Back in 2001, Goldman Sachs’ Jim O’Neill coined the term BRICs to describe the key fast growing developing economies of Brazil, Russia, India and China. But a dozen years later, is the focus on the BRICs misplaced? Indeed, is the group “broken,” as Morgan Stanley’s Ruchir Sharma has suggested?
“Although the world can expect more breakout nations to emerge from the bottom income tier, at the top and the middle, the new global economic order will probably look more like the old one than most observers predict,” Sharma wroteearlier this year. “The rest may continue to rise, but they will rise more slowly and unevenly than many experts are anticipating. And precious few will ever reach the income levels of the developed world.”
Each day this week, a leading analyst will assess the prospects of a BRIC nation and weigh in on whether it still deserves its place in a group of economic high flyers. Today, Madhav Nalapat, holds the UNESCO Peace Chair at Manipal University, looks at the prospects for India.
By Madhav Nalapat, Special to CNN
Editor’s note: Madhav Nalapat holds the UNESCO Peace Chair at Manipal University in India. The views expressed are the author's own.
Sept. 6, 2013. Voters in India seldom vote for a particular party or candidate – they typically vote against him or it. Back in 1977, fears of forced sterilization in the populous Hindi-speaking states of northern India helped bring to office a ramshackle coalition that had been cobbled together just weeks before the poll. Thirty-six years later, there is a whiff of the same anti-establishment sentiment that finally toppled the Congress Party from office after its continuous spell in office from 1947.
This time, however, the principal beneficiary of rage against the ruling party may be an individual who has openly defined himself as being from the right of the political spectrum. Narendra Modi, the current chief minister of Gujarat, has shrugged off the refusal by the United States to grant him a visa, going instead to Japan and China, where he was treated with the deference shown to a potential future prime minister.
However, such a snub has not prevented Modi from welcoming investment and trade between his country and the West. Indeed, among his principal backers are those from India settled across North America and Europe who see in Modi a miracle man who will deliver double digit growth to India of the kind Deng Xiaoping launched for China three decades ago.
Although much of the international attention on Modi focuses on six horrifying days in 2002 in the state of Gujarat, when mobs went on a killing spree, a look at the rest of the eleven years he has led the state shows a steady improvement in the quality of governance and, crucially, a halt to the sectarian killings that have scarred Gujarat for centuries.
Since the riots, Modi has won three state assembly polls, and over the past year he has emerged as the principal challenger to the Congress Party and its ruling dynasty, the Rajiv Gandhi branch of the family of Indian founding father Jawaharlal Nehru. Given Prime Minister Manmohan Singh's obvious desire to serve out his second full 5-year term, the odds are that national elections will take place only around April 2014, by which time most economists expect a deterioration of the already adverse economic conditions facing India.
Politics is central to the present decline in India's growth rate, from 8 percent in 2003 to 3.2 percent in 2012. Since 2010, when the Commonwealth Games scandal filled television screens across the globe, a debacle followed by the telecom license and later coal allocation scandals, confidence in Singh as an effective head of government has fallen to the low double digits.
Over the past four years, Singh has allowed the powers of his office to be usurped by the courts (which cancelled a slew of telecom licenses, throwing the industry into chaos), NGOs (which could block a completed nuclear power plant from generating power for two years) and rival political parties (which have taken advantage of poor floor management within parliament to indefinitely block legislation on economic and other issues).
Fearful of being hauled up before a court on the basis of an anonymous complaint written on the back of a postcard, civil servants have refused to make decisions, leading to a further slowdown in the already glacial pace of administration in India. The prime minister seems to have lost both his vision and his nerve, with his only public interventions being petulant outbursts against his critics. The result has been a loss of confidence in the India story even among domestic firms, many of which are concentrating on overseas acquisitions and assets rather than putting more of their money into India.
When the prime minister warns his people not to buy gold and thereby swell India's current account deficit, the response is to buy more. When he says to Indian business that better times are ahead, they accelerate their rush to the door. More than Ben Bernanke's remarks or the continuing slowdown in Europe, what ails the Indian economy is a crisis of leadership, a swelling belief that the government of India is on autopilot. The resulting panic is leading them to search for a knight on horseback, and many see Modi as their savior.
Should, as expected, the main opposition Bharatiya Janata Party anoint Modi as their candidate, the 2014 elections will take on the chemistry of a presidential election, where the hopeful for the premiership asks for votes not because of the merits of his party or the local candidate, but so that he personally can take charge.
Given the fact that the fundamentals of the Indian economy are actually strong, and that the pool of human talent here is huge, pragmatism and genuine leadership could be just the tonic needed to strip away the mood of despondency that has settled across the country because of the unwillingness or incapacity of Manmohan Singh to act.
Despite the 2002 riots, and perhaps because of his overbearing nature, more and more voters seem to believe that only a “strongman” like Modi can bring back the rapid growth that Indians were just beginning to get used to. Should Modi become prime minister, it will be much more than the economy that changes. His coming to office would indicate that India has entered its Ronald Reagan or Margaret Thatcher phase, that of a right-wing leader unafraid to take decisions based on his ideology. That would be a significant change from the fuzzy idealism of what has gone before. India's version of the neocons clearly believe that their turn is coming – and soon.