SPECIAL REPORT INDIA

September 29th 2012

Aim higher

N. The man glances at one and lets his conjectures y. The country is more stable than ever (aside from a brief spell of trouble in Assam this summer). Himanshu Bhatt. even as the economy goes through a tougher patch. who have much to feel pleased about. Pankaj Pachauri. Siddique. Suhel Seth. Sid Singh. T. then subsidises a lot of it for consumers). the relentless spread of mobile phones. and so on. And its underlying optimism re ects the attitude of many ordinary Indians. Ninan. rural poverty down. data from last year’s national census look good: fast-rising literacy. from a peak of 10%. we think our Indian readers can face political reality. Indian readers will therefore probably be deprived of the map on the second page of this special report. Professional fortune-tellers politicians.A.A. polio has just been eradicated. and keep the gains coming. It is more intolerant on this issue than either China or Pakistan. making it the world’s tenth-biggest. industrialists. Manish Tewari . turned 80 on September 26th. a slumping rupee. and some members of his cabinet too are getting on. Basharat Peer. Syed Akbaruddin. Montek Singh Ahluwalia. a leading manufacturing and technology rm. Nick Bisley. Aditi Phadnis. Annual growth is down to about 5%. They must become bolder. Jairam Ramesh. Lalitha Kamath. Sarang Shidore. But the greatest pains are self in icted: locals and foreigners discouraged from investing. Dalal. There will be political turmoil in the next two years. The challenge is to manage this change. Anand Mahindra. Nandan Nilekani. T. the boss of Mahindra Group.K. India will soon be the world’s greatest power. After a decade of rapid economic growth. big and fast-growing. India censors maps that show the current effective border. Partho Banerjee. Income per person is up. Navdeep Suri. A political succession is inevitable in a country where the median age is barely 25. A general election is due by mid-2014 at the latest.com/audiovideo/ specialreports A transcript of an interview with Narendra Modi is available at Economist. Sanjit Das. about the impending political drama. It is young. By the mid-2020s it will be more populous than China.com/node/21563185 The Economist September 29th 2012 1 . Gautam Bambawale. too. The soothsayer is surely right. bureaucrats. Yet his analysis of India’s prospects may not be so far o the mark.com/asianborders A list of sources is at Economist. Unlike their government. Manmohan Singh. Nair. Dinesh Navadiya. economists and analysts generally come up with a dimmer prognosis than the Delhi soothsayer. Sanjiv Goenka.S PE C I AL RE PORT I NDI A Aim higher India’s prospects have dimmed as politicians shrink from big reforms. The prime minister. It is a razzle-dazzle prediction for a sixth of the world’s population. Pratap Bhanu Mehta. Shivshankar Menon. In many ways India seems set on a promising path. low-ceilinged home of a fortune-teller with a green parrot. For a bundle of rupees he sets the bird to work. more girls in schools. Maya Valecha and Anupam Yog Missing map? Sadly. He sees an elderly leader’s death and a dynastic marriage. M. Anant Nath.I. paved roads are becoming more widespread. Sporting triumphs lie ahead and riches will fall upon Indians. Those who want to see an accurate depiction of the various territorial claims can do so using our interactive map at Economist. picking from a selection of cards. The economy is worth almost $2 trillion. Ajay Mathur. says Adam Roberts PICK YOUR WAY through the narrow alleys of a south Delhi slum to the dark. An assassination looms. the author would like to thank the following for their help in preparing this report: Bharat Agrawal. but strength will follow. India faces 1 CON T E N T S 3 Politics Power shifts 4 Gujarat’s chief minister The candidate 6 The economy Express or stopping? 7 Manufacturing On a hiding to something 8 Education A billion brains 10 Cities Concrete jungles 12 India abroad No frills 13 The tragedy of the commons An uphill walk ACKNOWLEDGMENTS In addition to those mentioned in the text. a current-account gap that is hard to nance. reckons this is the worst conjunction of political and economic problems he has seen in his adult life: I can’t remember any year worse than this. B. Akash Kapur.com/specialreports An audio interview with the author is at Economist. Paresh Patel. Mark and Gilly Tully. insisting instead that only its full territorial claims be shown. a scal de cit that could provoke a nancial crisis. including weak global growth and high oil prices (India imports 80% of its oil. External problems hurt.

056 N UTTARPoliticians. Chennai 1.1 TRIPURA GUJARAT MIZORAM 33.6 1. will be reassured only if they see politicians deliver setax rules. about 9% of GDP this year. lamented a senior plan61. Their dead hand explains 1 foreign capital look increasingly wrong-headed.158 things have got worse. rightly. March 2012. was precipitated by a balance-of-payments crigenerally his government has failed to carry out profound resis.057 Population by state.135 72. so babus consider it 2 awkward years. briskly sets out subsidies by more than a token amount.050† MADHYA PRADESH 3.5 2. has been stalled.2 Gorakhpur PRADESH 68. when L PRADESH E P Gurgaon DELHI* CHA NA 600m people in the north of A L 16.4 reaucrats. probably beyond 2014. This parliament is on course to sit for Inviting more foreigners to invest in India would help senless time than any other in India’s independent history. applications to supply goods to local governvernance .0 Amarnath Cave Srinagar JAMMU & 12. 2003-12.7 60.181 Babus have been a proMAHARASHTRA 1.com/indiastates12 strued as favouring special interests.4 0. That means.SPEC I A L RE P OR T INDIA t Line of c o n rol PAKISTAN ADMINISTERED KASHMIR old may be gone.182 MANIPUR 2. Sonia laxed labour laws could help get them sta ed. and vestors. much of what does not happen day-to-day. Services and consumer spending are still dominated by Congress. Bu1. passed no signi cant legislation and is mired in sleaze. Fortunately in July he was rious reforms. babus Puducherry S e a are worried by corruption PUDUCHERRY* TAMIL 300 km 1. The licence raj of GDP growth. in 1991.5 KASHMIR 1. Netas betiment and plug the current-account hole. but industrial production contracted this summer.0 103. More reprime minister and a dithering dynastic party leader. Most important. which could allow the inuntil recently the nance minister.4 ning o cial earlier this year.056 n g 199.648 1. There are three years1.0 una R A J A S T H A N deeper problem is organisaPatna 1. $ P A K I S T A 2 CHH AT TI SG A KER ALA The Economist September 29th 2012 . Welfare spending Gandhi.637 India su ered blackouts for 31.043 Pune B a y reaucracy now works to rule.315 1.1 NICOBAR ISLANDS* 1. got the PUNJAB AKHAND 1.9 CHANDIGARH* the economy are still run or 000 PRADESH 1. bureaucrats working in an ossiinto domestic airlines.5 GOA 84.4 HARYANA blame for the dramatic power 0. bids for land The core of the internal problem is often summed up as goto set up factories.6 B I H A R 504 Jam e s 666 MEGHALAYA 3. Growth is down. round of big reforms. foreign investment and a revenue squeeze.7 BANGLADESH 708 tional: a wretched public coal JHARKHAND monopoly gets too little of its 1. Beyond that.3 41.6 1. Palaniappan Chidambaram.677 Delhi N cuts of this summer.957 Bangalore Like politicians. rst. held back by o cials. ForNetas and babus eign direct investment.4 and below 7.5-7.064 72.4 Kolkata product distributed by the 807 RH † Ahmedabad 1.864 2. India’s economy is in a bit of trouble. politicians (netas) who do not rule.361 SIKKIM 2.052 blem since Mughal days.1 25.716 WEST state-run railways to (mostly) 849 BENGAL MYANMAR Surat state-run power stations. peatedly blocked reform. But the 1. ment all are now stuck in bulging in-trays.0 1.1 rather. Congress’s coalition could switch from a widely abused system of food rations to allies (together with obstructionist opposition parties) have recash transfers into individuals’ bank accounts. Pranab Mukherjee.86 ¤1.194 two sweltering days.848 Population.5-9. Mr Singh did announce some limited economic reforms this Is there a way out? The country’s rst batch of liberalising month.5 and above 6. 2011. The IMF has said that the scal de cit could rise to booted upstairs to become president.9 1. In ation may at last be dipping.1 ISLANDS* National totals: 33.4 8. Yet with a do-little bill could make it easier for industry to set up factories.851 1. safest to do nothing. allowed to set up supermarkets in some Indian states and buy Now add unhelpful babus. but 112.209. but too much of the commanding heights of HIMACHAL 6.329 means dodgy deals no longer Thiruvananthapuram Exchange rates.801 1.6 ASSAM 736 NAGALAND 2.4 Mumbai 25. But reforms. Thomson Reuters Economist. Outsiders may now be yond Congress share the blame for paralysis. bizarrely attacked foreign independent central bank to start cutting interest rates. March 2012 = $1.507 A r a b i a n 0. 3. Yangon No civil servant is remotely ino f Hyderabad terested in pushing something ANDHRA B e n g a l PRADESH along.8 Ga 1. That spread uncertainty.853 na 1.15 LANKA Sources: Ministry of Statistics angry that even honest deciInteractive: Compare contrasting GDP and and Programme Implementation.7 10. such as Vodafone. *Union territories population levels across India’s states at: †March 2011 sions are sometimes conCensus of India. But it. he looks short of political means. and retrospectively tried to rewrite investors.4 C H I N A 27. and domestic private rms The ruling United Progressive Alliance (UPA) coalition.2 NADU scandals that also nger buLAKSHADWEEP 2.42 £ 1. A land-reform dence and raise investment and growth. a host of a tempting menu of his intended economic reforms to boost conmeasures is waiting to be passed or implemented.5m freedom-of-information act na GDP per person. 2011 = 1. that means slashing His successor. which provoked considerable political upheaval.7 worth of pipeline projects 4. A welcome new 1. ODISHA 91.5-8.4 6. The public is so 100 rupees = US$ 1. m GDP per person. Perhaps another economic emergency would force a second form. Tenders for road construction.557 KARNATAKA ANDAMAN AND stuck. which last year hit a record $47 billion.8 BHUTAN ARU Neemrana U T TA R 3. has dropped by 67% so far this year. are refusing to invest. September 17th 2012 SRI stay hidden. % 9. But continued caps and restrictions on ed system bequeathed by Britain. Faced with slowing buoyant.

letting more foreigners into the retail business and slightly cutting diesel subsidies. is tarnished by presiding over the most corrupt government in India’s independent history. If Congress were pushed out it might be replaced by a pro-growth gure from the national opposition. and bigger changes would be far more awkward. Sonia. or preparing to assume high o ce. say the optimists. Mr The Economist September 29th 2012 . and some say that prime ministers who know their tenures will be short try to get more done than the timorous and long-serving. And although he had a hard-won reputation for good economic management. India does not have long to wait for an election. But even the limited reforms anounced this month. Growth in the past decade. as the next article will explain. grandson and great-grandson of prime ministers was by now supposed to be reviving the party. Singh’s warning in August that slower growth threatens national security sounded like a vain cry to his fellow politicians. Known as the Goods and Services Tax (GST). No one really knows what he stands for or whether he can lead. One property billionaire with good contacts in government says that if it’s not done by the end of October. Public anger with the corrupt and the super-rich has risen. merging with doubts about market reforms. The liberalisation of 1991was pushed by outsiders and was relatively easy to implement. The chances that all. Rahul Gandhi the son. it is hard to see the party implementing the big reforms that it has failed to push since 2009. head of the biggest business lobby. The ruling party in Delhi often su ers so many setbacks that it is hard to believe voters will support it again. In recent years she had repreatedly blocked reform e orts by Mr Singh. the ruling party has been thumped in big states. and national a airs can appear as an amalgam of assorted local rivalries. Mr Singh likes to say that ordinary voters more than politicians grasp the bene ts of reforms. he seems to have lost his nerve. even a minority government after 2014 might have the stomach for more reform than the current one. caused a political storm. These three months are crucial for India’s economy. Narendra Modi. the outcome was still unclear. are bound to hold widely divergent views. distrusting the centre to dish out revenues fairly. perhaps with more public funds going to her state. But the gloomsters may be half right: India’s politicians are not. and its opposite. But Congress will feel growing pressure to dish out public funds directly to its voters. along with high commodity and land prices. Concerns at local and state level often trump national ones. by instinct. is bound to be populist as it will be the last before the general election. has too obviously enriched a destructive band of robber-baron politicians. FICCI. The party’s electoral prospects look poor. He wants to promote industry and would surely get the babus working again. such as Narendra Modi (see box. As this section of The Economist went to press. More than usual now rests on who holds political power. Maharashtra’s chief minister and an advocate of reform. his new e orts to reform are unlikely to win much support from the public. and 1 3 The case for gloom Yet sceptics see a more alarming possibility: that India’s politicians are not really interested in reform. Given a rush of state elections over the next year. Andhra Pradesh provided more Congress MPs in 2009 than any other state. Most assume that Mr Singh’s government. unless Congress is forced out sooner. Mr Singh. Explanations varied: urban voters liked rapid growth.SP EC I AL REP O RT I NDI A 2 One other important reform would simplify trade inside India. rural ones were impressed by new welfare measures. allies ourished in the south and Congress roared in big Andhra Pradesh. 7 Politics Power shifts Weaker national parties. On September 18th Congress’s main coalition ally. and tried to make the case for them this month. yet to general surprise it was re-elected with a bigger mandate than before. Almost any explanation. once a model of rectitude. says Prithviraj Chavan. from vastly di erent backgrounds. Alternatively. Rajiv Kumar. new voter habits and corruption are changing India’s politics MAKING POLITICAL PREDICTIONS in India is risky. the country’s mood could improve. or even most. But that looks like a defensive strategy. Nobody ever gets to interview either him or his mother. But optimists think that if at least one or two of them do. Congress has also done badly in massive Uttar Pradesh (UP). perhaps with new allies. Worsening the scepticism is widespread dismay over crony capitalism. Politics in India is big and messy: hundreds of millions of voters. limited reforms is short. So it was with Congress in 2009. but now a local leader’s desertion has shattered the party there. Ramachandra Guha. could be right. The central bank would probably trust him to rein in public spending. But having led a dreadful campaign for Congress in UP. such as Gujarat’s surly strongman. ahead of the general one. the party president. it ain’t happening. It is an obvious way to boost trade and growth and lure investors to a bigger single market. But building a constituency for bigger reforms anything beyond letting foreign supermarkets in will be endishly di cult. Mamata Banerjee. next page). the populist chief minister of West Bengal. Mr Modi says he has a mission to serve his country. stronger regions. A dispirited senior member of government in Delhi frets that an old broad consensus in favour of reform has broken. Voters gave that party no credit for helping create conditions for economic growth. such big reforms will happen soon are nil. The time for adding to the current. in a tirade before television cameras said that her party would quit the national government and no longer back it in parliament unless the limited reforms announced a few days earlier were rolled back. India has had a few of these in the 1990s. Some close to her had thought she might be bought o on this occasion. earning only a poor fourth place in the state election there this year. national one. Yet state governments and the opposition are blocking it. points out that India’s cheerleaders as well as its pessimists tend to overstate their case. the reform of public pensions and the like. can hang on until 2014. This special report will try to steer a path between the two. it would replace a tangle of state levies with a single. in the spring. The next budget. Politicians show no wish to be bolder. reformers. Instead a strike was called for September 20th and street protests erupted. a noted historian. having learned from the defeat of the most recent reforming government led by the Bharatiya Janata Party (BJP) in the general election of 2004. describes it as India signing a free-trade deal with itself . Still. The next general election is in 2014. As usual. They act when pushed. perhaps people distrusted the opposition BJP’s candidates.

Mr Modi cites more girls at school and fewer drop-outs from education. The hope is that Gujarat’s leader would replicate such gains elsewhere. This is an article of faith. outshining Congress’s indecisive Rahul Gandhi. says a Congress leader. an observer of the party. the RSS. or grudging admiration. The rst is Muslims and other minorities. Sachin Pilot. The party tries hard to be seen as ghting corruption. and the BJP is unsure of its ideology. head of the BJP in parliament’s upper house. Nitish Kumar. says Swapan Dasgupta. things like literacy. Other BJP leaders are wary of Mr Modi. do much better on social indicators. Elsewhere many are sure he is a monster: A mass murderer who should be in jail. were killed in riots. Usually built around a charismatic individual who becomes a state’s chief minister. his eyes burn with determination. he could turn out to be India’s Barry Goldwater. the chief minister of Bihar. Yet many other states.SPEC I A L RE P OR T INDIA 2 meanwhile no other young leaders can rise. the historian. shortly after he took over as chief minister. The Gandhi dynasty still holds together Congress (which lacks much ideology beyond broad secularism) and helps to settle leadership spats. he says. Other observers are more sceptical. said only a secular candidate could lead India. they matter. But they are really a collection of regional leaders. with power and money to spread around their states. It gets little support in India’s south. thinks a national two-party system as in America would raise standards. lead within a team or su er criticism are absolutely baseless . As parties compete to o er better public services and other social goods. Rahul Gandhi intrinsically doesn’t want it. say over 170 seats. The Economist September 29th 2012 . wielding near-presidential power over a territory that often has a country-sized population. a Hindu nationalist. electricity and e cient bureaucratic support. for its well-built roads. The crumb of hope for Congress is that the national alternatives are weak. luring manufacturers from the rest of India. says Gujarat’s chief minister. Mr Modi is its likeliest candidate. too. talking of his mission to serve: I am interested in doing something for my country. The rank and le of his Bharatiya Janata Party (BJP) love him. when over 1. The lesson from India’s states. is matched by a strong agricultural record. form of Hindu nationalism but also muddied its old pro-market stance. east or north-east. says a political observer in Delhi. He leaves little doubt about his wish to become prime minister. an anti-graft campaigner. The Hindu nationalist movement. notably in India’s south. the Gandhis look unrooted. The state has been calm since and Gujaratis seem mainly to want to forget the riots. Modi wants to get ahead opposes its one-time protégé. If not. Regional dynasties. says the party has a galaxy of leaders for 2014. But it matters less and less to voters. odious. A level of detachment is built into his personality. Unfazed. but not his plans for a powerful anti-graft ombudsman. letting mobs vent their rage after Hindu pilgrims died in a train re. Infantmortality rates are down and prosperity is up. Nitin Gadkari. In June a close ally of the BJP. a junior minister and loyal friend of the Gandhis.000 people. the position of women and infantmortality rates improve. Polls show him to be the most popular gure to lead the country. mostly Muslims. His fellow politicians do not know how to handle such a con dent loner. It would then be in a good position to impose its choice of prime minister on its coalition partners. This happens in Kerala and Tamil Nadu in the south and Himachal Pradesh and Punjab in the north. Now Mr Modi is trying to reshape his image. a direct swipe at Mr Modi. When he talks of seeing himself as destined to triumph. as the burly Mr Modi. the quick allocation of land. Mr Gandhi’s restraint in reaching for power is admirable. No politician stirs as much anger. Arun Jaitley. A newspaper editor in Delhi thinks India is getting ready to make the Gandhi family irrelevant . Mr Modi agrees and calls himself secular too. which remains in uential in the opposition grouping. Smaller national parties do not look promising. He faces two main challenges. and it lacks ideas for making things better. It has had its share of scams and crookedness. If the party wants to campaign on the economy and e cient government. He appeared to turn a blind eye. As for the bene ts to ordinary Gujaratis. are in the ascendant. Think local Regional parties ll the gap. when he became popular. It opportunistically backed Anna Hazare. Courts have found him guilty of nothing. says that analysis is unfair. Narendra Modi chuckles when asked if he is a dictator. is that a regular alternation of parties in power tends to deliver the best results. but it is less debilitating than in many other places. he says his local popularity proves them to be politically irrelevant: This question has no use I have 4 faced ten elections of various kinds in my state. and no rising stars are being held back. Gujarat’s industrial success. Corruption has not been eradicated. Many distrust and despise him for what happened in 2002. Mr Modi says. These states control roughly half 1 The candidate Narendra Modi wants to be India’s next prime minister RESPLENDENT IN A pink shirt. having toned down its earlier. Mr Modi’s time could come if the BJP got a big victory in 2014. The people always supported me. Suggestions that he cannot compromise. preferring the BJP’s party president. says Mr Dasgupta: reshaping the country’s right wing but seen as too divisive to lead. Pressed about the riots. with a neatly trimmed white beard. He fared poorly as a campaigner in the 2009 national election. the plentiful supplies of gas. yet projecting itself as clean is tricky. Ramachandra Guha. Without their own state as a ef. appeasement to none. Investors ock to Gujarat. justice to all. The second challenge is distrust inside his own party and among national coalition partners. notably in the southern state of Karnataka.

Congress still gathers in the this year for pocketing $1. food mixers. What is new is the arrival of oating middle-class voters They run some of India’s wealthiest states and preside over more than 600m people. social elections. Around 100m voters in 2014 ment. hilesh Yadav and family in UP. schools and hospitals. India’s new airWhat is new is the arrival of a group of oating middleports. reward favoured groups. improving transparent. who swing between parties depending on how they They are unlikely to unite as a coherent perform. A leading Congress gure rails that Nadu and Mayawati. it will be in part because of an explosion 1 Cleaning up? in television watching. Mr Modi keeps being reMore likely. Another government leader calls the middle class a lages. but voters overwhelmingly rewarded nors and parties maintain their close relations but making them him for delivering better roads. what happens in Delhi too. but parties also raise huge quantities of cash to win they are increasingly well-informed thanks to cable news. It wants a Even state assemblymen have massive constituencies. and caste still counts: Mayawati relies on Dalit jects in exchange for 30% equity in them. universally outed. saris. who often in uence such as telecoms spectrum. but worries that it might Karnataka 2006-10 Illegal mineral pillage $3. driven by a commodity boom and a shift from a attention to national parties. TVs. politics will become cleaner if and when Inelected in Gujarat mostly because he runs the place e ciently. an ally of Congress in Maharashtra and nationally. Jayaram Jayalalitha in Tamil sighs a commentator in Delhi. In UP one politician was recently lmed telling o cials it Yet some voters are beginning to drift away from the rigid was acceptable to steal. Mr Hazare’s dramatic street campaign and public “Coalgate” 2004-09 Shady allocation of coal blocks $34bn fasts were made for TV and earned non-stop live cable-news cov“Adarsh” 2010 Mumbai home for war widows taken by the powerful $ millions erage. For evidence. Mr Sardesai thinks TV lets voters vent anger against the “CWG” 2010 Crooked contracts for Delhi Commonwealth games $ millions system and judge leaders from close by. More wealth created by entrepreneurs. the more changes will take time. And everything is big. but have great veto power over national matters. in These voters may be starting to decide results. will be rst-timers. O cial limits on party spending are look at Mr Kumar’s triumphant re-election in Bihar in late 2010. perform. mobile and privately employed. with government jobs. Even the limited hope of letting private doCaste was still a factor. but the media and mobile phones. A political party is said to clear business profervent Hindus.SP EC I AL REP O RT I NDI A 2 of all India’s public spending. not on promises of rewards for their group third force of politics. a leading news preSelected Indian scams senter and editor since the 1990s. and several ministers were sacked earlier identity politics of old. good job. In India many voters in tight new caste . education. 7 transparent and e cient delivery of food rations to the poor. We are creating an oligarchy. says India now has 365 roundNotional the-clock satellite channels. Aksustained only because they have huge war chests. whisky and even. rice. Punjab this year. He identi es. lionaires. Television helps shape reactions to national issues such “2G” 2008 Dodgy sale of mobile-phone licences $39bn as corruption. Rajdeep Sardesai. dish out cash. has to woo around 1m voters. One satrap is believed votes and the Yadav family on middle-ranking castes and Musto have become the biggest property developer in India. heroin. as well as many city-based and caName Date Description loss* ble ones. especially. Voting in India is generally clean and honest. not on promises of rewards for their particular group. trips to vilMumbai. us of property and political funding. local organisers and the like. But such services are getting better. The billionaires too often ourish thanks to political conhi for discretionary funds. when pricier electricity was imported instead. If holding leaders accountable for their performance becomes a national habit. Raman Singh. says a high-pro le Congress gure in Money is needed for the usual stu : posters. in turn. rallies. There is such a deep nexcaste) who ruled UP until earlier this year. A series of outrageous scams (see table 1) 5 The Economist September 29th 2012 . A power minister in one state reportedly referred to as vote banks . seems forlorn at the moment. Such hatred would be understandable because much of In*Maximum estimated by the Comptroller and Auditor Source: The Economist General and others. urban. Nationally. West Bengal. sometimes The costs are real. as in America. dia’s economy shifts away from a system in which politicians alThe chief minister of Chhattisgarh.6bn lead to public hatred of politics . but they will increase as citical MP in the Lok Sabha. Growing inequality spreads dismay. Many political leaders are The others are Nitish Kumar in Bihar. a Dalit (the lowest there are no audits of political parties. irrigation schemes and toll roads are typically overpriced class voters who swing between parties depending on how they and often late because they are built by rms with political ties. A typFor now they are in a minority. campaigning is expensive and dirty. Young India wants good policy. He reckons it is the single most cheering thing in Inraces also expect pre-election goodies. invoters re-elect him because their incomes are rising and public novators and manufacturers might loosen political ties. Politicians want the lifestyle enjoyed by the country’s bilMostly young. They inclosed to an open economy.2 billion from a scheme supposed to Muslim and the more secular Hindu votes and the BJP the more help sick villagers. Gloomier commentators see an outclude three women: Mamata Banerjee in right Russian-style kleptocracy. India may be passing through an American-style robberThe mightiest satraps pay the least baron phase. the lower house of the national parliaies expand and schooling improves. says that locate public goods. land and public goods strongest leaders. education tried to close functioning power stations so he could take a cut quotas and other handouts. so politicians regularly dian politics. which rely least on Delarice. thanks to computerisation and the spread of ID cards. Mr Modi in Gujarat and Sharad Pawar. Leaders. lims in UP. throw up the nections and access to natural resources. literate. especially as a tiny minority grew rich beyond the dreams of avprosperous ones. as lost revenues or as stolen goods dian politics is rotten. law and order and lifting the economy. The most has left voters resentful at the huge losses of revenue involved.

according to census data from last year.6 6. so far. which produces small consumer goods are those targeting such buyers.2 5.5 1. especially in food prices. To drive the 1.8 -8. for example. ports and railways are overwhelmed.3 51. or Hindustan Unilever. Now that prospect is in question. A decade ago few would have cared. 2011. is falling back to older. China’s. creating a market worth $1trillion.0 2. have a car.6 5. On one 4. take up a job. said this month that three-quarters of Indians now have access to a mobile.6 India 7. Economist Intelligence Unit 2 Brazil 2. Indians are also increasingly well connected.2 28.4 -2.3 8.380km from Delhi to Mumbai. Doubters had long been saying that India’s potential rate of growth was bound to be lower than.7 6.0 20. though only 5%. in 2010 some 470m Indians had incomes between $1. through 615 stations. The endless rows of concrete houses with trailing wires seen from the windows tell a story too.6 Russia 4.2 8. even though the Chinese.4 4. Odishan coffee pickers in Karnataka. which makes motorbikes.S P E C I A L RE PO R T INDIA 2 The economy Express or stopping? India’s growth rate. usually a mobile. a logistics rm. blackouts are common and labour has become as expensive as in China. Ericsson.6 9. According to a new report by PricewaterhouseCoopers. an average of just 21km 1 How the BRICs stack up Selected economic indicators. are three times richer. The next few years are likely to see much slower expansion. That gives passengers plenty of time to observe their fellow riders.0 48. reported in May that every one of 17 important road routes was clogged. supercharged for a decade. Assamese students in Kerala and Bihari diamond polishers in Gujarat all move as freely around their country as Americans hop from state to state. Roads.1 -2. since only 9% had a phone of any kind. your correspondent never once lost his mobile-phone signal. a carmaker.8 34. lower levels INDIA’S TRAINS MOVE slowly.000 a year. The same census showed that of India’s 247m households. 63% of householders have a phone.4 31.6 18. two-thirds have electricity and nearly half TV. The Transport Corporation of India. They are travelling far to visit a hospital. Hero MotoCorp. takes an average of nearly three days. That mobility should give India an advantage over countries like China that penalise farmers when they leave their land. Now.4 6. The big Indian rms that are doing best such as Mahindra and Mahin6 dra. % Indicator GDP growth Inflation Unemployment Investment/GDP Savings/GDP Current-account balance/GDP Budget balance/GDP Sources: IMF. enroll at college. Yet the rosy forecasts were drawn up when the economy was roaring ahead and it seemed that another decade or two of similarly high growth would deliver a big mid-income economy. But they gave warning that it could not keep up an express-train speed of close to 10% because its economic engine quickly overheats.200km train ride. say. A similar number own bicycles.8 -1. a maker of phone handsets. They agreed that India could achieve much more than the 3% stopper-train growth rate that was the norm before reforms in 1991.6 -2. The consultancy reckons that this gure will rise to 570m within a decade.000 and $4. on average.7 China 9.2 The Economist September 29th 2012 . Recent years have brought high in ation.5 23.

He expects 200-300 joying buoyant consumer demand. But sustained rapid agers. ticians that blocks change. and in theory quite a lot of capacity. the rm is doing remarkably but since labour costs make up only a small Congress is fond of entitlement schemes well. them have been working there for ten or 15 forms tend to be introduced only little by He sees manufacturing as essential to years. Some scarce goods are now sold by his brand. keeps on ticking’. such as IKEA. especially from 70-odd branded shops at home. They calculate Surjit Bhalla. Most of been allowed to oat more freely. his party that’s what I hope we’ll say of India soon. pushing many goods o the tracks and into overuram Rajan.SP EC I AL REP O RT I NDI A 2 an hour. who has just taken over as the government’s chief economic adSeen in that light.6%. points out that spending on welfare ed spec sheets for a wide variety of designs. but the 1 coal to keep the lights on even though there are new power stations. import or shift enough time Mr Rajan had not yet been appointed to his new job. The government could even break up or sell o Coal India. for the rst time in nine years. but it is risthriving manufacturing niche. Politicians naturally prefer to spend. are On a hiding to something The Economist September 29th 2012 7 . ‘takes a licking. ing fast: during Mr Singh’s rst governHe employs 3. but reIndia want $100 bags. we lost of paid work a year for every rural housethe core strength. One obvious remedy would be to deregulate the distribution of coal. says Mr Kapur. measures. share of the total he was saving little and his such as NREGA. stores in India within ve years and also has ON THE FACE of it. internal market to sell o cuts. At a meeting in April Raghbeing raised. ly. a Parsi businessman in Mumbai. are getting hard to nd. given a weak global economy. Each of them takes an average of 13 little. Mr Bhalla worries this to rise to 5. India could do with many more like it. India hurts when it is growing at 8. Sri Lanka. but the skilled workers he needs hours to make a bag which a Chinese worker auction. been allowed in. which promises 100 days workers got grumpy. a Delhi-based econotheir own productivity and follow complicatmist. have ters of his present sta are studying for jobs rising by 13-14% a year. To subsidise the fares. poorest people. DoDiesel prices went up this month. but only after years of scams. anyone trained who can work independentrepetition got the time down to nine hours.K. booming markets in Malaysia. Twelve years ago the company relied on with kerosene. sales to foreign distributors. one of India’s tive jobs. an MP from Bihar and economic adviser to the BJP-led governA ourishing Indian leather business ment of 1998-2004. inveighed against the paralysis in growth-enhancing reabout 5% was almost welcome. says Mr Kapur.000 soon. All this suggests that potential American and Australian. The rm says the delays are getting worse: the road net- still cheerful. the slowdown in economic growth to viser. India is exploBusinessmen. Sevantilal Shah. At the and minerals. along year. admits over a vegetarian growth would require a slew of big secpeople is harder still. That. to be kinder to investors in order to attract capital. We should not try to get back to forms and an unholy alliance of some businessmen and polithe highest growth path. wealthiest corners. and ticular worry is energy. Simpler designs and more land acquisition. along with other new welfare uniqueness. growth. of the Mahindra Group. I lost the ability to brand. he says: We have lunch in his garden that he tried and failed ond-round reforms. who founded the business look set to follow. labour laws and tax. His parrapidly. Anand Mahindra.000 people and expects ment it was just 1. freight charges keep Economists are more cautious. graphic designers and marketing and still runs it. mostly British. a product that spoke of hold. a big diamond polisher and producer in Surat. leader forced him out. India has a voracious appetite for energy to become paranoid again about generating growth. to include things like mountains of untrained labour but hardly to speed them up. serve a GDP. When Dinesh Trivedi. Even so.5% of His workers’ skills. Worst. but cannot dig. That is not a huge share. Yet their wages are Single-brand retailers. say. says he The railways are no better. tried it in March. Singh. to relieve poverty now represents 2. particularly those enMr Kapur’s bags of success sive. the creation of produc(formerly Pondicherry). He said India had to raise fuel prices argues Cyrus Guzder. the boss of Venus Jewel. Nor have India’s politicians shown much appetite for reforms to improve matters. says domestic sales are work is growing by 4% a year but tra c by 11%. but probaleather (the costliest input) and run an bly also raising labour costs. Growth is shattering. for 94% of its growth is nowhere near double digits but income. Finding capable shop manDilip Kapur. is helping some of India’s Instead he decided to raise quality. lifting rural incomes and Sta are now rewarded for e ciency in using boosting consumer markets. ter. then the railways minisI remember that old watch ad. Its leather bags are stitched and Congress did free petrol prices in Russia and South Africa. but the mestic sales rose by nearly one-third last fuel remains massively subsidised.5%. Hidesign is a manufactura massive and badly run state monopoly. Already he is the that this sort of spending does less to help largest private employer in Puducherry the poor than. Raising passenger fares is politican’t imagine anything but an improvement on a dreadful year: cally impossible. Despite slower economic Fiscal policy is generally pro igate. Today 70% of its revenues come close to what India has today. He is amazed by glued by ranks of well-educated women in 2010. ing failure. fertiliser and food. ourishing. and over the years the rupee has how many customers in forgotten corners of blue saris on a shady factory oor. he suggests. he says. consumers love his products. an academic and former chief economist at the IMF loaded lorries on crowded roads. and multi-brand ones in banking or IT. argues N. Many of the daughcould produce in three.

also in Neemrana. many still poorly educated. have done well (though Tata’s Nano. most se- nior o cials say something similar. As for the rotten bits of the economy. There is plenty of anecdotal evidence that skilled workers are becoming scarce. More factories could provide more jobs for the 13m people that join India’s workforce every year. A hole in the middle Yet optimists need to address another problem: the structure of employment. As you whizz. allowing interest rates to come down. workers can end up getting paid different rates for the same job. He puts faith in the expanding young. for Indian customers they need social skills to cajole the reluctant into the walk up the hill. 7 8 Your country needs you The Economist September 29th 2012 . Sadly Mr Rajan. Agriculture still employs roughly half of all working Indians. lift your legs and hurtle down a wire towards the sharp corners of a 15th-century Rajasthani fort. urban and literate population and in new technology. the state-run rms. despite global worries. of the sort that thrives in China and drives exports. Indian labour costs are high and laws are restrictive. At a Maruti factory near Delhi this summer. he says. Was the zipwire serviced by someone who knew what he was doing? Is the safety adviser any good? Who is trained in rst aid? Fortunately the sta in Neemrana. countries such as Bangladesh are well placed to pick up business. A weaker rupee will make the country more attractive as a base for exporters. but India is not. Raj Kumar. He is particularly pleased that India has persistently high national savings and investment which in his view can be sustained. I had planned to do my PhD. is not yet the triumph it was billed as). explains that getting and keeping reliable workers is his greatest headache. Jonathan Walter. lacks political clout. despite some recent slippage. The out t’s British owner-manager. once the current uncertainty and urgent scal problems are dealt with. which is very di erent from that in most East and South-East Asians economies. are on the ball. Manufacturers also complain about the high cost of credit in India.1 60 65 70 75 80 85 90 95 2000 05 12 Fiscal years ending March 2 prime minister was at his side and clapped. thankfully they account for only 14% of GDP (against about a third in China). When rms persuade unions to allow contract labour to increase exibility. In private. by and large. Mr Basu remains an optimist on the economy. To deal with foreigners his sta need good English. This may ease a bit as in ation subsides. India’s carmakers. it su ers from India’s entrenched bureaucracy and wretched infrastructure.SPEC I A L RE P OR T INDIA Something missing GDP by sector. But there seems no prospect of a big leap in Indian manufacturing in the near future. a cheap small car. but this opportunity came along. the country needs huge quantities of skilled labour that will not be easy to come by. the lead instructor of Flying Fox. contrasting it with the late 1980s when the country felt like a warmer outpost of Soviet thinking. says he had extreme di culty recruiting the ten types of masons he needed to work on his campus. % 100 Services Industry Agriculture 1951 55 Source: CEIC 3 Education A billion brains 80 60 40 20 0 A better education system calls for more than money CLIP ON A harness. like his a able and clever predecessor. that led to clashes which left an HR manager dead. And the service sector already makes up 59% of GDP (see chart 3) and is still growing rapidly. IT and outsourcing companies such as TCS and HCL are performing well. many of whom are much less productive than they might be. The man in charge of building a university. And if services are to keep expanding. Kaushik Basu. The missing middle is industry and manufacturing. A manag. The problem is not so much the onerous labour laws but nding skilled people. And its own booming markets o er a growing incentive for manufacturers to overcome their problems. has an impressive (if not entirely relevant) quali cation as a Master of Philosophy in ancient Indian history. you might have a few niggling doubts. More than other sectors. near 9%. In particular. much the same as in the 1960s. a tourist spot some 130km south-west of Delhi. So he reckons that the country will return to a high growth rate. Manufacturing makes up just 15% of the economy. As Chinese wages rise.

A On a morning in a poor quarter of east Delhi. To make India more competitive. China more than Chinese.4m schools. The navolves parents. Some 97% of school-age children enroll. training is crucial. Khajuri Khas. rice transplanters and harvesters are booming in Punjab beand some other help. the rest for universities). It predicts that by 2020 the cumping-up by tutors. student-teacher ratios and the like.SP EC I AL REP O RT I NDI A 2 er overseeing hotel construction near Del- vertising English medium schools. books tors. is pay. carpenGross school enrolment rates. the biggest gains in education must come after school: in vocational and higher education. A migrant from Manipur. the shortage is of people who are literbrisk. thinks the country needs to recruit 4m new teachers needed and to retrain 8m. But the public sector gets plenty of money too. setting aside about $11 billion for education this year (three-quarters for schools. they that eagerness is evident. 200 chilquickly it o to the next job. like many of her students. when it To improve matters. tional literacy rate is up from 52% in 1991 to 74%. says nding Source: World Bank mist worries that parents almost spend skilled sta is next to impossible because too much . A senior government economagazine. at a civil cost of about 120 billion rupees a year. an NGO. In newspaper marriage ters and electricians are like gold-dust. tutors and manhi’s airport says good plumbers. are turned away. the Right to Education act. she inate. There is plenty of rote learning. local education is extremely bad .000 architects when it needed OECD cation either private school or top366. In one small school.K. the tens of millions. even illiterate ones. An agent in ill-lit rooms each morning.H. studies of why some students ourish and others do not.000 Some teachers accept bribes from students in return for exam passes.000 civil enBrazil By one estimate. The OECD predicts that by 1 9 The Economist September 29th 2012 . 40% of Indian stugineers when it needed nearly 4m. dren sit rapt before young women teachers in a series of small. prospective grooms and brides often A survey by the Royal Institution of Secondary Tertiary mention their quali cations before their Chartered Surveyors estimates that in 0 20 40 60 80 100 120 age. argues the In 2010 group’s founder. But gains beyond that are coming far too slowly. A survey in 2011 by ulative shortfall of core professionals inRussia Credit Suisse suggested Indians typically volved in the building trade could be in spend 7. Sharath Jeevan. The basics are improving. Quantity is not the issue. K. Russians or BrazilThe shortages extend far beyond the India ians. The rude and troublesome. That could raise quality. The headmistress. 2010 India had just over 500. % agement schools. too. Education is seen as a quick route to construction industry. The editor of a new prosperity.000 day-meal scheme set up here and there decades ago to get poor children into school each day is now running nationwide. and dents now make some use of private edu45.5% of their income on education. discrimination against nearly 4m. It also requires every private school to reserve 25% of its places for poor locals. Then they move to a nearby state Chandigarh for an engineering company says that sales of tracschool for the afternoon. though.000 problem. and 45. trained and ready to work. Even Parents like Ebyon because it is cheap (80-150 rupees a poorer farmers now buy machines to share. low-caste children. India had Some 500.000. They gather in lots of funds from anxious just over parents. enjoying a free midday meal. Critics say fees for the rest will rise or standards will fall. ads. manufacturer moans that even if you nd capable sta . month) and well run. Even some low-skilled labour is in short supply. N. The quality of needed teaching is variable.000 of India’s 1. Spreading good ideas could do more to transform schools than simply scattering money around. One private school in east Delhi has CCTV cameras in evarchitects ery class which allow the headmaster to monitor his teachers. grade in ation and sometimes ogging. The Caravan. com4 A vital test puter-training colleges. are private. Small towns display garish murals or uttering notices adnow gathering such examples of good teaching habits to share elsewhere. the MP from Bihar. though over half when it drop out before completing secondary school. But the best schools are getting on with it. Better nutrition should engineers mean more concentration and better results. an 18% rise on last year. according to the paan spitters . 2010 or latest. is designed to lift school results by setting minimum standards for school buildings. playing elds. looks or caste. A new law. but may mean more bureaucracy. with around 300m students. though. Alice. A mid500. Ebyon. cause fewer casual labourers are migrating from Bihar. The government seems to have recognised the 366. Singh. There is no lack of interest in education. or willingness to Schools and Teachers Innovating for Results (STIR). And she keeps records: case census. is bright and Generally. sometimes teachers do not even turn up for lessons.

some 12% of the world’s total.9 0. have good public services and social indicators despite slow urbanisation. to dodgy property traders. surveyed 55. In the absence of piped water. The area was set aside for some of the estimated 500. However. are living in 640. such as the NIIT. but many families have been split: the father sleeping somewhere back in Delhi. Gujarat’s chief minister (who talks of rurban life). have endowed universities such as the OP Jindal University (named after a steel family). electricity. Part of a planned knowledge corridor of new universities in Rajasthan. The fund is meant to help train 62m workers in courses of varying lengths over the next decade. Some 92% of the graduates were de cient in programming or algorithms. Several tycoons.000 engineering graduates a year who could soon be working in its IT rms and beyond.500. The government also pays in ated prices for most wheat and rice. luring Indian academics from foreign universities and encouraging research as well as teaching. Some have sold their plots.000 of them last year and found that not even 3% were ready to be taken on by IT rms without extra training. notably the publicly run institutes of technology and of management. Savda Ghevra represents progress of a minimal. An o cial estimates that 44% of state-managed food vanishes as leakage . on the back of which the country’s IT sector ourishes. The government is pushing to increase enrolment to 30% of the age group by the end of this decade. The leafy campus in Neemrana is rising up beside a maze of Japanese factories. a computer-education company. or nearly 14% of the age group. a Gurgaon-based company that assesses students’ employability. Two-thirds of the population. and in many states it also encourages corruption. The government is pouring money into a National Skill Development Fund. the quality is often wretched. Politicians such as A.3 Urban Rural 1960 65 70 75 80 85 90 95 2000 05 10 15 20 25 30 35 40 45 50 Sources: World Bank. sighs a noted economist. both private and public. such as Kerala and Tamil Nadu. A corner house is for sale at a scarcely believable 2. however. Some private groups. unsatisfactory sort. but resisting it also comes at a price.J. Flies swirl over open sewers. the survey concluded. India’s cities.5 1. much public spending ows to the sticks. tailors. Mr Pawar’s group is now building a university to promote research that will be immediately useful to business. India’s o cial count of higher-education institutions. rickshaw-wallahs and hawkers who saw their shacks attened. Too many people end up with worthless quali cations. And even identifying people for further training might not be easy. Over the next decade he wants to educate 7m more for industries such as hospitality. it o ers teaching as well as research into biofuels.000 engineering graduates a year. rather than leaving their entire fortunes to their children. According to the survey only 17% of the graduates had basic skills. given plots and told to build. Since rural voters collectively have clout. illegally. west of Delhi. They are paying higher salaries for good faculty.P. is nearly 26. That discourages migration. the rest of the family in the new home. Some pockets of higher education work well.6 0. The country produces over 500. Farmers get subsidised diesel to run pumps. then sells much of it back to villagers as cheap rations. want people to stay out of cities. allotting 10 billion rupees to it for this year alone. There is a long way to go before engineering graduates in India become employable. A few trees have been planted. Some were taken to Savda Ghevra. UN Population Division 0 The Economist September 29th 2012 . Ernst &Young. a professional-services rm.2 0.SPEC I A L RE P OR T INDIA 2 the end of this decade India will churn out more graduates than Cities any other country bar China. the Azim Premji University (after the founder of Wipro) and the Shiv Nadar University (after the founder of HCL). or Narendra Modi. pukka ones.7m rupees.8 1. Village life is often hard for 1 Found wanting Education in engineering. for example. but overall the feel is little better than that of a shanty town. says this would involve a rise in the number of students to 40m. Many management colleges do little teaching but lure applicants with promises of getting them jobs when they have graduated. That sounds glum until you realise that it also means India produces around 100. The next push is to expand their work into other sectors. The NREGA scheme creates low-paid make-work jobs. wireless networking and more. Aspiring Minds. a former Indian president. 7 10 The slow road to the city India’s population. it has struggled to nd enough credible partners to spend its money well. Meanwhile private money is ooding into tertiary education. That is one reason why the country remains mostly rural (see chart 5). at a cost of around $200 billion. Soon the campus will also provide space for start-up rms. the world’s biggest country total. 78% struggled in English and 56% lacked analytical skills. It may not be San Francisco yet. the NIIT’s founder. is not what it might be. poorly built brick houses with beaten tin doors. some 833m. Only a minority of homes. The number of students currently enrolled is 15m. 55 tankers bring in supplies daily. banking and insurance. In theory. biotechnology. A lot of private education is useless. supposedly a great Indian strength. the retail trade and banking. So far. says Rajendra Pawar. bn F O R E C A S T 5 1. are charmless and badly put together. giving it 24m graduates aged between 25 and 34. But funds are likely to be forthcoming. Public funds are also being deployed to lift skills. such as nance. He says his group has trained over 30m people in technology. Abdul Kalam. have toilets.000 slum-dwellers displaced when Delhi hosted the 2010 Commonwealth games: sh-sellers from beside the stinking Yamuna river. and would like the internet. health care. by and large. Some states. Now they have homes and electricity.000 villages. schools and jobs to go to rural areas instead. but it is a step in the right direction. also produce reasonable graduates. Concrete jungles A mainly rural country is ill-prepared for its coming urban boom SAVDA GHEVRA IS a township of narrow.

I see no improvement in thinking about cities. stretching from Ahmedabad in Gujarat in the A far more encouraging example can be found farther up north. But it is mired try-dwellers see opportunities. gangsters and smugglers. According to What it takes one vision. Much land is privately held. In China just over half the population is now urban. has plenty of glass towers but falls slum-dwellers are often productive short on sewerage and power supplies and is only slowly acquiring public transport. Several delivered. Historically most urban growth has been harashtra. But there is plenty of growth in smaller places too. a business district near Delhi. Municipalities also need planning skills. are also getSome 96% of residents pay their municipal taxes on time. When farmers leave the land to work in factories. contribute 43% of its national income. formed.000 inhabitants. and even Japanese doand transport improved. for new infracade the growth in Surat’s population averaged 5% a year. A cricket eld on the city’s edge is so thickly strewn with rubbish you can hardly see the ground beneath. Rubbish was collected Delhi gets plenty of public money. engineers and the like to manage cities. the Parsi businessman. contribute 43% of its national income.000 inhabitants. Any big metropolis can tap a central fund. like Savda Ghevra. Inland. the fastest of any city in the world. Aromar Revi. Called Lavasa. So in future India’s urban popuin controversy and hardly o ers an urban model for one-sixth of lation will rise much faster. Gridlocked MumSome rich folk are trying to get round the problem by startbai can appear to be falling to bits. India’s entire western seaboard could turn into a single conurbation. currently 377m. says that India’s 100 biggest cities. other cities. It has 670. According to his planners. But we have no urban infrastructure. a city in Gujarat of 4. it is now being built on The number of town-dwellers. . women and members of religious or other minorities. doubling by mid-century. past Mumbai and south to Thiruvananthapuram in Kerathe coast. Surat. but many are grim and badly run. Cows munch on plastic bags in the streets.000 professionals planners. Even Gurgaon. Manoj ting metros. Mr Revi estimates that by 2031 India will be short of 100. poor public health and a broken and clogged road system. but markets are opaque and development too often depends on cronies with political connections. Within two decades Inpur. Hyderabad and Chennai. call centres or almost anywhere else. no widening of roads. says that over the past deharlal Nehru National Urban Renewal Mission. is growing 25. among structure.5m people. He heads a new university that will train people to ll the gap. have a leg. by 1 The Economist September 29th 2012 11 Already 53 cities have at least 1m inhabitants. the chief minister of Maharashtra. Miraculously. gridlock. Some urban centres will become megacities. a sanctuary for 300. Yet many urban spaces. Gorakhpur is a sprawling city near the Nepalese border in eastern Uttar Pradesh.SP EC I AL REP O RT I NDI A Gurgaon looks good. it became famous for squalor. streets were swept and public services nor funds. especially in heavy rains. lifting assorted development indicators. including Bangalore and Ahmedabad. the JawaKumar Das. Mr Guzder says the entire Mumbai metropolitan region is overseen by a single town planner ( and she is retiring soon ). That is changing as counfrastructure. Towers shoot up. ulation. Prithviraj Chavan. no provision of police. notorious for thuggish religious politics. In 1994. their incomes and consumption almost always go up. Mumbai. a bridge connecting the southern part of the city to the north. Putting o urbanisation can also mean postponing prosperity.000 acres of hilly private land by a reservoir near Pune in Maby around 5m a year. with 16% of its total population. who now runs the city. the improvements were sustained. each with at least 10m people: Ahmedabad. provided there is enough water. Delslums and rotten management. E ective managers cleaned up. blames the city’s woes on a deep nexus of property and political funding . ing a city from scratch. Delhi and its environs could be a hub for 60m-70m trading hub that not long ago was a wretched dump like Gorakhpeople. Since then it has been transhi. Property in the city has run riot.India’s 100 biggest cities. is a ourishing la. It looks pleasant enough: a town to walk in. Some are seeing improvements. director of the Indian Institute for Human Settlements (IIHS). says a senior gure in construction and retailing. says Mr Guzder. but do the drains work? 2 people of low caste. Bangalore. especially around the Sea Link. Even slum-dwellers are often productive manufacturers and traders. India is ill-equipped to make such places attractive drivers of growth and better living. which have helped pay for a newish metro. not migration. York. Mumbai is especially bad. good indue to natural increase. with 16% of its total popacy of poor planning and management. after a reported (but never con rmed) outbreak of dia will probably have six cities considerably bigger than New pneumonic plague. Villages are usually the places with the worst schools and health care and the least productive work. the planet’s population.

Overstretch is evident: a single o cial in Delhi has to liaise with 19 Latin American ambassadors. Cultural ties via India’s The Economist September 29th 2012 India abroad No frills The country’s foreign policy is frugal. Mr Tharoor notes that the foreign service has only about 800 diplomats. Slums are being cleared and parks being created by the river. concedes a senior o cial. ’000 Population per ing abroad. The boss of a diamond rm says his home town has been reshaped and feels great. others cities are capable of similar improvements. His talk of a cross-border bus service. West Bengal’s chief minister. the local chamber of commerce and a prominent city journalist all give the same answer: governance. In March SIPRI.341 India nuclear deal agreed with 6 Singapore George W. What made Surat work? An assortment of businessmen. the country is fast becoming a donor. That States 12 Germany goes down better with its foreign partners than its sermonis10 France ing of old. Sensibly. ’000 are limited: to ensure that its 0 2 4 6 8 foreign relations serve its big United 20 16 transformation at home. The country’s economy is more closely enmeshed with the rest of the world than ever. they happily contributed to the city’s success. But the means are limited. concludes C. Manmohan Singh implored a gathering of businesspeople. thinks India is trying to do more but is devoting far too few resources to achieving its foreign-policy goals. customs o cials. ranked the country as the largest single importer of weapons. India’s star is risLatest. is home to a large Indian diaspora. overtaking London. Its three main con10 Britain cerns today are America. South Korea and elsewhere. with diamond polishing. but they grumble that rivals. And it is an enthusiastic joiner of international groups. Foreign trade is now equivalent to 43% of GDP. a Congressman from Kerala and one-time under-secretary-general at the United Nations. Last year Mamata Banerjee. the boss of a jewellers’ association. MYANMAR’S once-shuttered main city. Regional satraps who bully Mr Singh on domestic issues have also caused sudden foreign-policy reversals. Long a recipient of aid. Put less kindly. When residents felt able to trust o cials and their plans. think-tanks and commentators are only just beginning to show an interest in foreign matters beyond Pakistan. Size of diplomatic corps Even so. On a shoestring All this speaks of rising ambitions. The municipal engineer says the entire city has clean piped drinking water. many people in Patna. the democracy activist. This year rms planted 200. a foreign-a airs expert. There are few people to handle di cult cross-regional topics such as water resources or climate change. but far too many pen-pushers in the coal and steel ministries. so as yet there is only a small corps of experts outside government to help advise policymakers. Keep a place in your hearts for India. Nothing Mr Singh does is electrifying. notably state-owned Chinese ones. and retailers like Jimmy Choo. and few linguists uent in tongues helpful beyond Asia. against just 16% two decades ago.000 trees to help make the place greener. reversing its policy. By last year India’s two-way trade was worth a total of $794 billion. scuppered an Indian water-sharing deal struck with Bangladesh. a Swedish think-tank. It also has a growing appetite for energy. The same day he turned a historic meeting with Aung San Suu Kyi. it’s a realist approach. Pointlessly strict secrecy rules lock up o cial foreign-a airs documents for good. The machine that guides India abroad is slow and cautious. Some even wonder how much of a grip the national government in Delhi is able to keep on foreign policy. diplomats and soldiers. even if he came long after nimbler leaders from Britain. Many turned out to hear a speech from India’s prime minister during his rst visit in May. Armani and Gucci are due to open soon. In spring this year a Tamil ally of Mr Singh’s government helped to get India to vote against Sri Lanka at the UN over war 6 Diplomacy lite crimes. dust or noise at the municipal dump is strangely thrilling. When he was a boy. Dynamic Indian rms establish themselves in new markets without government help. Mr Das says given the right motivation and belief in o cials. India’s state is a 65-year-old who has fat in all the wrong places. even if most foreign-affairs experts wisely eschew any talk of an incipient superpower. Investors like its reliable power. After decades of facing inwards. computerised and run largely on electricity from a biomass plant red by methane. are now connected to the grid. a model that other cities could copy tomorrow. into a stilted and awkward a air. its goals diplomat. It has too few border guards. Bihar’s capital and his home town. commercial and other interests in Africa. dishing out aid and soft loans worth billions of dollars every year. says Mr Tharoor. he had to study by lantern light. For instance. On a sweltering monsoon day the lack of smell. with a 10% share of the world’s total. Over 90% of households are said to be connected to sewerage. It helps that the local economy is thriving.3m people. Indian universities. India is still punching well below its weight 12 . more yovers and a Bollywood theme park modelled on Disneyland.SPEC I A L RE P OR T INDIA 2 2031 it could have 9. The city’s sewage works are similarly impressive: e cient. set few hearts racing. sober and generally sensible DOWNTOWN YANGON. and mutual trade worth $5 billion by 2015. Even the rubbish is being put to work: soon about 1. mineral. Raja Mohan. Next on the list is a rapid bus transport system. shrugged when they heard that Mr Singh was in town. Burberry. less than a fth of China’s and roughly the same as tiny Singapore’s (see chart 6). We’re not trying to cut a grand gure abroad. There are posh car showrooms. 7 in foreign a airs. A group of resident Bengalis in a hardware shop. textiles and petrol products doing particularly well. 321 China Relations with America 162 Brazil have thrived ever since a civil 1. enjoy cheap credit and diplomatic backing. ies. Shashi Tharoor. That he got to Myanmar at all was an achievement. tra c that ows and the can-do culture of Surtis. Bush seven years Source: Shashi Tharoor ago. Bangladesh. Central Asia and elsewhere. Even the grimier end of town is uplifting. We run a no-frills policy. It is e ciently run by private contractors.200 tonnes will be burned daily in German-built incinerators. buying materials for a goat cage. China 23 Japan and its immediate region.

And it is putting more soldiers and aircraft at permanent forward bases along the border. other Indians and Pakistanis have long vied to control this pristine territory. Ties with Australia will improve as it looks poised to announce that it will sell uranium for India’s domestic nuclear plants. Ravishing views of glacial lakes. but they feel no com. Red communications wires snake up cli sides and around waterfalls. and says another $10 billion is lined up. or threats have been so serious that the pilgrimage has been called o . it o ers the luxury of open. now. marine exercises and anti-piracy e orts continues. In April it testred a home-built long-range nuclear-capable missile. worth just $2. The tragedy of the commons An uphill walk As Indians get richer and better educated. or at least to agree to India’s requests for more open trade. They daub rocks with instructions Slow and steady . But he explains with equal enthusiasm that India has made rapid gains in domestic military mobility. temporarily on the UN security council. the site of a humiliating frontier war 50 years ago that India lost. but at least it has a clear purpose. as do stronger trade links. Crucially. and long overdue. The two powers’ interests are converging. India is doing more to improve relations in its region. which in theory could strike China’s big cities.000 Hindu pilgrims follow a yatra. Though still poorly resourced. religious. The two collaborate in Afghanistan. it takes just two weeks. In Myanmar. On every ridge soldiers are on guard. thanks to better roads. Gone are the days when Indian leaders abroad somehow managed to appear arrogant. But they also vie with each other. has voted three times with America against Iran over that country’s nuclear programme (though it has been cagey over Syria). Close co-operation in counterterrorism. India wants America to preserve its ties to Pakistan. they need to become more public-spirited HIKING IN KASHMIR. such as who should run Kashmir. missiles and more. The yatris’ devotion is remarkable. The air is still. The two countries also share the experience of running big. One big reason is its second concern: China’s rise. The two Asian powers are developing closer ties. India. Cheery city boys and middle-aged men with pot bellies race ahead. A decade ago it took two months to move several army divisions to defensive positions on a disputed border in the north-east. Mr Mohan points to defence orders worth $10 billion for C130 and C17 aircraft. but that caused only a temporary ripple of bilateral irritation. exhaustion and exposure to bad weather. cool and clean. and elsewhere in the region. expensive. fried food. India has become modestly active in oil exploration in the South China Sea. But over a few weeks each summer. Marksmen in nests of sandbags look out for militants. India is forging links with democracies and those already close to America. Last year America failed to sell India a big consignment of ghter jets. This month the countries’ foreign ministers at last signed a deal easing their bilateral visa regime. In the past there have sometimes been terrorist attacks. most of them ill-prepared for the high altitude. a tough walk over several days to a cave containing a phallus-shaped piece of ice. Unlike much of India. materialistic and messy democracies in which central governments are constrained by powerful states. in the Himalayan foothills. moralising and ine ectual all at the same time. 7 The Economist September 29th 2012 . A China expert in India’s foreign ministry says that bilateral trade. notably in trade. since no one else. India’s foreign a airs seem better run than they have been for a long time. The Amarnath cave is revered as one of the most sacred sites in India. And disputes continue along the still un xed India-China border. for example over Tibet and the Dalai Lama (who lives in India). where India is a big civilian donor. Mr Singh says he is ready to visit his own birthplace in Pakistani Punjab if only Pakistan would do more to stop terrorists who attack India. the two Asian giants compete for in uence and energy supplies. America is now one of India’s biggest weapons suppliers.500m.SP EC I AL REP O RT I NDI A 2 diaspora in America help. should pass $100 billion in 2015. the Agni-V. And India will increasingly engage with the West. sparsely inhabited space. no longer get aired. Respect nature and the names of their battalions. happily exhausted. certainly not China. And it is a big recipient of aid and investment from Japan. Goat-herders and villagers work as porters and guides. Butter ies seek out alpine owers. India is also trying to boost trade by building better border infrastructure and loosening non-tari barriers.9 billion in 2000. Farther east. At stops along a 32km path that at the peak reaches a height of 4. At the same time India is wary of China’s ability to make trouble. Barefooted and bedraggled yatris o er a picture of conviviality. Awkward issues of old. raising temporary tent cities. sugary tea and stodgy sweets. Then the annual invasion begins. too. An occasional bird of prey swoops by. or lingam. though there will be no formal treaty.1 13 Just in case Last. But American ties with India will get more important. Well over 600. This year 93 yatris died en route. India wants a stronger military deterrent. snowy peaks and immense green valleys make it easy to see why Kashmiris. then slump. America is increasingly adopting India’s stance against extremist groups based on Pakistani territory. thousands of Indian soldiers ascend zigzagging paths into a series of valleys near the line of control dividing India and Pakistan. India’s policy may lack frills. workers set up kitchens producing noodles. would help moderate Pakistani behaviour. is a joy.

apart from cricket). the capital. It will be a messy transition.economist. The valley is seeing a construction boom. few people seem to have much of a sense of shared But eventually India has to move beyond jugaad. in the north. paper mills and other industrial users dump waste and chemicals in it. the here and now is Corporate offer unimportant) and a sense of faCorporate orders of 100 copies or more are talism. Air pollution plagued 90% of villagers (who breathed smoke while cooking) and around a third of urban dwellers. The mountain roads are clogged with straining.com/specialreports often comes an attitude that it is up to others to tackle the problems. There have been street protests against corruption and innovative ideas for ghting it. The river Ganges is considered sacred by Hindus. strewn with plastic. this will change as Indians become richer and es. such as providing websites where people can post details of bribes they have paid. especially years may need to be toned down. Ordinary Indians will gradually body else’s job. A favourite word in India these days is jugaad. more responsible individuals and leadthe commons. Delhi’s air got cleaner for a decade after buses and autorickshaws switched to liquid gas in 1999. Fast-growing economies with few rules often run into problems of this sort. tins. Groups such as WWF run projects It is depressingly common to litter and out with local governments to tackle the dam. too. start to contribute. www. Both last year and this. Please contact us to discuss your requirements.com ing people by caste). A ourishing democracy may respond more vironment. ponies and yatris that it has the despoiled air of a refugee camp. terrorist. Soil degradation had cut farm output way below potential. says he is certainly more concerned than he was at the time. but a welcome one. We also offer a customisation pressures of an overwhelmservice. A report in 1997 by a Delhi-based think-tank. with better quality around them. Forest stocks were down. When a crisis erupts be it environmental. But with it economist. with paths of mud and excrement. Yet that may change. More of them will refuse bribes. reprints or any copyright queries lights. elbows ying. often causing crashes. ingly huge population. Indians rank among the world’s least generous organ donors. or. create wealth as entrepreneurs and take better care of the enbetter educated. No longer special Years of insecurity and underdevelopment in Kashmir ironically served as a sort of nature conservancy scheme. religion (for the faithful. drinks cartons and mounds of waste half buried in the ice.environmental rules if you can get away with it age. they are also increasingly ready to turf out politicians who have disappointed them. but such e orts are too rare. smouldering piles of part-burned rubbish. For example.com and so is tax avoidance. who heads TERI (as well as the Intergovernmental Panel on Climate Change). economic. paying or accepting Fax +44 (0)20 7576 8492 bribes is considered normal. Along with Beijing it is one of the most polluted cities on earth. the available. more peaceful but also gradually more despoiled.com ation for others are ubiquitous: For more information on how to order special drivers who race through red reports. leaving the place in good physical shape. Tel +44 (0)20 7576 8148 Small failures of considere-mail: rights@economist. Near the ice cave the valley is so crowded with shacks. This is true everywhere. That Mexico November 24th people generally respond with Previous special reports and a list of good humour is a tremendous forthcoming ones can be found online: asset for the country. Fifteen years on. and outrageously wealthy tycoons are only slowly discovering philanthropy. more directly. The approach to the ice cave crosses a glacier-turned-rubbish-dump. say.SP EC I A L RE P O R T INDIA 2 punction about leaving some ugly marks on the landscape. matters are worse. common goods seems particuA minimum order of five copies is required. melting glaciers aside. stalls. you may have. Altruism is thin on the ground. farmers allow pesticides and fertilisers to slosh in and the human waste from burgeoning cities goes in largely untreated. laments Mr Pachauri. It is a tragedy of functioning institutions. In much of the country the consequences of that process look devastating. Robust ownership of public spaces or obligation to the natural world success will come only when standards rise. and the high expectations of recent . Kashmir is slowly becoming more like the rest of India: wealthier. 7 14 The Economist September 29th 2012 quickly than.com/rights Given how common such Future special reports failures are. The Energy and Resources Institute (TERI). But the winter smog that bedevilled the city in the 1990s is now back. China has Offer to readers done. We have no sense of individual responsibility. But in India. For all that Indians are accused of fatalism. gave stern warning that 50 years of rapid population growth had led to dire environmental prospects. political both leaders and ordinary people in India draw on values such as tolerance and openness that do their country credit. The reasons may inPlease contact: Jill Kaletha at Foster Printing clude culture (a history of dividTel +00(1) 219 879 9144 e-mail: jillk@fosterprinting. many of whom bathe in it. The valley is lled with acrid smoke from damp. That requires vironmental rules if you can get away with it. It is depressingly common to litter. paper. each summer brings a bumper crop of tourists. Forests are a bit better protected and public transport in some cities has improved. extend private in everything from homes and cities to schooling and sporting property by encroaching on public land and out safety and enachievements (pitifully low. it may be di cult to The world economy October 13th get anyone to worry about a Information technology and geography particular example. whisking the wealthy and un t to the sacred spot. Local men hired to gather litter along the way simply hurl their bags into the glacial stream below. such as enOctober 27th France November 10th vironmental despoliation. pollutants in rivers and a dramatic fall in groundwater levels. Helicopters buzz above. Everyone feels it is someers who dare to take decisions. But instilling respect for Reprints of this special report are available. And de26 Red Lion Square London WC1R 4HQ spite the indignant rage about Tel +44 (0)20 7576 8148 corruption. Rajendra Pachauri. Kashmir got over 1m visitors. e-mail: rights@economist. is crowded with youngsters on jetskis. notes Mr Pachauri. Other woes included water shortages. please contact: crowds that barge on and o The Rights and Syndication Department trains. larly hard. The once serene lake in Srinagar. The next ve years are likely to be messy. but we carry it to a ne art. But now that military action has receded. pay their taxWith luck. Yet tanneries. People have a tendency to want the government to x things. overloaded lorries. meaning a spirit of innovating and making do.

Sign up to vote on this title
UsefulNot useful