SINCE PARTITION (THEY STILL CALL IT INDEPENDENCE) INDIA HAS BEEN SUFFOCATED AND STRANGULATED BY BANDIT NEHRU AND HIS DYNASTY WHO HAD FREE HAND IN SUPPRESSING THE NATIVE GENIUS WHILE PLUNDERING THE NATION.
NOW THAT THEY ARE ALL BLASTED OUT OF EXISTENCE, INDIA IS MOVING AHEAD BY LEAPS AND BOUNDS.
BUT A WORD OF WARNING: ALL THIS PROSPERITY CAN TURN INTO ASH AND DUST WHEN THE NEXT CIVIL WAR BREAKS OUT. THE MUSLIM FACTOR SINCE PARTITION IS THE PROMISE OF TROUBLE AHEAD.
THE WALL STREET JOURNAL ONLINE, JANUARY 15, 2004
'Animal Spirits' in India
By EMILY PARKER
NEW DELHI -- For the past decade, Western media attention has focused on India's potential . . . to disappoint. Now the economy is buoyant, but those who've been burned before argue that the country lacks some of the economic fundamentals needed for sustainable growth. These doomsayers, however, may be overlooking a new and hard-to-quantify asset. What John Maynard Keynes called "animal spirits" are infusing the Indian business culture.
The level of confidence is extraordinary. The same phrases are repeated over and over: "It is time for the Indian to find his place in the sun." "We are on the cusp of major change." "We can compete!" Of course, some ask if this is more of the irrational exuberance that the country has seen before. No one disputes that India had a fantastic year, sparked by an excellent monsoon that set off a cycle of rising demand and consumption in India's largely agricultural economy. Foreign-exchange reserves have passed the $100 billion mark, last month India reported 8.4% GDP growth rate for the July-through-September quarter, and the stock market recently hit a record high. In the past few weeks, even relations with Pakistan have been looking better.
Even so, major obstacles remain. The economy is shackled by an enormous fiscal deficit, red tape, bureaucracy, poor infrastructure and widespread poverty. When major reforms began in the '90s, expectations shot sky high. Yet India's inability to maintain reform momentum and resolve inefficiencies in the economy have created an understandable cynicism among India watchers.
So it's reasonable to ask: What makes this current optimism different?
The answer is simple. The mood is not optimism -- it is confidence. Many Indian businesses are no longer afraid to take risks and compete on a global scale. This is a major departure from the past. From Independence in 1947 to the early '90s, the self-acclaimed "self-sufficient" nation was largely closed off to the world. Protection by the government meant less competition and safer profits, so many businessmen feared reforms that would alter the status quo. Such fears partly reflected a lack of confidence that India would be able to compete in the global economy. Even after India opened its doors in the early '90s, many were anxious that Indian industry would be demolished by foreign competition.
For an increasing number of Indian businesses today, such fears are obsolete. Over the last 10 years, some of the weaker companies couldn't take the heat, but others have proved that not only can they compete, they can win. Furthermore, more and more Indians are reaping the benefits of globalization and liberalization -- as consumer goods like cell phones, televisions and automobiles are made accessible to a larger part of the population. Foreign companies' outsourcing to India is no longer seen as exploitation, but rather as the generator of thousands of jobs per month.
Indian success stories in industries such as pharmaceuticals and software are common knowledge. But other triumphs may be even more revealing of how liberalization is benefiting the country. One example is the auto industry. Indian companies, exposed to further competition, have been forced to innovate, take risks and cut costs. In 2002, utility vehicle maker Mahindra & Mahindra was facing strong competition from Toyota. The company defied skeptics and embarked on a truly ambitious project: building a homegrown Indian SUV. The Scorpio was a hit in the domestic market, ranking first in a recent customer survey, and giving the company's sales a major boost.
What drove Anand Mahindra, vice-chairman and managing director of the company, to take a leap of faith that could have cost him his job?
"Competition and threat of extinction," he says. Not to mention "a very deep confidence that at some point in the future India would be the lowest cost source of engineering skills." Mr. Mahindra, who now receives requests from business schools to share his experience, sees confidence on the rise. "The Scorpio story is going to be pedestrian in another year or so," he says. "The ability to take risks takes a quantum leap when you have a few success stories."
The Indian press is full of accounts of domestic companies holding their own against foreign competition, with examples ranging across a variety of sectors. Furthermore, a growing number of Indian companies are venturing beyond the country's borders -- and some have gone on to make global acquisitions. In a bold move that would have been unheard of several years ago, the auto-components firm Bharat Forge purchased a German company last November.
Some would argue that too much protection remains, and Indian companies have yet to be exposed to truly cutthroat competition. But in a few cases where they've been forced to compete, Indian companies have emerged leaner and meaner -- and proud that they don't need government protection to survive. "There is a rise in Indian pride," says Uday Kotak, vice-chairman and managing director of Kotak Mahindra Bank. "We can stand up [to competition]. Indian quality is world class or can be world class."
In many ways, India is being woven into a global network. Outsourcing has made India a viable part of multinational production chains. Many Indians take pride in the fact that outsourcing is no longer only for low-end labor, but also for "low-cost brainware" such as research and development. And India no longer feels as threatened by "brain drain." For many years, India's top talents graduated from university and went abroad. Now, many are coming back, lured by the opportunities of a rapidly developing economy.
Ajay Shah, a consultant at the Ministry of Finance, explains: "I still have more friends in San Francisco than I do in Bombay or Delhi. But there's nothing left to do in the U.S. . . . This is the Wild West and I'm having a ball."
Even the Indian diaspora, once disparaged for having "abandoned" the Motherland, is being dramatically reconceived. Indians increasingly view compatriots abroad as a major asset. Successful Indians in the U.S. are perceived as promoting India's "brand image," and overseas Indians in top corporate positions are viewed as directing jobs and investment over to India.
Many Indians no longer resist global integration -- rather they see it as a tool to sharpen their competitive advantages. Most importantly, India has finally shed its former handicaps, fear and insularity, and is developing the self-assurance essential for economic growth. As long as the government presses ahead with reforms that allow these "animal spirits" to thrive, India is poised to take on the world.
Ms. Parker is an editorial page writer at The Asian Wall Street Journal.
Updated January 15, 2004
THE EXPERTS OUGHT TO REFLECT ON SEPTEMBER 11. WHEN ALL WAS WELL, THERE CAME FOUR DEMONS FROM THE SKY . . . .
UNLIKE AMERICA, INDIA HAS NO MAN AT THE TOP. THE SUPREME COMMANDER IS CALLED ABDUL KALAM WHO WATCHES THE NATION BLEEDING ON DAILY BASIS NOT ONLY IN SOUTH KASHMIR.