In an impressive exercise in democracy, about 551.3 million out of 814 million eligible eligible voters participated in India’s 16th general election. Narendra Modi of the conservative Bharatiya Janata Party (BJP), who presided over rapid economic growth in his 13 years as chief minister of the state of Gujarat on India’s northwest coast was elected. Modi won because most Indians believe that he can deliver further rapid growth in the country as a whole.
The election once again demonstrated how different in political terms India is from its giant neighbor, autocratic China. Now, however, the new government must try to match the superior economic progress that China has achieved over the last three decades. To do so, it will have to foster — in a different political context — two key ingredients of China’s economic success.
The first is a robust industrial sector composed of manufacturing industries that use unskilled labor, which would offer a route out of poverty for India’s hundreds of millions of rural laborers and their families. It is the route that China and other countries before it have taken. By contrast, the underdevelopment of the industrial sector has kept India from realizing its full economic potential.
The second ingredient is the infrastructure that all economic growth requires: roads, bridges, ports and schools, as well as reliable supplies of electricity and clean water. Poor infrastructure constrains the industry that India does have. Factories need reliable supplies of power to operate effectively, good roads and railways to source inputs and distribute products and, if they are to export those products, ports for cargo ships and airports for high-value items and business travel. China has these things in abundance. India does not.
Power outages are routine in India, nearly half the country’s households lack any electricity at all, and modern highways are scarce. While a trucker in the US can haul a load 1,600km in about 20 hours, in India the equivalent trip takes four to five days.
The underlying cause of these two shortcomings is one of the fundamental features of Indian democracy — and indeed of all democracies: The power of minorities.
In democracies, people are free to organize themselves and often do so on the basis of common economic interests. Such groups work politically to bring benefits to their members, but the benefits can come at the expense of the general welfare — and in India they have blocked the development of low-skilled industries and high-quality infrastructure.
While India abounds in workers with low or no skills, laws governing employment make it all but impossible for large firms to fire workers, discouraging hiring in the first place. The most efficient companies tend to avoid precisely the industries that could lift millions of Indians out of poverty if established on a large scale.
Similarly, laws restricting land use make it difficult to build facilities such as factories and hotels, which could employ large numbers of people.
It is a particular kind of interest group — trade unions — that promotes and defends the laws that discourage large firms from entering industries that employ unskilled workers. While these laws benefit union members, who make up a very small fraction of the total workforce, they penalize India as a whole. Other interest groups obstruct the growth of employment-creating businesses. Local protesters, for example, sometimes prevent the use of land for industrial and other commercial purposes.
Political minorities also inhibit the construction of infrastructure and the development of the educational system that India needs by using the democratic process to divert resources to themselves, which then cannot be used to build roads or pay teachers. Subsidies of various kinds, all of them legislative achievements of interest groups, account for fully 2.4 percent of India’s GDP.
The Indian bureaucracy itself is a large, powerful and voracious interest group. Its salaries consume resources that would be better devoted to more productive uses. Special-interest spending leads to budget deficits, while the borrowing needed to finance these deficits drains yet more money from infrastructure and education.
Modi’s new government cannot — indeed, must not — abolish the democratic rules that permit minorities to flourish. With its various ethnic groups, religions, castes and 30 languages used by more than 1 million native speakers each (and another 105 spoken by at least 10,000 people), India is more culturally diverse than the entire EU — but with twice as many people. Without the emphasis on compromise, peaceful dispute resolution and minority rights inherent to democracy, a united India could not exist.
So Modi’s challenge is to overcome the obstacles to growth-promoting polices using democratic methods. The election has brought good news: the growing strength of India’s growing middle class, a potent ally in the cause of pursuing the needed economic reforms.
That middle class consists of propertied, salaried people, many of them young, who see government as an impersonal enforcer of the law and a neutral arbiter of disputes, rather than as a source of funds and favors. The votes of such people helped Modi win the election. His success in office will depend on how well he can harness the power of the middle class to overcome the political obstacles to the economic growth that its members demand.
Michael Mandelbaum is the author of The Road to Global Prosperity.
Copyright: Project Syndicate
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry