Much noise but little movement

Information technology is by far India’s most dynamic sector but its success comes despite rather than because of government initiative. The BJP government has sloughed off the Congress Party’s socialism but is desperately slow at implementing its objectives of privatizing and increasing foreign investment. There’s some hope, though, in the initiatives being taken by state governments. Kala Rao reports

Email a Friend

All fields are compulsory

Your name:
Your email:

To include more than one recipient, please separate each email address with a semi-colon ';'

Recipient email(s):

Email yourself a copy?
Comments:

Add Your Comment

All comments are subject to editorial review.
All fields are compulsory

Your name:
Your email:
(will not appear)

You may email your comment to a friend
To include more than one recipient, please separate each email address with a semi-colon ';'

Recipient email(s):

Publish your name?
Receive email notification of new comments posted by other users?
Email yourself a copy?

Comments:

I have read and agree to the Terms and Conditions

A chance meeting with reform-minded Indian politician Chandrababu Naidu in Silicon Valley two years ago convinced Prasad Yenigalla, a young Indian engineer, that he should return home. In November last year, he started his company, Vantel Technologies, an incubator of IT products, in Hyderabad. Today Vantel employs 85 people and has developed half a dozen switching products that Prasad hopes to sell to global telecom giants such as Lucent Technologies, Nortel Networks and British Telecom. The company launched an IPO in June this year and is listed on the Bangalore and Hyderabad stock exchanges.







Chandrababu Naidu: all parties must live with coalition politics

Prasad sees no disadvantage in his company's being located in India even though it is in the competitive global IT products business. "On the contrary. The right skill sets are easily available here. As for lifestyle changes, in the valley I spent most of my time at home or workplace, so it hardly makes a difference. "That young entrepreneurs such as Prasad find enough hope to return home and set up businesses is a measure of how much has changed in India.
It is tempting to paint a picture of boundless optimism from the bustle and enterprise to be seen in such places as Electronics City near Bangalore, Hi-Tech City outside Hyderabad or Gurgaon near Delhi. Clearly, India does not lack enterprise. According to the IMF's World Economic Outlook, India has been one of the 10 fastest-growing economies over the past two decades. GDP has grown by an average 6% since 1992 when economic reforms were introduced.
But India's politicians have so often failed its people that, as minister in charge of disinvestment Arun Shourie puts it, the country is a contrast between "a resilient society and an inert state."

After a balance of payments crisis in 1991 inadvertently set India on the path of economic reform, the transition from a controlled economy to a market-driven one appears to have lost steam in the mid-1990s.
The Congress party, which initiated liberalization and ruled India for most of its post-colonial history, went into political decline. Former prime minister Narasimha Rao and former finance minister Manmohan Singh, key figures in the reform process, have disappeared into political oblivion.
Congress eclipse created a political vacuum. A string of hung parliaments and shaky coalition governments struggled for political coherence, then collapsed. Says Sanjaya Baru, an economist: "The Congress party ruled India for 40 years by controlling the two most populous and politically dominant states of Uttar Pradesh and Bihar in the north. After its decline, the BJP could not quite fill that space." Instead India's disparate regional parties began to exert a clout that was disproportionate to their actual political base, mostly caste and community affiliations. Some see their rise as a legitimate urge towards federalism in an overly centralized state.
Unlikely champion
The Bharatiya Janata Party emerged as the unlikely champion of the regional parties in its bid for power. It now manages a disparate coalition of some 16 regional parties ranging from the DMK and Shiv Sena in the south to the National Conference and Akali Dal in the north. "Indian parties are learning the rules of coalition politics," says BJP's Shourie. "Some mistakes may happen (such as when regional party leader Jayalalitha toppled the government by one vote only to get a drubbing in the election last year); but what is important is that a principle is established. The culture of coalitions is being internalized." India is, perhaps, the world's noisiest democracy.
Powerful state leaders such as Chandrababu Naidu, chief minister of Andhra Pradesh and a key ally of the BJP, have an important say in what goes on in Delhi even though his Telegu Desam Party is not part of the government there. "We have entered an era of coalition politics at the centre and all parties must live with this," says Naidu. An ardent reformer, he is battling the Congress party in his home state over the cut in electricity subsidy (see box) and charges that the central government punishes better-performing states by giving them less money.
The BJP's ideology is seen by some as antithetical to India's pluralist democracy. India's minorities and liberals distrust the party's divisive politics and that of its mentor organization, a right-wing Hindu nationalist group called the Rashtriya Swayamsevak Sangh. But the politics of power have wrought an amazing change in the party in recent years. It is now paternalistic towards minorities and in early August initiated negotiations for peace with armed Muslim separatists to resolve the Kashmir row. Few can even remember that this party once promised to build a Hindu temple in north India on the spot where a mosque was demolished some years ago.







Arun Shourie: country is a contrast

A party that might seem politically incorrect for India may be good for business. "It has none of the socialist baggage that dogs the Congress party. For that reason business likes the BJP," points out a businessman. The party appointed a prominent Indian businessman, Viren Shah, as the governor of the left-ruled state of West Bengal. "Nehru's socialism brought India to ruin," says the CFO of a leading software company in Bangalore. "It bred a parasitical capitalism that made shoddy scooters and cars."
In May 1998, when the BJP-led government decided to flex India's nuclear muscle, the country faced political isolation. The US imposed economic sanctions and many predicted doom for its economy. Yet, two years later, the US and India, estranged democracies as some now call them, got cosy during president Bill Clinton's visit to India in March this year. The US sees India as an emerging economic power and a potential counterpoint to China in south Asia as well as an ally against perceived Islamic terrorism in the region.
That visit signalled a strategic shift by India from its Cold War alignment with the Soviet Union. That a Hindu nationalist-led government courted and won the approval of the west did no longer seemed incongruous.
But as the BJP pushed aside ideology for pragmatism, its mentor, the Rashtriya Swayamsevak Sangh, rose to protect the faith. The RSS's new leader, K Sudarshan, warns it of the dangers of wooing foreign multinationals and other members of its extended family such as the Swadeshi Jagran Manch flay its privatization programme. BJP's Shourie, a former editor and ideologue for the party, makes light of these differences. "The RSS is making the transition from being an inward-looking organization born in a situation where it was constantly under siege," he says. Prime minister Atal Behari Vajpayee has managed to check the hard-liners in his party so far.
Page 1 of 5 Next | Single Page

No. 6: If you don’t give it to me you’ll only lend it to someone else and look where that got us

Abigail Hofman:

Much noise but little movement

Email a Friend

Add Your Comment

US treasury market reaches breaking point

Top 10 financial definitions that are funnier since the credit crunch

Top 10 reasons to tell your boss you deserve a bonus this year

Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

Eksportfinans turns to government for funding

Why Hank Paulson has failed as Treasury secretary

Middle East real estate debate: Middle East real estate holds its own in unsteady global markets

Plans Look To The New Frontier

Country risk September 2008: Money talks in a world of risk

US treasury market reaches breaking point

Nomura Eyeing Lehman Bonus Renegotiation

Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

Corporate defaults: The LBO zombies set to stalk the market

Real estate: Global volumes slump in 2008, hangover predicted for 2009

Latest Issue