space, the democratic system is the only one that works because it allows everybody a voice. India, at the time of independence, had a huge class of people from the lower caste who really were not given any opportunities in the past centuries because of the caste system that kept people in their place. It was really a guild system that became rigid. It kept the lower class in its place and it allowed the upper class the upper hand, so these people never had a voice. Upon independence, India gave everybody universal franchise -- one-man, one-woman, one-vote. The lower class became a powerful bloc and they were able to vote their own people into power. So India has seen a tremendous power shift from the upper caste to the lower caste.

A tremendous amount of affirmative action -- your American-style affirmative action -- has really helped the country find equality. Because of this, India has an economic development model that is very different from other countries and China. It’s different from the prescription model. Its economic growth model is grass-roots driven. It’s nonforeign-investment-driven growth.

Everything in India happens because the masses demand it. It’s all entirely demand-driven. The politics change because the masses want it. The economics change because the masses demand it.

Q: What is India’s most enduring and worst problem?
A: Health care and infrastructure. India’s problem is really poverty and poverty is driven by lack of education, health care and infrastructure. The politics in India are a mixed bag. Some states are very good and some states are very bad. But it will all eventually work because the people demand it and the politicians do what people demand. And people’s aspirations have risen and changed, so they are now going to demand things like education and infrastructure and health care that they have never demanded before.

Q: How has globalization helped India?
A: India has been one of the greatest beneficiaries of globalization. To begin with, there is the great outsourcing movement. Outsourcing is really the newest wave of globalization and it has emanated from and was innovated in India. One of the great blessings of globalization is the lowering of telecom costs. It's created remote services. The whole outsourcing industry arose because of cheap telecom prices. Data was easily transferred. You had Indian companies writing software for foreign companies in the United States and Western Europe. And similarly, the call centers. This is something Indians thought would be to their advantage, and they have used it.

Q: Has globalization helped the poor?
A: Absolutely. As far as I am concerned, globalization has been the biggest benefit for the poor. It has given them opportunities that they wouldn’t have had. It isn’t just telecom. Because of the availability of satellite, Indians were able to get cable television that was not that expensive. Cable television allowed Indians to get a lot of foreign channels. Because of the soap operas and the talk shows, Indians in the smallest, poorest areas are transported into the drawing rooms of the world. So they don’t really only see their superiors in the big cities of India, they now see people all over the world. It takes them out of their own rigid confines. Whereas once a cobbler’s son could never ever hope to be more than a cobbler, he can now aspire to be a doctor, because you know what? He saw it on TV, and if it happens in the world, he can do it. Television gives them examples. People with basic smarts can seize opportunity.

Q: What are the downsides to India of globalization?
A: People of a certain political hue will say that getting companies like Wal-Mart inside India is a downside because the small shopkeeper loses his livelihood, but I would disagree. Particularly in the case of India, the threat of Wal-Mart’s arrival got Indian entrepreneurs to start setting up large retail operations. So they began the process of aggregating these small retailers, and they are not such a threat because they are Indian and know the environment and how to manage the people and the system. Secondly, because the Indian entrepreneurs began getting large Wal-Mart-style retail operations together, they also began to push the government to do the very difficult reforms in the agricultural sector, because they had to source products from the farms. India’s farming community is totally disorganized. The last thing India’s government will do is agriculture reform, because it is the toughest and will take a toll on the poorest initially. But that is the one reform which will really lift Indians out of poverty. They haven’t done it because agriculture has become very politicized and is dependent on government subsidies. So this is helping India build a cold chain. The farmers will get better methods of farming. They will have better produce and get better prices. I think globalization has been good. It has been great for China too, because it’s given it a path out of poverty.

Q: What should India be doing that it is not already doing to improve its economy and raise its standard of living?
A: Reform, reform and more reform. It needs to reform its agriculture sector. There is not a law that India does not have but these laws need to be enforced. The government is the major provider of all services across the country. These services are very spotty, and what government needs to ensure is implementation -- of its services, implementation of its laws and more reform.

Q: Does India have the potential to become a real economic powerhouse?
A: I think so, very much. It could be an economic power, particularly for South Asia, and it can be an economic, social and political model for the rest of the world. Most of the world today looks like India, which is poor, underdeveloped, multiethnic, multireligious.

We could say this is true from Southeast Asia to Africa to Middle East and Central Asia. India is a great development model for these countries because it is grappling with all these issues at the same time. It has problems with secession. It has terrorism. It has inter-religious conflict, inter-communal conflict. It has myriad political parties.

But India also has tremendous talents. It has had tremendous adaptability. Over the past centuries it has been raided by the Arabs, the Greeks, the Mongols, the British, the Europeans. But India has a remarkable ability to adapt to new influences, even alien influences, and absorb them, make them its own and move on.