Advancing a Free Society

In India, it is not because of the Government, it is in Spite of the Government

Saturday, June 11, 2011

That’s the money quote on Indian development from Jim Yardley’s terrific article in the New York Times on Gurgaon, the booming Delhi suburb that probably best exemplifies the new India with all of its problems and possibilities.

Surveying Gurgaon, one quickly apprehends how virtually all of India’s modern growth miracle has occurred due to the dynamism of the private sector, with the vast majority of the government serving only as a corrupt impediment to progress. In fact, as Yardley correctly notes, a key driver in Gurgaon’s early development was that there was no local government at all to interfere with it. As a former resident of nearby Delhi, I am always struck by how much Gurgaon grows and changes between each of my semi-regular trips back to India’s capital.

A close Indian friend of mine recently relocated with his family back to India after several years in the U.S., and he and his wife took high-powered jobs in one of the most fashionable and pleasant parts of Delhi. Yet they commuted an hour plus each way to Gurgaon because they felt that for their young children, who had grown up in the U.S., the culture shock would be far less if they moved to Gurgaon than if they had relocated to one of the pleasant yet more traditionally “Indian” neighborhoods in the capital.

Yet, as Yardley notes, for all of its flashy modern façade, Gurgaon has no reliable municipal roads, sewers, water or power—everything must be done in independently by companies and residential colonies. For some it might seem like a libertarian paradise—Yardley even gives a nod to Gurgaon’s private transport networks. And there is no question that Gurgaon’s private amenities are far, far superior to those India’s government provides. But ultimately, the Gurgaon model, powerful as it is, produces both urban planning nightmares and economic inefficiencies— It may be better than the existing alternatives, but it can’t scale to make India an economic superpower, a reliable partner for America, or a regional check to Chinese ambitions.

A final important point Yardley touches on is the political role of India’s emerging middle and professional classes, one that is frequently misunderstood by outsiders. These groups, which provide India with its economic dynamism, actually have very little political power in many cases. They are dwarfed by the numbers of poor at the ballot box and their needs are ignored by politicians only interested in caste-based or other similarly situated vote banks. Furthermore, India’s political system, in which “Anti-Defection” laws make it impossible for members of parliament to defy their leadership on votes without losing their seat, render the views of all but top leaders irrelevant on many key issues.

In fact, they are so irrelevant that another Indian friend, extremely politically sophisticated and running a prominent political organization in the capital, once confessed to me that he didn’t even know who his own representative in parliament was (since the member in question was not in the leadership, he was not relevant.)

So while the growth of Gurgaon is an Indian success story that should serve as a lesson to Indian politicians about the centrality of the private sector to economic growth (something that many American politicians seem to have forgotten, if they ever knew it), The Gurgaon model of development ultimately has its limits if it is not accompanied by at least a minimally functional state. Whether India’s current political and administrative system can supply even that minimally functional state is very much an open question.