India's Problem Is Not Politics

Marshall M. Bouton

From Foreign Affairs, May/June 1998

Article preview: first 500 of 4,615 words total.

Summary:  India's elections aroused fears about its political viability but elicited yawns about its economic health. The reality of India's prospects is just the opposite. Conventional wisdom aside, the main threat India faces is economic. Slower growth and a stalled program of economic reforms could endanger India's stability. Its politics, by contrast, exhibit an admirable ability to bring extremists, including the Hindu nationalists of the newly preeminent Bharatiya Janata Party, closer to the center. India's democracy is the glue that keeps the country together; its economy, if not reformed, could cause dangerous strains.

Marshall M. Bouton is Executive Vice President of the Asia Society.

MISREADING THE ELECTIONS

India's recent parliamentary elections aroused fears about its political viability, but not about its economy. The fractured verdict -- 40 parties won at least one seat, and no party won more than a third of the seats -- created a hung parliament incapable of ending the political turmoil at India's center. While Sonia Gandhi stemmed the Congress Party's losses by assuming its leadership, the party that once provided India's stability continued its sclerotic decline. At the same time, the strong showing by the Hindu nationalist Bharatiya Janata Party (BJP), which was asked to form the new government, stirred fears that India would abandon its commitment to secularism in public life, setting the stage for sharper Hindu-Muslim conflict, political unrest, and perhaps heightened tension with Pakistan.

Economic issues, in contrast, stirred little alarm. They played practically no role in the elections, despite the current slump in India's economy and the meltdown in East Asia. Instead, most observers assumed that continued economic reforms, even at a slow pace, would keep India moving forward on the higher GDP growth path of six to seven percent attained in recent years.

The reality of India's prospects is just the opposite of these perceptions. The main threat to India's future is not political but economic. India's political system has for several years been in transition from Congress Party dominance to a more splintered picture in which regional and caste-based parties control most states, alongside a still unclear political pattern at the center. But neither the kaleidoscope of parties nor frequent changes of government nor the rise of the BJP as the preeminent national party should be mistaken for threats to India's underlying stability or its very unity. Rather, they are integral to the latest stage -- a messy one, to be sure -- of a social and political transformation made possible by democracy itself.

On the economic front, however, India's reforms are for all intents and purposes stalled, and its relatively poor recent performance -- GDP was projected to increase by five percent at most in the 1997-98 fiscal year -- is more than a passing business-cycle downturn. The unfinished half of the reforms -- structural adjustments needed to lower fiscal deficits, improve financial markets, and create labor market flexibility -- are nowhere in sight. During the tedious last two years, observers have consoled themselves over the slow pace with the view that the reform process is irreversible. But elements in the business community have soured on the reforms, no foreseeable government in New Delhi will have the strength to take on those who guard the status quo, and support for structural economic changes remains limited to narrow segments of the population.

A slower pace of reform and lower growth rates will not only cause economic pain but will also endanger India's social and political progress. Indian democracy is mobilizing heretofore sidelined classes and castes seeking both group recognition and material benefits. Regional differences in living standards and growth, a long-standing problem ...

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