Tuesday, August 25, 2009

India renews its tryst with destiny


Imagining India by Nandan Nilekani

Reviewed by Dinesh Sharma

Nandan Nilekani represents an Indian entrepreneurial class that is spearheading a quiet revolution. He claims the forces of information technology, economic liberalization and globalization have created a resurgence in India that resembles the heady days of the founding of the nation.

In the words of his friend and confidant, Thomas L Friedman, who has written the foreword to the book, India's economic rise could potentially level the playing field for more than one billion people. Weaned off of a half-century of dependency on quasi-socialist ideologies, India's forays into the information technology sector have demonstrated its readiness to take on the challenges of the free-market economy and become the largest and the fastest growing democracy on the planet.

Nilekani's rediscovery of India through entrepreneurship tells the story of an ancient civilization entering the information age - an antique land with one of the world's fastest growing cell phone penetration rates. India today stands at a crossroads, facing a major demographic transition and bustling with the spirit of technological innovation. It can either embrace this, take the arduous path less traveled and reshape the country for the 21st century, or due to a lack of political resolve forego an economic tidal wave that could improve the living standards for its hungry masses.

As a co-founder of Infosys, Nilekani stumbled upon the idea of a technology start-up in the early 1980s. He describes himself as "an accidental entrepreneur" trying to renew India's outlook.

"[A]s an IT company, Infosys always faced challenges different from the rest of the Indian industry. Shortages in infrastructure did not affect us, as our markets were international, and all we needed to do business was a wire and some computers. We experienced little of the labor problems and strikes that plagued India's traditional industries" (p 3).

Nilekani concludes that India's recent victories in economic reforms have been gained "despite the state", an idea encapsulated in the underlying theme of the book: "India's weaknesses are all within, in the ongoing struggle to define the direction of our future ideas and policies for the future" (p 5). Like a piece of software code or an Indian classical raga (melody), this theme plays throughout the book in different variations, tempos and pitch.

This is a book driven by ideas, both large and small. In part one, the book examines ideas that have arrived and where attitudes in the Indian population have changed. For example, the English language was once seen as a vestige of the Raj but with the onset of outsourcing, it has become the language of choice and a ticket to globalization. Not long ago, India's large population was seen as a burden but now it forms the human capital reserves needed to meet the challenges of affordable labor. Prior to liberalization, global brands were driven out of India; yet, today no one raises an eyebrow when another KFC or McDonalds opens in a local town or city.

The second part of the book examines new ideas that have not yet been fully adopted. For example, the idea of universal literacy. Similarly, the idea that the "real India" is to be found in its villages has been central to the romantic notion of India, but lately this has given way to the need to build modern cities.

The third part of the book examines controversial ideas the role of government in private education, the reform of labor laws and the building of integrated financial markets. In the concluding section of the book, Nilekani challenges readers to create innovative Indian solutions to uniquely Indian problems, rather than simply importing ideas from other countries. India's economy, population and energy challenges demand Indian solutions not necessarily pre-configured in Western ideas about development.

For a man of technology, inclined to measure progress in nanoseconds, Nilekani has a long view of Indian history: "The problem was that the curve of India's history and its ideas had been an extremely discontinuous one - a foreign occupation had long divorced the region from its pre-British ideas and economic and social structures ... What we saw in its place instead was strange grafting of the Indian identity with an entirely new culture. The British brought with them the English language and Western education, and with such education came the ideas of modern nationalism, self-determination and democracy. However, these ideas only reached a small elite - the British consensus was that, on the whole, Indians were best left alone" (p 10).

Nilekani states that fissures created by the British have endured; India has remained divided between the elite civil service class and the mass of humanity which is predominantly feudal and rural. The chasm between the old India, "the village India", and elite India, "the babu-sahib [term for British colonials] culture", saddled the post-independence India through the stagnant years of growth, leading up to the economic liberalization of the 1990s.

India was unified in the two decades after independence due to the national goodwill created by the transformational leaders like Mahatma Gandhi and Jawaharlal Nehru. There were also brief moments of unity during the 1962 war with China and wars with Pakistan in 1947-1948, 1965 and 1971. Otherwise, India has been divided along traditional lines of rural-urban region, religion, caste, social class and gender hierarchy. Economic liberalization was the singular event that marked the beginning of the great Indian middle class, which approximates the population of the United States.

Partly due to his global vision, Nilekani breaks through with clear insights. He recognizes that India at the time of its independence and shortly thereafter was a unified nation under the shadow of its founding fathers. This was a short-lived moment, however, and India has not been unified ever since; post-independence India has been splintering from within and without. Former prime minister Indira Gandhi tried to create a national identity driven by genealogy, personality, and an iron-fisted rule. But after her demise this led to the rise of the nationalist Bharatiya Janata Party, a fragmentation of multiple communal parties and the weakening of the traditional center.

Today, Nilekani regretfully admits, "Our politics are broadly organized along the lines of caste, religion, region and class. These form the basis of our loyalties and, often, of our development policies." He adds that hope is not lost, however, as "our divisions were overcome once, in the heady days after independence, and this may happen again" (p 15) as demonstrated by the consensus formed in the recent elections in favor of the Congress Party.

Nilekani is boldly envisioning a second Indian renaissance. Is he an overly optimistic dreamer, buoyed by success and confidence in the private sector, wishing that all of India will soon possess laptops, flat-screen monitors and manicured lawns like the Infosys campus? Or, is he a cautious realist who knows that structural changes will require a paradigmatic shift in the social and moral order, which may have been jump-started by the growth in the information technology sector but still has a long way to go?

Nilekani represents a combination of both of these attitudes; parts of the book are inspirational, yet other parts are weighed down by serious policy analysis. As someone who has examined India from the perspective of social and marketing sciences, I found Nilekani's vision a much-needed antidote to outdated social and cultural theories as well as to the recent hype and hopes about India. This book will certainly go a long way towards correcting the romantic view of India as the land of snake charmers and levitating yogis.

The top-heavy policy analysis lays out a systematic argument for why India is poised to make a significant contribution to the world economy and how the next century might be the Asian century.

"India has gained dramatically from similar, massive changes in our attitudes towards our population, entrepreneurs, the English language, globalization and democracy. It has made India a country that right now has a unique cadence, where all our major strengths have come together and matured at the same time" (p 32).

Nilekani discusses how India was once considered the basket-case of the world, an overpopulated and unsustainable country of a billion hungry stomachs, but is no longer seen in these Malthusian terms. In light of the information technology boom, India is the preferred destination due to its untapped pool of talent and affordable labor.

Comparing different government policies, India and China stand at the opposite ends of the demographic and political continuum; India's destiny is tied with democracy and the demographic boom, while China's growth is the byproduct of autocracy and the one-child policy.

Nilekani of course believes that history favors the Indian model of development to reap what he calls "the demographic dividend", while China may have already peaked in terms of population growth as the typical family structure now consists of four grandparents, two parents and only one child. This has led to irreversible levels of fertility and a shortage of labor supply. Thus, India appears green and young demographically, while China is already graying, not unlike the baby boomer generation in the developed economies.

Nilekani suggests that India in fact has "a camel" in its demographic graph, consisting of a double hump or a bimodal distribution, representing a different population rate for its advanced southern region versus the backward northern states. While the southern hump has already peaked and led to irreversible birth rates in states like Tamil Nadu and Kerala, the northern hump, consisting of Uttar Pradesh and Bihar, will peak sometime near 2020.

According to many demographic models, the majority of India's population will remain younger till 2050 in comparison to the rest of the developing and the developed world. Thus, the benefits of democracy coupled with the demographics of a younger population support the Indian model of development over the long haul. The challenge is that the Indian government and the populace at large must have its own house in order to fully take advantage of these demographic trends.

Having been colonized by the East India Company, Indians have always had an uneasy alliance with the profit motive and the world of private enterprise; even ancient Hindu scriptures warn against the profit motive as maya or illusory. Thus, the founding fathers when confronted with the challenges of governing an independent India opted to not give much weight or responsibility to the private sector. This led India down a socialist path in its development of industry, with the government the majority stake owner. While this fostered strong local businesses, India remained parochial, closed-off and uncompetitive vis-a-vis the rest of the world.

As the path of last resort, when India faced bankruptcy and was forced to adopt economic liberalization in the early 1990s, Nilekani along with nine other entrepreneurs received a call from Montek Singh and the current Prime Minister Manmohan Singh to attend a meeting of American and Indian business leaders for a conference with the president of the United States. The agenda of course was how to jump start the Indian economy. This in essence began India's American revival with technological innovation, which in the two decades since has doubled if not tripled its growth rate.

There are other fascinating connections between America, the first democracy, and India, the largest democracy in the world. When George Washington's armies finally trounced Charles Cornwallis in Yorktown in 1781, Cornwallis was sent packing to Bengal as the governor general of India who first pushed the English language on the subcontinent. Anyone who has driven along the East Coast on highway US-1, can easily trace the names of towns back to the old world and then connect the dots to Calcutta or West Bengal across the Indian Ocean. Even today the English language remains the common thread across time and space; it is the lingua franca of commerce and trade, except now it is transmitted through high-speed fiber optic lines.

India's feelings over the English language have blown hot and cold over the centuries; however, post-liberalization Indian companies have won software contracts on the back of English becoming the principal language of commerce, and this has indelibly shaped the Indian mind. Nilekani provides a fascinating exposition of how the rise, the fall and the eventual rise of English as the language of IT and Business Process Outsourcing services has put India at a distinct advantage in the global economy.

Because language is the often the medium of cultural exchange, India's reaction to the English language has reflected in its attitudes towards the West. Like any human relationship, this has included a range of emotional and intellectual postures ranging from outright resistance to unspoken admiration and everything in between. Resistance and admiration of the West has ebbed and flowed depending on the mood and tenor of the country. However, what seems to have swept in after the liberal reforms of the 1990s is a reversal of a staunchly inward-looking stance.

As Indian businesses have succeeded in the global marketplace, the internal fissures that held India back have resurfaced, shedding new light on the real stumbling blocks towards progress. Nilekani observes, "But even as the world is acknowledging India's new promise, the opportunity of the global economy has highlighted our internal differences - between the educated and the illiterate, the public and private sectors, between the well and poorly governed, and between those who have access and those who do not. In this sense, even as we Indians define ourselves in the context of our home and the world, we face incredible contradictions" (p 139).

India's founding fathers, while they chose a quasi-socialist economic policy, put their faith squarely in the democratic ideals of a civil society, free press and human rights. The Indian populace could not have known it at the time, but this was an immeasurable gift. The million little mutinies that have come and gone could not consume the nation state because the democratic ideals among Indians had become resilient and strong. Except for a few glitches, for example, during the emergency in 1970s, Indians have stayed on the path of democratic rule, even though it has neither come easily nor naturally.

Today as India faces a multiparty system, democratic governance has led to greater regional voices participating in the electoral process; thus, an institutional framework that was once considered "essentially foreign" has now simply become essential to the Indian experiment (p 163), again as demonstrated by the outcome of the recent elections which has voted in the architects of the economic reforms.

"The ideas that the country has become more optimistic over the last sixty years - demographics, entrepreneurship, the English language, the role of IT, globalization and democracy - have been the foundation for an expanding economy. They have also led to a kind of catharsis - it now finally looks like India has escaped from its sense of persecution and the limitations of its history" (p 271). Yet, for all its strengths and optimism India's quantum leap forward has potential pitfalls that cannot simply be shrugged off. India suffers from significant challenges in terms of building its human capital, literacy, educational system, urban infrastructure and an integrated market to name just a few of the urgently needed social projects.

The challenge that India faces now is how to sustain the economic reforms and to continue on its growth trajectory. This is where the narrative becomes fuzzy and the path appears less certain: "In this we confront the paradox of a nation that is blessed with the most talented and diverse entrepreneurs but which still does not trust the market to deliver on broad-based development. We are struggling with constrictive labor laws even as the economy is rapidly creating more jobs and markets worldwide are eager to recruit India's young people.

We are battling growing shortages in higher education as we face a crunch in skilled workers. And our battles for better ideas here require us to vanquish a monster with many heads - of old ideology, deep-rooted caste groups and the many temptations of short-term populism" (p 273). Here, Nilekani finds parallels with Latin America, particularly, with the recent Brazilian experience, where a socialist government has also adopted liberal economic policies.

Yet, his well structured arguments are at their best when he compares India's past with its present. "At the time of independence, India's leaders were clearly ahead of the people. The creation of new, secular democracy with universal suffrage, anchored by the Indian constitution, was a leap of faith the government took with an uncompromising yet trusting country. Sixty years on, however, it seems the roles have reversed" (p 297). Now, the Indian people have taken the lead on reforming the country, while the leaders are lagging behind.

Nilekani claims that India is in the midst of a bottom-up economic revolution against the backdrop of globalization. Freed from the socialist government controls, Indian people have been motivated by creativity and entrepreneurship. While India has proven its metal in the service economy, it has yet to gain the same success in the traditional manufacturing sector. Top-down planning was not able to achieve what the people have been able to unleash in the last two decades as the Indian growth story is beginning to cut across the traditional sectors and industries. Clamorous debates in the media reflect the engaging mood of the country. Rural populations and everyday folks from small towns are coming forward and taking big risks in the private sector.

The growth of the Indian middle class, concentrated in the cities, is supporting all of these trends. "We are closest today than we have ever been to a truly effective "deliberative democracy" where individuals and groups across the country are chipping away at the once absolute power of the state" (p 456). Political leadership has been put on notice with a high anti-incumbency rate.

Entrenched skepticism against economic reforms will be overcome with real results; as the economic reforms spread to wider segments of the Indian population and improve people's lives, the changes will gain a solid footing. If the returns of globalization do not reach the masses the reforms might be stalled or even worse fail miserably. As in business, implementation is the key to success.

As the recent elections made clear, political leadership may have to be steered to follow the will of the people to ensure future growth; and because the demographic window of opportunity is limited, Indian people must keep moving ahead and must not linger. According to Nilekani, the growth model has to be owned, underwritten and managed by the private sector and cannot be left simply in the hands of government officials.

The entrepreneurial as well as the philanthropic class must contribute the ideas and the capital to push the reforms forward; the reawakened India cannot afford to pass up its renewed tryst with destiny.
Imagining India: The Idea of a Renewed Nation by Nandan Nilekani. Penguin Press HC, (March 19, 2009). ISBN-10: 1594202044. Price US$29.95, 528 pages.

Dinesh Sharma is a marketing science consultant with a doctorate in psychology from Harvard. He is the author/editor of the following books: Human Technogenesis: Cultural Pathways through the Information Age (2004); Childhood, Family and Sociocultural Change in India (2003); Socioemotional Development Across Cultures (1998).

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