INDIA UNBOUND: GURUCHARAN DAS

From Independence to Global Information Age

INTRODUCTION: ABOUT THE AUTHOR

Gurcharan Das (born 3 October 1943) is an Indian author,[1] commentator and

public intellectual. He is the author of The Difficulty of Being Good: On the subtle

art of dharma which analyses the epic, Mahabharata. His international best-

seller, India Unbound, is a narrative account of India from independence to the

"global information age", and has been published in many languages and filmed

by BBC.

He is a regular columnist for six Indian newspapers in English, Hindi, Telugu and

Marathi. He writes periodic pieces for the New York Times, Wall Street

Journal, Financial Times, Foreign Affairs, and Newsweek.

Gurcharan Das graduated with honours from Harvard University in Philosophy. He

later attended Harvard Business School (AMP), where he is featured in three case

studies. He was CEO of Procter & Gamble India and later managing director,

Procter & Gamble Worldwide (Strategic Planning). In 1995, he took early

retirement to become a full-time writer.

His other literary works include a novel, A Fine Family, a book of essays, The

Elephant Paradigm, and anthology, Three English Plays.

INTRODUCTION- INDIA UNBOUND

India Unbound is the riveting story of a nations rise from poverty to prosperity and the clash of

ideas that occurred along the way. Todays India is a vibrant free-market democracy, and it has

begun to flex its muscles in the global information economy. The old centralized, bureaucratic

state, which stifled industrial growth, is on the decline; the lower castes have risen confidently

through the ballot box; and the middle class has tripled in the last two decades. This economic

and social transformation is one of the major themes of this book.

Gurcharan Das recounts the hope and despair of the last fifty years. The Licence Raj created a

work environment in which a cousin of the author, on his first day at work in the railways, could

precipiate a strike just because he was honest. And on one occasion, the author, even though a

seasoned executive, was driven to sit by the polluted Yamuna and weep after a fruitless meeting

with a bureaucrat. The transformation began in the golden summer of 1991, when a reticent
reformer, Prime Minister P.V. Narasimha Rao, finally changed the nations course through

sweeping economic reforms. A restrictive regime, in which the state dictated everything, from a

womans choice of lipstick to the programmes on television, gave way to the optimism of a

rising middle class eager to compete with the rest of the world. It was a quiet revolution, one that

has not been chronicled before.

Gurcharan Das examines the highs and lows of independent India through the prism of history

and his own experiences and those of numerous others he has met following the reforms, from

young people in sleepy UP villages to the chiefs of software companies in Bangalore. Defining

and exploring the new mindset of the nation, India Unbound is the perfect introduction to

contemporary India.

The powerful story of a nations transition from poverty to prosperity. Examining the highs and

lows of independent India through the prism of history and his own experiences, Gurcharan Das

defines the new mindset of the nation in riveting prose.

BOOK SUMMARY-

The book is divided primarily into three parts, pre-independence era [focused on

British Raj including some stories of Mughal period], post-independence pre-

liberalized era and post-liberalized India.Since, the author was born in 1943 West
Punjab (now under occupation of Pakistan), he narrates his personal experiences

of (economic) conditions of India from 1947-2001.

1 BRITISH RAJ

While British raj did harm India [economically], the reason that Indian handicrafts

lost to machine driven goods is also significant.

Hand looms all over the world were impacted by emergence of technology and

since India was largest textile maker in the world, it got impacted the most.

Author further notes that while some britishers made huge profits in India,

overall the British India did not provide a lot of profit to the crown.

The prevailing culture of looking down on merchants as greedy [as opposed

viewing them as lifeblood of economy] did further harm.

Emergence of brown sahib in British Raj: Primarily Brahmins learnt English and

took up the clerical and managerial job for Britishers. Author notes that those who

were quick (as opposed to better) to grab the opportunity benefitted at that time.

Indians prefer vertical over horizontal relations, on numerous instances from

wars to running industries, it has been seen that Indians prefer/are more

comfortable with their managers and sub-ordinates as opposed to colleagues.

Author believes that with globalization (read fight for survival) this trend has to

change.
2. LICENSE RAJ

STATE-CONTROLLED PLANNING OF 1950S

Almost all newly independent nations [and many economists of that period] had

the feeling that state planning and state controlled industries are necessary which

just lead to inefficient, high-priced, low-quality goods.Also, in that era, most

western nations were going through a phase of emphasizing wealth distribution

[for wealth creation was going on at a good pace].Unfortunately, many of the

Indian bureaucrats trained in these nations forgot that India needed wealth creation

first.

Among common man, trade was not seen as positive-outcome game, but it was

perceived as zero-sum game.

Note: John Rawls showed that it is possible for a group to agree to different

outcomes provided everyone of them is better off by accepting the outcome

(market-based liberal democracy) which convinces the author that inequality can

sometimes be acceptable.

NEHRUSECONOMICPOLICIES
Emphasized state-control,looked down upon private sector,pursued the policy of

import substitution over export promotion,promoted big state owned industries

[steel] as opposed to small toy making wage goods industries [Asian tigers took

the latter route],extreme license control where several months will be spent for

approval [India was the only non-communist where manufacturing good

beyond licensed limit was a crime],Tax rates shot upto ~80% [and thus, the

creation of tax-less cash transactions],[despite repeated warnings from USA] India

decided not to focus on agriculture since it was believed that it is a western

conspiracy to keep India backward and eventually suffered food crisis,

Finally, when Lerma Rojo was imported [leading to green revolution], it was

criticized as being sold to America,slowly the businesses learnt the tricks like

exhausting all the licenses of a product [to prevent any future competition] and this

reduced their capability to work in competitive economy.

Indiras Era

While socialism was popular during Nehrus era, it has lost most of its charm in a

couple of decades, but during Indiras rule, controls were further tightened.

Several state-owned enterprises emerged during this era which were not profitable

[and sometimes did not produce any goods eg. Scooters India Ltd.] and it was

illegal to close them,By 1980, 75% of state-owned companies were in losses,

14 banks were nationalized and in a decade, most of them were bankrupt,

Final nail was Monopolies Restrictive Trade Practices Act of 1969 which implied
anyone with 10 Billion Rupee in combined assets cannot invest any further, which

forced Aditya Birla to establish companies in Indonesia, Thailand and Hong

Kong.

Author laments that while everyone remembers emergency as 2 years of political

suppression, very few realize the 40 years of economic suppression.

The author bluntly criticizes Congress politicians and leftist intellectuals for being

anti-free market and anti-west and refers to Indians of this era as lost generation.

3.Post- Liberalization of 1991

Being short of foreign exchange reserve, India asks for a loan from IMF and starts

economic reforms in parallel.Author praises Narsimha Rao (PM), Manmohan

Singh(FM) and P Chidambram(Commerce Minister) for their role in liberalizing

Indian economy.

Several examples like Zee TVs Subhash Chandra, NIITs Rajendra Pawar has been

given to illustrate first generation millionaires created by liberalization.

While some Indian business houses have reformed [and separated ownership from

management], others are still struggling with the new world order, Ranbaxys

Parvinder Singh sat an example by passing his company to professionals instead to

his sons,

There are three ways to compete superior [lower] prices, superior product and
superior service, as of now, Indian industries follow superior prices and they

should move to superior service now,

the growth of middle class is one of the most significant consequence of

liberalization.A major area where reform has still not occurred is education and

nation is in a dire need of it. Author criticizes swadeshi policy of

nationalists[terming as another form of license raj] since he believes that rather

than asking for protection from competition, indigenous companies should learn to

compete in a free market.

Ideas can be copied, execution decides who is the winner

India missed Industrial revolution, IT revolution is therefore, critical for India.

While some people fear that Indians is westernizing, author believes India is

modernizing and the spiritual component of life is here to stay in Indian life.

BOOK REVIEW AND ANALYSIS-

The ascent of the country from poverty to prosperity, from tradition to modernity,

is a great and fascinating enterprise. India has recently emerged as a vibrant, free

market democracy after the economic reforms in 1991 and has begun to flex its

muscles in the global information economy. This economic and social

transformation is one of the themes of this non-fiction book written by Gurucharan

Das. The story is taking place quietly and profoundly in the heart of the Indian

society. The author hangs the chronicle of great political and social events upon the

thread of an individual personal experience. However, this is not an autobiography.

Author questions about why we have not completely transformed our society. He

says that there were 6 things wrong with Indias mantra. His book covers a wide

vivid explanation of these things. One, it adopted an inward looking, import-

substituting path rather than an outward looking, export promoting route, thus

denying itself a share in world trade and the prosperity that trade brought in the

postwar era. Two, it set up a massive, inefficient and monopolistic public sector to

which it denied autonomy of working, hence our investments were not productive

and we had a poor capital output ratio. Three, it over regulated private enterprises

with worst controls in the world and diminished competition in the market. Four, it

discouraged foreign capital and denied itself the benefits of technology and world

class competition. Five, it pampered organized labor to the point where we have

extremely low productivity. Six, and perhaps the most important, it ignored the

education of half of its children especially girls.

In part, this is a story of the betrayal of last two generations Indias rulers. On

above these aspects, the author has described its causes, effects, his ideas giving a

lively, interesting answer to key question: why was India rich, why is it poor, when
will it be rich again? I wish to share few inputs and ideas propounded by the author

about India and Indians I this book. He says that India will never be a tiger. It is an

elephant that has begun to lumber and move ahead. It will never have speed, but it

will always have stamina. Although slower, India is more likely to preserve its way

of life and its civilization of diversity, tolerance, spirituality against the onslaught

of the global culture. If it does, then it is perhaps a wise elephant. The author

measures the passages of his life by the nations milestones. When he was born,

they were fighting against British. When he was 4 years old, India became free.

During his school days in 1950, Nehru set about to build India based on

democracy, socialism and secularism. When he went to work in 1960s he

discovered that we had become economically enslaved and socialism was leading

us to statism. By the time he got married, Indira Gandhis rule was leading us into

a ditch. The period of Emergency made him think that political freedom was gone

but mercifully it didnt last long. We soon received our political freedom after 22

months. Just before he took early retirement, Narasimha Rao delivered us our

economic freedom. It was the various economic reforms which led us on our way

to regain paradise. We have climbed to a 7% economic growth rate, and if this is

maintained and we keep raising our literacy level, the nation will turn increasingly

middle class and the degrading poverty of India will begin to vanish. British

introduced English language and western education which produced clerks for
their company, also lawyers, teachers, engineers, doctors, bureaucrats as well.

Members came from various castes and backgrounds however; upper castes were

the first to seize this opportunity. The Brahmins took to English education, passed

exams and became a part of the new middle class. They could then rant in English

and chant in Sanskrit. Western education provided the stimulus for the most

dramatic change in the minds of Indians in a thousand years. British gave us 100

years of peace- the so called Pax Britannia- but they also consciously perused a

divide and rule policy which made Hindus and Muslims conscious of their separate

identities. Thus, there was Indo-Pak divide. Had India remained united, billions

could have been saved in defense expenditures and invested instead in improving

the lives of ordinary people in both countries. The Raj gave us modern values and

institutions but it did not interfere with our ancient traditions and our religion.

India has, therefore, preserved its spiritual heritage and the old way of life

continues. Author tells about various entrepreneurs like Ghanshyamdas Birla,

Ambanis, etc GD Birla, a Marwari magnate and Gandhis confidant, GDs Grandpa

ShivNarain came to Bombay and smelled an opportunity of shining in trade. He

went in to villages and convinced farmers to switch over to particular long variety

for English Mills. There is vivid description of success story of GD in textile mill.

On post independence, the system that Nehru created and India further followed

actually suppressed growth. It did very little for poor. More of wastage was seen
than efficient use. Moreover, India, with one of the worlds greatest railway

systems, that was enough to modernize and lift the economy. Nehru taught us to be

liberal and tolerant. He inculcated a respect for democracy and a loathing for

feudal behavior. He also infected us with his idealism. He reinforced our prejudice

against businessmen and profit. We never learned about virtues of entrepreneurship

and competition and we paid dearly for them. He called state owned companies as

Temples of Modern India. He called his system a mixed economy- combining

the best of socialism and capitalism. But Nehrus mixed economy turned out to be

a gravely flawed image of our future. It was partly Nehrus fault that we never

learned to value dreams of people like Kasturbhai and GD Birla. Had a hundred

Kasturbhais been encouraged rather than discouraged we might have had a

different India. When ordinary human beings err, it is sad, but when leaders do, it

haunts us for generations. India was rich, no doubt. Then, why India didnt emerge

as Industrial economy? Why is it impoverished? Eighteenth century India was

lagging behind in technology, institutions and ideas. Neither an agricultural

revolution nor a scientific revolution had occurred. It is difficult to answer to

problem that the country was prosperous and people were poor. Indias social

system and attitude is also an important cause of its low productivity, primitive

production techniques and low levels of living. According to Myrdal, poor work

discipline, contempt for manual work, lack of punctuality, alertness, ambition, low
aptitude for co-operation and superstition were result of inhibiting attitudes making

poor nation prosperous is more difficult problem. Solution lies in technology and

institution. He describes his life in America in the mid 1950s where he worked

distributing newspaper and the lessons that he got from it. His paper route taught

him that customer is important person in America. He also compares American and

Indian approach of solving problems. Americans were joiners- joined all manner

of local organizations and this was the strength of American democracy. They have

a dense network of voluntary organization and so on. In contrast, social life of

Indians revolves around the family or the caste and does not encompass whole

community. Perhaps this is why our streets are dirty when our homes are spotlessly

clean.

Author describes how India had begun to implement the ideas and theories of

development economists vigorously. In 1944, Indias leading capitalists came

together in Bombay and crystallized their vision for a modern independent India.

They included the giants of Indian business- JRD Tata, GD Birla, Lala Shri Ram,

Kasturbhai etc- they produced what came to be known famously as Bombay

Plan. The plan argued rapid, self reliant industrialization. They wanted foreign

capital and technology but under strict control of state. They were willing to accept

important limitations on the freedom of private enterprise. In 1950s, a new vision

of economists like CN Vakil, Brahmanand stated that India lacked capital but had
plenty of people. These people must be put into productive work at lowest capital

cost. But it is a great tragedy that no one paid attention to their strategy. It is

shocking to know that Tatas made 119 proposals between 1960 and 1989 to start

new business or expand old ones and all of them ended in waste baskets of

bureaucrats. Thus licensing system became more damaging. Commerce is the art

of exploiting the need or desire someone has for something. Here, author shares his

experience of his first job. His job was to learn to market Vicks in Indian market.

Since he knew nothing about business, he asked the most elementary questions. He

wanted to know why things were done the way they were. No one had questioned

the basic system. He merely tried to learn by questioning but the sales director gets

angry and complains to the boss. Author directly asks whether it is wrong to ask

questions. Boss says that it was, as it showed a lack of respect. Author felt

defeated- where it was a funny world where one couldnt ask questions. Later on,

his job also taught him that persuading the customer to buy a product is ultimately

what leads to business success, then it is logical that company must spend its time

and energy to enhance customer satisfaction and employ outside suppliers to do

everything else. By one of his experiences, he acquired a new respect for his work.

By illustrations or examples of his own experiences, author has tried to depict the

advantages of a competitive market compared with monopoly. Monopoly market

as in railways their employees would never place the customer in the centre. He
has also learnt that it is better to build out strength than to try and correct a

weakness. It is wiser to listen to the market than to try to impose your will on it.

Also take your employees closer to your customers. This might help to give more

meaning to their work. They would understand why they were in business and the

company can get some good suggestions in return. We also ought to be transparent

with the union and employees sharing our troubles and our triumphs. Author

questions whether caste has suppressed our capacity to grow and develop. Taking

the case of reservation and its impact, author says that its original aim was to

accelerate rise of backward castes. It is now a sectarian tool used by backward

castes to demand a share of the patronage. Caste rigidities may also be responsible

for our lack of cohesiveness and inadequate technological innovation-both of

which might have contributed to our weak performance in the industrial economy.

On the other hand, our Brahminical proficiency may be a reason for our emerging

success in the new information economy. Indira Gandhis rule suppressed

economic growth and destroyed chances for the poor though Garibi Hatao was

her winning slogan during elections. Author has clearly pointed out the reasons: the

terms of trade had changed in favour of agriculture after the Green revolution.

Growth of inequalities, low productivity of investments, low capital output ratio,

lack of capital, poor infrastructure, and massive control over private sector. JRD

used to urge Mrs. Gandhi to give more autonomy and accountability to the public
sector. Author also describes the success story of Ambani- belonging to zero club

who started with nothing. Reliance story is an inspiration to many young people

across India. Dhirubhais story is an Indian morality play. It is a classic rags-to-

riches story. About the ascent of a simple village boy who created against all odds

a globally competitive enterprise to become the most powerful businessman of

modern India. At another level, it highlights the dilemma passed by a decaying and

corrupt system. The new Industrial Policy of 1991 made the author very excited.

Major achievements were witnessed after that. Central Governments fiscal deficit

came down, foreign exchange reserve shot up, virtually abolished industrial

licensing, industries released from the control of MRTP Act, dismantling of

complex import control regime, raw materials, components, capital goods could

enter virtually free of restrictions. Meanwhile, there was much left undone. Labor

reforms were not introduced. Agriculture or insurance was not opened. Author tried

to make some observations about the changing India from stray street encounters

over the past 5 years. Reforms are creating a revolution in ideas and changing the

attitudes of the people. The author encounters it frequently in the hopes of the

young, in the way people talk, in the way mothers think about their daughters. It is

a new way of looking at the world. One day and sooner than we perhaps expect,

the mental revolution should lead to a physical one. After independence, new

government took over the princely states, abolished zamindari and decimated the
old money. NRIs, Green revolution farmers and corrupt public officials became

the New Money. With reforms in 1991, moneymaking again became respectable

and old business houses suddenly acquired the esteem and power that had eluded

them for fifty years. They finally became old money. Later on, manner in which

Indian managers run their business drastically changed. Industrial liberalization

paved way for business expansion or creation without government approval.

Hence, businessmen invested heavily in new capacity. Thus, Indian markets

became progressively competitive after the reforms. The most striking feature of

contemporary India is the rise of a confident new middle class- it is full of energy

and drive and it is making things happen. The new class is street smart. The new

middle class is based on money, drive and an ability to get things done. Author

feels that the young are no less virtuous today. Nor is the new middle class any

greedier. The chief difference is that there is hypocrisy and more self confidence.

Self interest has always been the basic motivator of individuals and classes. Author

opines that our continuing inability to distinguish between modern and the

western is surely the cause of some of our grief. Author grew up with wrong

conception of the modern. To his aunts, it was a derogatory word meaning

someone westernised with false and superficial values compared to our

traditional, God-fearing ways. Later on, he discovered that modern was no

necessarily something negative or western. Economics became industrialized,

nation states came into being, social democracy arose and world saw the

beginnings of mass society. For lack of a better word, they called it modernity.

Moreover, they linked these changes to the broad acceptance of a set of values and

institutions which they termed modern. There are only 2 nations where

democracy preceded capitalism- the US and India. The US is the oldest modern

nation and India is one of the oldest civilizations. Democracy is easier to

understand more difficult to achieve because exchange is natural to humans.

Capitalism is easier to achieve but more difficult to understand. But there is a

positive relation between these two. In spite of this, why does India remain half

reformed? Collective action is a problem in all democracies. When in power,

leaders find it difficult to push through programs for when opposition mounts, they

find few supporters and tend to take the easy way out, which is not to act at all. For

this reason, the Indian State is sometimes called a Soft state. A question arises

whether capitalism and globalization succeed in establishing a comfortable place

for themselves in India? Answer depends on their ability to deliver prosperity

broadly, depends on leaders in government and in business to champion the classic

liberal premises of free trade and competition. A successful nation has 3 attributes:

politically it is free and democratic, economically it is prosperous and equitable

and socially it is peaceful and cohesive. India enters the twenty first century with

considerable strengths in all 3 areas. Transformation of world from industrial to a

knowledge economy means that jobs, experts and economic activity with highest

value added will come from knowledge sectors of the economy and countries that

participate in these sectors will be rewarded with a growing and higher standard of

living-sustained success in knowledge economy will obviously require greater

attention to education- both expansion of primary education and improving the

quality of higher education.

India enters the twenty first century on the brink of biggest transformation in its

history. The flood of information will wash every village will force transparency in

the government and lead eventually to prosperity. The theme of this book is how a

rich country became poor and will be rich again. Creative dynamics of technology

and capitalism dramatically shortens the time it takes for a nation to develop. Our

economy is increasingly powered by knowledge sectors of economy. The new

India is increasingly one of competition and decentralization. Thanks to our

intellectual capital and opportunity opened by technology and globalization. We

face the very real prospect of conquering the pervasive poverty that has

characterized the lives of the majority of the people. We have good reasons to

expect that the lives of the majority of Indians will be freer and more prosperous

than their parents and grandparents lives. Never before in recorded history have

so many people been in a position to rise so quickly. The book India Unbound is
about the past, the present and a certain vision of the future. It is indeed an

insightful guide to a rapidly changing nation.