Why Invest in India: Resurgent Economic Growth in 2007

In this continuing series of "Why Invest in India", I found a very interesting article in an Indian Magazine "The Week".

The text of this article is given below. Readers can read the orginal article at: http://week.manoramaonline.com/

India expects to forge ahead in 2007

Barring sudden disasters, India will welcome the New Year in a satisfactory frame of mind. Considering the alarming conditions in several parts of the world - the Middle East for instance - India can claim to have earned the blessings of providence to be reasonably well placed at the moment.

The economy is chugging along at a brisk pace. The deficiencies, mainly in agriculture, have been recognized, even if belatedly, and Prime Minister Manmohan Singh has promised redress. If tackled imaginatively, this sad chapter in the nation's life, highlighted by farmers' suicides, should come to a close.

In politics, the scene is much better. The earlier fears about the durability of coalition regimes have been largely dispelled. The multi-party alliances run by Manmohan Singh, and by Atal Bihari Vajpayee before him, have proved to be relatively stable, notwithstanding the presence in them of small regional parties with their narrow caste-based provincial attitudes.

As if to cap the good news from the economic and political fronts, the India-US nuclear deal has emphasized India's unique status in the world. India is now the only country that has been accepted as a legitimate nuclear power although it not only refused to sign the non-proliferation treaty (NPT) but tested nuclear weapons in 1974 and 1998 in defiance.

This new shining image of a "nuclear" India is in striking contrast to countries like Pakistan, which is suspected of having had a hand in the black marketing of nuclear technology, or North Korea that is regarded as a rogue state, or Israel that is believed to have a secret nuclear arsenal, or Iran whose nuclear programme is a cause for worldwide concern.

There are several reasons why the US and the world have chosen to overlook India's transgressions of the nuclear protocol. One is its responsible behaviour even after going nuclear to register its principled opposition to the NPT, which arbitrarily divided the world into nuclear "haves" and "have-nots".

The second is its robust economy that has removed all doubts about India's emergence as a regional superpower.

And the third - and perhaps most important - reason is its remarkably successful democratic experiment in a country with 4,635 communities speaking 23 major languages, including 17 "official" ones, 22,000 distinct dialects, 85 locally or nationally important political parties and, last but not the least, with 300 ways of cooking the potato.

Considering that Charles de Gaulle had wondered how a country like France could be kept together when it produced 265 varieties of cheese, it is not difficult to appreciate the extraordinary nature of India's achievement.

What is also noteworthy is the growing belief that just as Indian democracy has smoothened the rough edges of a diverse society, it has also taken out the sting from the rapid economic progress via the route of market economy.

While Reuters has noted a dramatic rise in the number of riots in autocratic China from 10,000 in 1994 to 74,000 in 2004, India has been relatively free of the social tension caused by the growing disparity between the rich and the poor, which is an inevitable early fallout of "neo-liberal" economic policies.

It is not that there haven't been protests in India. The latest such resistance to the official encouragement of capitalist strategies is in Singur in West Bengal, where the main opposition party is up in arms against the acquisition of fertile agricultural land by the Tatas for a small cars factory.

Earlier, similar industrial ventures involving farmlands in the neighbouring state of Orissa by the Tatas and the South Korean steel giant Posco led to police firing and deaths of tribal demonstrators.

The setting up of Special Economic Zones in nearly all the states providing tax relief and other incentives to domestic and foreign investors has also attracted protests from the opposition parties. But while news of the unrest in China trickles out after a considerable lapse of time, the protests in India are played out in full view of the television cameras and media personnel.

The pros and cons of these contentious developments are also discussed threadbare in parliament, state legislatures, public forums and television and radio studios. The result is that the lid is taken off a volatile situation. Therefore, it rarely boils over into widespread violence.
This is not India's only saving grace. What has also ensured social harmony is the fact that the governments of all hues, ranging from West Bengal run by the Communist Party of India-Marxist to Gujarat under the Bharatiya Janata Party, are all eager to make the most of the economic upsurge. As a result, they all value the market economy, which is normally the bugbear of the dogmatic Left and also evoke the ire of the protectionist Right.

Given these factors, it may be safe to predict that 2007 will give a more definitive direction to
India's policies in several fields - economic, political and foreign affairs. While pro-capitalist policies will lead to the burial of "socialism", a two-coalition system is likely to evolve with the Congress-Left alliance on one side and the BJP-Janata Dal-United on the other.

At the same time, the presence of a large number of smaller parties acting as allies will prevent the two major coalitions from adopting extremist postures, thereby ensuring the pursuit of moderate policies.

In foreign affairs, India's growing proximity to the US will be the final nail in the coffin of the cold warriors in both New Delhi and Washington. But America will also realize that India is too large and too boisterous a democracy to endorse whatever the US may say. In this respect, the tradition of non-alignment will survive.

And the icing on the cake may well be an understanding with Pakistan on the basis of the suggestions made by both Manmohan Singh and Pervez Musharraf about making the Line of Control (LoC) in Jammu and Kashmir irrelevant.

Also see:

1. Why Invest in India - Banking
2. Why Invest in India: Booming Air Travel Industry
3. Why Invest in India?