India Rising

This bottom-up activity is evident not simply among entrepreneurs. The Indian consumer is also rearing for action. Most Asian success stories have been ones in which the government forces its people to save, producing growth through capital accumulation and market-friendly policies. In India, the individual is king. Young Indian professionals don't wait to buy a house at the end of their lives with their savings. They take out mortgages. The credit-card industry is growing at 35 percent a year. Personal consumption makes up a staggering 67 percent of GDP in India, much higher than China (42 percent) or any other Asian country. Only the United States is higher at 70 percent.

Statistics don't quite capture what is happening. Indians, at least in urban areas, are bursting with enthusiasm. Indian businessmen are giddy about their prospects. Indian designers and artists speak of extending their influence across the globe. Bollywood movie stars want to grow their audience abroad from their "base" of half a billion fans. It is as if hundreds of millions of people have suddenly discovered the keys to unlock their potential. A famous Indian once put it eloquently, "A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance."

Those words, which Indians of a certain generation know by heart, were spoken by the country's first prime minister, Jawaharlal Nehru, just after midnight, on Aug. 15, 1947, when independent India was born. What Nehru was referring to, of course, was the birth of India as an independent state. What is happening today is the birth of India as an independent society--boisterous, colorful, open, vibrant and, above all, ready for change. India is diverging from its past, but also from most other countries in Asia. It is not a quiet, controlled, quasi-authoritarian country that is slowly opening up according to plans. It is a noisy democracy that has finally empowered its people economically. In this respect India, one of the poorest countries in the world, looks strikingly similar to the world's wealthiest country, the United States of America. In both places, society has triumphed over the state.

The Indian state has been a roaring success on one front. India's democracy is a wonder to behold. One of the world's poorest countries, it has sustained democratic government for almost 60 years. And this is surely one of the country's greatest strengths when compared with many other developing countries. If you ask the question "What will India look like politically in 25 years?" we know the answer: like it does today--a democracy, probably with a coalition government. Democracy makes for populism, pandering and delays. But it also makes for long-term stability. (In case President Bush is looking for some answers for Iraq, he should recall that the British were able to stay in India for 200 years and built lasting institutions of government throughout the country, and that India got very lucky with its first generation of leaders. Men like Nehru may not have understood economics, but they deeply understood political freedom.)

If the Indian state has succeeded in one crucial dimension, it has failed in several others. In the 1950s and 1960s, India tried to modernize by creating a "mixed" economic model, between capitalism and communism. This meant a shackled and overregulated private sector, and a massively inefficient and corrupt public sector. The results were poor, and in the 1970s, as India became more socialist, they became disastrous. In 1960 India had a higher per capita GDP than China; today it is less than half of China's. That year it had the same per capita GDP as South Korea; today South Korea's is 13 times larger. The United Nations Human Development Index gauges countries by income, health, literacy and other such measures. India ranks 124 out of 177, behind Syria, Sri Lanka, Vietnam and the Dominican Republic. Female literacy in India is a shockingly low 54 per-cent. Despite mountains of rhetoric about helping the poor, by any reasonable comparison, India's government has done too little for them.

Is this a problem with democracy? Not entirely. Bad policies fail whether pursued by dictators or democrats. But there are elements of democracy that have hurt, certainly in a country with rampant poverty, feudalism and illiteracy. Democracy in India too often means not the will of the majority but the will of organized minorities--landowners, powerful castes, farmers, government unions and local thugs. (Nearly a fifth of the members of the Indian Parliament have been accused of crimes, including embezzlement, rape and murder.) These groups are usually richer than most of their countrymen, and they plunder the state's coffers to stay that way. It is ironic, for example, that India's Communist Party does not campaign for growth to lift the very poor but rather works to maintain the relatively privileged conditions of unionized workers. As these power plays go on, the great majority's interests--those 800 million who earn less than $2 a day--often fall through the cracks.