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Rising Every year at the World Economic Forum in Davos, there's a star. Not a person but a country. One country impresses the gathering of global leaders because of a particularly smart Finance minister or a compelling tale of reform or even a glamorous gala. This year there was no contest. In the decade that I've been going to Davos, no country has captured the imagination of the conference and dominated the conversation as India in 2006. It was not a matter of chance. As you got off the plane in Zurich, there were large billboards extolling INCREDIBLE INDIA. Davos itself was plastered with signs. WORLD'S FASTEST GROWING FREE MARKET DEMOCRACY! proclaimed the town's buses. When you got to your room, you found an iPod Shuffle loaded with Bollywood songs, and a pashmina shawl, gifts from the Indian delegation. When you entered the meeting rooms, you were likely to hear an Indian voice, one of the dozens of CEOs of world-class Indian companies. And then there were the government officials, India's "Dream Team," all intelligent and articulate, and all selling their country. The Forum's main social event was an Indian extravaganza, with a bevy of Indian beauties dancing to pulsating Hindi tunes against an electric blue Taj Mahal. The guests joined in the festivities. The impeccably dressed chairman of the Forum, Klaus Schwab, donned a colorful Indian turban and shawl, nibbled on chicken tikka and talked up the country's prospects with Michael Dell. India everywhere, said the ubiquitous logo. It was. And everyone now is in India—most significantly, of course, George W. Bush, who will arrive there on March 1. Jacques Chirac was there two weeks ago. (So was Bill Clinton, who can't stop returning to the country.) Two weeks before that it was Saudi Arabia's newly crowned monarch, King Abdullah. The week after Bush leaves, Australian Prime Minister John Howard arrives. And that's all in six weeks. The world—and particularly the United States—is courting India as it never has before. Fascinated by the new growth story, perhaps wary of Asia's Chinese superpower, searching to hedge some bets, the world has woken up to India's potential. The marketing slogans wouldn't work if there were no substance behind them. Over the past 15 years, India has been the second fastest-growing country in the world—after China—averaging above 6 percent growth per year. Growth accelerated to 7.5 percent last year and will probably hold at the same pace this year. Many observers believe that India could well expand at this higher rate for the next decade. While China's rise is already here and palpable—it has grown at almost 10 percent since 1980—India's is still more a tale of the future, but a future that is coming into sharp focus. A much-cited 2003 study by Goldman Sachs projects that over the next 50 years, India will be the fastest-growing of the world's major economies (largely because its work force will not age as fast as the others). The report calculates that in 10 years India's economy will be larger than Italy's and in 15 years will have overtaken Britain's. By 2040 it will boast the world's third largest economy. By 2050 it will be five times the size of Japan's and its per capita income will have risen to 35 times its current level. Predictions like these are a treacherous business, though it's worth noting that India's current growth rate is actually higher than the study assumed. Even the here and now is impressive. Indian companies are growing at an extraordinary pace, posting yearly gains of 15, 20 and 25 percent. The Tata group, the country's largest business house, is a far-flung conglomerate that makes everything from cars and steel to software and consulting systems. In this sense, it is a useful window on India's industrial and postindustrial economy. Its revenues grew last year from $17 billion to $24 billion and it is heading for extremely strong growth this year. At another end of the scale, the automobile-parts business is made up of hundreds of small companies. Five years ago the industry's total revenues were $4 billion. This year they will exceed $10 billion. In 2008, General Motors alone will import $1 billion of auto components from India. India's growth is messy, chaotic and largely unplanned. It is not top-down but bottom-up. It is happening not because of the government, but largely despite it. It has vast and growing numbers of entrepreneurs who want to make money. And somehow they find a way to do it, overcoming the obstacles, bypassing the bureaucracy. "The government sleeps at night and the economy grows," says Gurcharan Das, former CEO of Procter Gamble in India. There are some who argue that India's path has distinct advantages. MIT's Yasheng Huang points out that India's companies use their capital far more efficiently than China's; they benchmark to global standards and are better managed than Chinese firms. India has produced dozens of world-class companies like Infosys, Ranbaxy and Reliance. Huang attributes this difference to the fact that India has a real and deep private sector (unlike China's many state-owned and state-funded companies), a clean, well-regulated financial system and the sturdy rule of law. Another example: every year Japan awards the coveted Deming Prizes for managerial innovation, and over the last four years, they have been awarded more often to Indian companies than to firms from any other country, including Japan. The Indian consumer is also rearing for action. In India, young Indian professionals don't wait to buy a house at the end of their lives with their savings. They take out mortgages. The credit-card industry is growing at 35 percent a year. Personal consumption makes up a staggering 67 percent of GDP in India, much higher than China (42 percent) or any other Asian country. Only the United States is higher at 70 percent. Statistics don't quite capture what is happening. Indians, at least in urban areas, are bursting with enthusiasm. Indian businessmen are giddy about their prospects. Indian designers and artists speak of extending their influence across the globe. Bollywood movie stars want to grow their audience abroad from their "base" of half a billion fans. It is as if hundreds of millions of people have suddenly discovered the keys to unlock their potential. What is happening today is the birth of India as an independent society—boisterous, colorful, open, vibrant and, above all, ready for change. India is diverging from its past, but also from most other countries in Asia. It is not a quiet, controlled, quasi-authoritarian country that is slowly opening up according to plans. It is a noisy democracy that has finally empowered its people economically. In this respect India looks strikingly similar to the United States of America. In both places, society has triumphed over the state. But Prime Minister Manmohan Singh has disappointed many of his fans. They had hoped for another set of large-scale reforms, but the government has been cautious and is implementing programs that look suspiciously like another round of subsidies (programs that have had such little success in the past). Singh heads a fragile coalition government without a strong mandate for economic change. He is not himself a powerful politician, depending on Mrs. Sonia Gandhi for his clout. But every week you read of a set of regulations that have been eased or permissions that have been eliminated. These "stealth reforms," too small to draw vigorous opposition from the unreconstructed left, add up. And India's pro-reform constituency keeps growing. Another change is that, since 1993, democracy has been broadened to give villages greater voice in their affairs. Most important, village councils must reserve 33 percent of their seats for women. As a result there are 1 million elected women in villages across the country. They will now have a platform from which to demand better education and health care. It's bottom-up development, with society pushing the state. Will the state respond? Built during the British Raj, massively expanded in India's socialist era, it is filled with bureaucrats who are in love with their petty powers and privileges. They are joined by politicians who enjoy the power of patronage. And then there are some journalists and intellectuals who still hold on to some romantic idea of Third World socialism. There are many in India's ruling class who remain deeply uncomfortable with the modern, open, commercial society that they see growing around them. But the state fills a vital role. Look at India's great success—its private companies. They flourish because of a well-regulated stock market and financial system that has transparency, adjudication and enforcement—all government functions. Or consider the booming telecommunications industry, which was created by intelligent government deregulation and re-regulation. Or the Indian institutes of technology—among the world's best—all government-run. But that's just a start. Most Americans would probably be surprised to learn that India is, by all accounts, the most pro-American country in the world. The Pew Global Attitudes Survey, released in June 2005, asked people in 16 countries whether they had a favorable impression of the United States. A stunning 71 percent of Indians said yes. Only Americans had a more favorable view of America (83 percent). The numbers are somewhat lower in other surveys, but the basic finding remains true: Indians are extremely comfortable with, and well disposed toward, America. More likely it is because Indians understand America. It is a noisy, open society with a chaotic democratic system—like theirs. Many urban Indians speak America's language, are familiar with the country and often actually know someone who lives there, possibly even a relative. The Indian-American community has been a bridge between the two cultures. The term often used to describe Indians leaving their country is "brain drain." But it's been more like brain gain, for both sides. Indians abroad have played a crucial role in opening up the mother country. They returned to India with money, investment ideas, global standards and, most important, a sense that one could achieve anything. The stories of Indians scaling the highest peaks in America have produced pride and emulation in India. Americans, for their part, have embraced India in some measure because they have had a positive experience with Indians in America. Americans also find India understandable. They are puzzled and disturbed by impenetrable decision-making elites like the Chinese Politburo or the Iranian Council of Guardians. A quarrelsome democracy that keeps moving backward, forward and sideways—that they know. Take the current negotiations on nuclear issues. Americans watch what is going on in New Delhi, with people inside the government who are opposed to a nuclear deal leaking negative stories to the media, political opponents using the issue to score points, true ideological opponents being utterly implacable—and this all seems very familiar. Similar things happen every day in Washington. The rise of China is the fundamental strategic shift that is altering Asia's—and the world's—landscape. And the United States and India will be glad to have each other's company in that circumstance. This doesn't mean that the United States and India will agree on every policy issue. Washington and New Delhi have different interests and thus will inevitably have policy disputes. But it is precisely because of the deep bonds between these countries that such disagreements would not alter the fundamental reality of friendship, empathy and association. Such a relationship between the United States and India is almost inevitable. Whether the nuclear agreement goes through or not, whether the governments sign new treaties, the two societies are getting increasingly intertwined. A common language, a familiar world view and a growing fascination with each other is bringing together businessmen, nongovernmental activists, journalists and writers. The world turns and India will have its ups and downs. But today it is India's moment. It can grasp it and forge a new path for itself. Along that road lies a genuine and deep relationship between the planet's largest democracy and its wealthiest democracy. Until now, this has merely been a slogan. It could actually become a reality, and who knows what such a world might look like? |
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