COVER STORY

India’s Domestic Strengths and Weaknesses

nasim zehra

From the BOARD of Editorial ADVISORS Ms NASIM ZEHRA made an excellent presentation to the NATIONAL DEFENCE COLLEGE, ISLAMABAD on Mar 18, 1999. This is being re-produced as our COVER STORY as a backgrounder to the events in INDIA

India, a country whose size, history and present aspirations, the world views with awe and admiration, stands at a genuine cross-road. It is a country where the struggle between the best and the worst of mankind, is in full swing. With immense potential and danger hovering over this billion-strong country, India is truly a playing field of paradoxes. Many paradoxes, the sublime and the base, the modern and the traditional, the unifying and the dividing, the efficient and disorderly, continuously mould the Indian scene - from the Indian society to its politics and from its state institutions to its economy. A living rapacious tension engulfs today's India. While its economic managers push forward a suitably contemporary agenda, its politics supports major players dedicated to deadly agendas of settling old scores.

India easily qualifies as the global showroom of the challenges and the pitfalls that confront our present civilization. Domestic India underscores the limits of yesterday's politics and the potential of contemporary technology and technocracy. Above all it points to the major stumbling block to contemporary human peace and prosperity-the poverty of socio-political concepts and practices that can contribute to social peace against the backdrop of proliferation of socially disruptive and divisive elements including light weapons, unemployment, enactment of historical and cultural revisionism, political fundamentalism, dehumanizing and destabilizing poverty.

Where India is

India by its sheer size poses a major challenge to its managers. India is a country of striking contrasts and enormous ethnic, linguistic, and cultural diversity. There are more than 1,600 languages; nearly 400 of which are spoken by more than 200,000 people. Many of the 25 states that make up India's federation are larger than most countries. Thirteen states have more than 20 million people, six have populations of 60 million, three exceed 80 million, and one has more than 140 million people. These states differ vastly in terms of their natural resources, administrative capacity, and economic performance. It is a country of continental dimensions inhabited by over 900 million people belonging to half a dozen religious communities and constituting a vast spectrum of ethnic and cultural diversities. The current political ethos of India flows from the 5,000 year old Indian experience - the India that today no longer is but has been replaced by Pakistan, India and Bangladesh. The ethos of contemporary India has been greatly influenced by Hindu philosophy and religion which over the centuries absorbed and accommodated in its fold varying systems of faith and social organisation which infiltrated and invaded the areas around the Indus, Ganga and the Brahamaputra until the birth of Islam.

The Hindu-Muslim encounter left the Hindu majority under Muslim rule for more than 1,000 years followed by the British rule in United India. Forcing a divide in United India the Muslims carved a homeland for themselves. Although much larger in size and population the post 1947 India continued to engage in a political cum psychological battle with a Pakistan much smaller in size. The establishment of Pakistan had drastically undermined the pre-eminent geo-political of an undivided India. Nevertheless there is a size based pride among the Indians historians and scholars which remind the world of an 'Asian giant' of 'one of the world's most populous and of a big and great nation'. Despite British India's division, the post 1947 India enjoys a crucial geo-strategic location. It comprises most of South Asia. It is situated beside South East Asia, the Indian Ocean, the Arabian Sea and trough its occupation, the highlands and vast valleys of Central Asia behind the Hindukush.

India's Domestic Strengths

As for its economic strengths India has made enormous strides. The country's development strategy has helped it eliminate famines and bring down high illiteracy and fertility rates. India has also developed a diversified industrial base and a relatively large and sophisticated financial sector. Industry and manufacturing have expanded over the past decade, and now account for about 29 percent and 20 percent of GDP, respectively. The service sector has strengthened, growing from 36 percent in 1980 to about 43 percent today. India's software sub sector-one of the most dynamic in the world has experienced a sustained rapid upswing, growing by 50 percent annually over the past three years.

Yet the development strategy that produced these results emphasised import substitution and government intervention, which ultimately over-extended the public sector and proved to be unsustainable. Protectionism isolated India from the rest of the world, and the country's share of world trade declined from 2 percent in the 1950s to less than half of one percent in the late 1980s. The strategy also discouraged exports, created recurrent shortages of foreign exchange, and made the balance of payments extremely vulnerable to sudden changes in international markets. With economic growth thus impeded, poverty reduction also lagged. By the early 1990s, India was in the defaulting on its external debt obligations.

In June 1991, the country changed its course, effectively ending four decades of government-led growth. The new approach focused on stabilising the economy; reforming the financial sector, public enterprises, and the investment, trade and tax regimes; and giving the private sector a much greater role in India's development. The reforms and good monsoons helped growth rebound 5 percent in 1992-94 GDP grew at 7 percent, placing India among the world's best performing economies.

Underpinning the economy's strong performance were important structural transformations. The declining economic role of the public sector since the start of the reform programme in 1991 is probably India's most fundamental structural change since independence. Areas that were previously the exclusive domain of the public sector-heavy manufacturing, banking, civil aviation, telecommunications, power generations and distribution, ports, and roads are now opening to the private sector.

Unlike previous episodes of economic growth, the recent expansion has been driven by private investment. In addition, India has begun to attract foreign investment. At $3.2 billion in 1997-98, foreign direct investment is nearly 25 times higher than it was before economy was liberalised. Due to the slowing pace of trade reforms, India's export growth in 1997-98 fell down for the first time in six years. Nevertheless, the medium term progress for India is positive.

India's drive for self-sufficiency in the decades after independence contributed to a broad - if inefficient - industrial base. There has been rapid expansion over recent years in the production of durable consumer goods, such as cars and scooters, consumer electronics and computer systems, and white goods.

Services account for around 40% of GDP-from state-owned railways, banks, telecommunications and airlines, to small scale private traders and construction companies-and have seen rapid growth in recent years. But a high degree of state ownership and inefficiency, especially in the banking sector, have been a constraint on growth.

Throughout the 1980s GDP grew at an annual rate of about 5.5% - a significant improvement on previous decades which saw rates of around 3.5% per year. Gross national savings and investment as a percentage of GDP have risen steadily, if slowly in recent years.

Of the 28m workers in organised employment in India, 70% work for the state. But the state accounts for only around one-third of economic output and less than one-third of investment. The vast majority of public-sector enterprises are unproductive, massively overstaffed and debt-ridden. A high level of unionisation (and political expediency) has restricted labour reforms and technological advances that could threaten jobs - and, has therefore deterred investors.

Agriculture output which accounts for more than a quarter of GDP, is expected to increase by more than 2 percent in 1998, after having declined by almost 2 percent in 1997, notwithstanding heavy rainfall during the early part of season.

Banking Reforms

On the basis of available indicators, the banking system's performance seems to be improving: (i) net profit of commercial banks rose from 0.7 percent to assets in fiscal year (FY) 1997 to 0.8 percent in FY 1998 and (ii) non-performing loans of public sector banks declined from 17.8 to 16 percent of outstanding loans during that period. Nonetheless, there is scope for further substantial improvement and reform in the banking system.

During 1998, the Revenue Bank of India intensified its supervision over non-banking finance companies by introducing a new regulatory framework for their operations, and strengthened asset valuation norms by requiring a larger share of securities to be marked-to-market over the medium term.

Assuming a gradual improvement in the external environment, policies that raise the profitability of exports, and renewed effort to consolidate the public finances both at the Centre and in the states, the economy is expected to grow by between 5.2 and 6 percent during 1999 and 2000.

The Overseas Indians

Meanwhile, the placement of the Resurgent India Bond issue in August 1998 attracted about $ 14.2 billion from non-resident Indians, which has helped to alleviate the pressure on foreign exchange reserves.

Miscellaneous

High population density and growth rates, coupled with poverty, accelerate this process of degradation, India's cities are beset by environmental hazards and sanitation problems due to years of under-investment and inadequate budgets, combined with population growth at twice the average national rate.

India has a free and diverse press, published in Hindi, English and vernacular languages. There are about 1,250 daily newspapers with a combined circulation of over 15m, as well as thousands of periodicals and journals.

Agriculture

Agriculture plays an important, although diminishing role in the economy, accounting for 28 percent of the countries gross domestic product (GDP) in 1996 and 70 percent of total employment. Improving the efficiency of India's agriculture is key to attaining high growth and reducing poverty for the more than 300 million poor who live and work in rural areas.

India's LandMark Reforms

From the early 1980s, there was a growing consensus in the country in favour of economic liberalisation. Fighting against vested interest pressure and in response to a political inertia and powerful vested interests initially ensured that little was done, save for limited incentives to exporters, minor industrial deregulation and some simplification of the taxation regime. But a serious financial crises in 1991 which led to emergency IMF funding changes were introduced to reduce government control of the economy.

The advent of a coalition led by the Bharatiya Janata Party (BJP) gave rise to fears that economic reforms (particularly trade and foreign investment policy) would be reserved: in its National Agenda, for governance, the government pledged to continue with the reform process, but to give a thrust to swadeshi (self-reliance). However, the imposition of sanctions and a downgrading of India's credit-rating in 1998 compelled the BJP to continue with reforms and, in particular, encourage foreign direct investment. Progress has been made towards further deregulation of industry and liberalisation of the financial and insurance sectors; however, policies towards labour and subsidies remain as fossilised as ever.

The Reforms of the 1990s

  • The opening up of more sectors to private investment, including power, steel, oil refining and exploration, road construction, air transport, telecommunications, ports, mining, pharmaceuticals and the financial sector. Areas reserved exclusively for the public sector are now mainly defence-related.
  • The encouragement of foreign direct investment with majority equity, except in a few consumer goods sectors, red tape has been greatly reduced. Portfolio investment is also welcome.
  • The delicencing of most industries to encourage competition. Only a few (15) sectors, including luxury and defence-related items, as well as industries reserved for the small-scale sector, remain subject to licencing, which is also being phased out.
  • The decontrol of some aspects of business decision-making, such as location and technology transfer. However, labour relations, exit policy (shutting down loss-making enterprises) and areas such as the environment remain controlled.
  • The devaluation of the rupee by 22% against the dollar in two instalments in July 1991, followed by the introduction of a market-determined exchange rate in March 1993 and current-account convertibility in August 1994. In July 1995 it was decided that all official foreign debt-service payments would be channelled the interbank market. The rupee is not yet fully convertible on the capital account.
  • Trade policy has been cautiously liberalised, with the conversion of some import quotas into tariffs and phased reductions in import tariff rates.
  • The capital markets have been liberalised, with the entry of private mutual funds, foreign institutional investors and country funds, and with stronger and more transparent regulation of the stock market.

Pool of Qualified Management

India fortunately has a large number of educated and vocationally qualified people although they comprise a small fraction of the population. India has 2m engineers and scientists, 10m graduates form 185 universities, and a total of almost 50m people educated to higher secondary level. But the number of unemployed graduates is high, suggesting that India should concentrate on increasing educational opportunities at lower levels in rural areas, particularly for girls. A large proportion of India's educated population is highly qualified, fluent in English and cheap to employ. While the number of Indian scientists and engineers is among the highest in the world, India as a whole faces unacceptably high levels of illiteracy and low learning achievement. Nearly half the population over 15 years old and 60 percent of all women over 15 years old is illiterate.

Portfolio investment contracted sharply during the year, largely reflecting net outflows of foreign institutional investors, while foreign direct investment inflows is anticipated to be below the 1996 level of $2.5 billion, down from around $3.2 billion in 1997. In view of these pressures, India's sovereign rating was downgraded to speculative from investment grade in June 1998.

An improvement in the fiscal performance could reduce some pressure on the balance of payments; nonetheless, in the short run, the external vulnerabilities will continue, stemming mainly from rising import levels, which are expected to further widen the trade deficit.

End of the One Party Democratic Dictatorship

Following four decades of one family rule, in the mid eighties the BJP and the numerous regional political parties emerged turning India's democratic dictatorship, into an active and vibrant even if chaotic democracy. However, at the state level in 1967 after Prime Minister Jawaharlal Nehru's death the political hold of the Congress party was first challenged by parties like the DMK, the Akali Dal in Punjab and the Telegu Desam in Andhra Pradesh. This process was somewhat reversed in 1972 after Prime Minister Indira Gandhi led the Indian intervention to the breakup of Pakistan in 1971. The 1972 elections, fought on an anti-poverty wicket, brought a landslide Congress victory.

However following the imposition of Indira Gandhi's 1975-77 emergency the Congress was defeated at the Centre by the grand Janata Dal alliance. Putting aside ideological diversities the socialists, the Hindu extremist Jan Sangh Janata Dal alliance defeated the Congress on an anti-emergency pro-democracy plank in 1977 elections reducing the Congress party's Lok Sabha seats from 352 to a mere 154. Janata Dal however demonstrated limited staying power. Significantly after Indira Gandhi assassination the Congress peaked in its polls battle in 1984 when Rajiv Gandhi, on a sympathy wave bagged 404 Lok Sabha seats. Finally in the 1989 elections V.P. Singh's National Front defeated the Congress bringing also the regional parties to the Centre for the first time. For the Indians the one family democratic dictatorship was over.

In the latest 1998 election, the Lok Sabha pie of 545 seats was distributed among about 23 parties. These parties ranged from the Hindu extremist BJP to the short-lived Janata Dal and from sturdy and popular regional parties like Telegu Desam Party of Andhra Pradesh, DMK of Tamil Nadu to Samajwadi party of the 'backward caste' leader Mulayam Singh Yadav. Regional parties and the Hindu extremist Sangh Parivaar has emerged as the countervailing forces on a Congress-dominated political scene.

Decentralization of State Power

While power tussle between the Indian Centre and the 25 states of India is inherent in the structure of their relationship, the end of a one-party democratic dictatorship, the assertion of regional parties on India's political scene and the Centre's appreciation of the economic challenges faced by India, has indeed led to some power-balancing. With the regional parties now enjoying political leverage by virtue of the key role many of them play in coalition governments, a pro-state power shift, political and financial has occurred. The states are no longer like satellites moving in the centre-defined.

Interesting political orbit, the Congress party's democratic dealings with the states remained intact only for as long as there was Congress rule in the states. For example when this was not the case in 1959 the Congress demonstrated the limits of its democratic ethos through the controversial sacking of Kerala's the Communist government. From 1967 onwards when the non-Congress state governments were voted into power at the state level , the Congress very generously invoked article 356 and 357 to dismiss state government's , dissolve the assemblies and impose president's rule. In fact in her effort to retain only yesmen even in the Congress state governments Indira Gandhi alienated many Congress leaders leading to the emergence of many mini-Congresses. By mid-1995 the Central government had invoked these articles around 90 times to politically 'tame' state governments.

State Governors appointed by the centre functioned as the Centre's agents, and were accused of partisan party and malafide moves and of openly using their powers to promote the Congress in the state. The Indian press complained against the steady devaluation of the gubernatorial office' which the centre had reduced to a 'rehabilitation centre for rejected and inconvenient politicians'.

There has significantly been amidst the chaos, a conscious and planned attempt to redefine centre-state relations. In 1983 the Council of Chief Ministers of the Southern states' was set up to 'promote the cause of cooperative federalism between the states and the centre' calling for equitable distribution of resources between the centre-states. In October 1983 a set of recommendations were made for restructuring union-state relations. In May 1997 the Committee of the Inter-State Council agreed on a broad consensus on safeguards against misuse of article 356. Proposals included approval by parliament before dismissal of a state government; inclusion of grounds for dismissal to be included in the presidential order. The latest manifestation of the limits put to the power of the Centre was the 76 hour drama of the dismissal and restoration of the Bihar government. The government of Rabri Devi was dismissed by the BJP government after winning the vote in the Lok Sabha but had to be restored because of the impending Rajya Sabha defeat.

The most significant move made by the Centre for assessing the Centre-State problems was the setting up of the Sarkaria Commission. The main recommendations of Sarkaria Commission are:

  1. Article 356 which empowers the Union Government to impose President's rule and the deployment of armed forces for law and order should be made use of sparingly and only at the request of the state.
  2. Article 258 (the centre's right to confer additional authority on the states) should be used liberally by the centre.
  3. The role of the states in expanding the concurrent list should be enhanced. The Union list should be curtailed. The Centre should consult states legislating on a subject on the concurrent list.
  4. The Constitution should be amended with a view to giving the states greater power and responsibilities.
  5. The Governors of the states appointed by the Centre should be non-political, non-controversial persons. They should be appointed in consultation with the Chief Ministers.
  6. The states' shares in revenues generated by them should be increased.
  7. An Inter-State Council (ISC) should be set-up as a permanent body to deal with subjects other than socio-economic development and resolve inter-state disputes.

The Sarkaria Commission advocated 'cooperative federalism' and recommended greater financial autonomy for the states. The West Bengal finance minister Asok Mitra in 1984 'the states are toothless, classless, resourceless wonders and the centre wants them to stay this way for its own political advantage.' The states have 'concurrent but subordinate powers, V.P. Krishna Iyer ' a quasi-federal constitution, Nikail Chakravaty.

Another abiding friction area of the centre-state friction has been the distribution of resources. The states have consistently argued that article 280 of the Constitution which calls for the setting up of a finance commission every five years to make recommendations regarding ' the distribution of net proceeds of divisible taxes lay down the principles of grants in aid and any other matter referred to the commission by the President in the interest of sound finance' has not been effectively deployed in the interest of resolving the issue of finances. However discretionary transfers prompted by horse-trading from the centre in the past had prevented the emergence of an appropriate level of financial autonomy.

However now the states have a key role to play in determining the extent of further reforms. In recognition of the key role that states can play to meet cash shortages and human and infrastructural underdevelopment combined with unemployment , the Centre has ceded additional powers to the states. The 1998/99 budget ratified the transfer of 29% of the divisible pool of central taxes to the state governments, substantially increasing the resources available to them. However, the central government is seeking to encourage states to improve the management of their finances by controlling current expenditure and promoting private investment in infrastructure projects. Combined state expenditure on non-developmental outlays, administration and interest payments account for around 70% of revenue receipts.

Some states, such as Andhra Pradesh, Karnataka and Maharashtra, have shown considerable initiative in raising additional finance, including issuing bonds and encouraging private investment in irrigation, roads, bridges, software development, and agricultural and horticultural projects. But most states have made little progress.

Economic activity is widely distributed, and growth rates differ greatly throughout India. High-growth private-sector industry in concentrated is three main areas: around Mumbai (Maharashtra) and into Gujarat; around Delhi; including Haryana and western Uttar Pradesh; and the corridor from Bangalore (Karnataka) to Chennai (Tamil Nadu). Andhra Pradesh is also emerging as a centre of growth.

India's Domestic Weaknesses

The Poverty Pitfall

Improving the living standards of the poor has long been among India's most important policy priorities and most pressing challenges. In the early 1950s, nearly half of India's population was living in poverty. Since then, poverty has been declining; but this has occurred slowly and vast disparities persist between and within India's states. With a gross national product (GNP) per capita of $390 million in 1997, India continues to have the highest concentration of poverty of any country, with roughly 300 million people (one-third of the population) living below the national poverty line.

Malnutrition also continues to constrain India's development. More than half of India's children are undernourished, and this affects their physical and mental development. Despite some improvement, India's women remain significantly more malnourished than men. Bias against women and girls is reflected in the demographic ration of 929 females for every 1,000 males. Unlike in most countries, more women than men die before the age of 35 in India. At 437 deaths per 100,000 live births in 1996, India's maternal mortality rates remain high (particularly in rural areas), and account for almost 25 percent of the world's childbirth-related deaths.

Although declining, largely preventable diseases such as leprosy, tuberculosis, cataract blindness, and malaria continue to account for 50 percent of reported illness, and around 470 deaths per 100,000. HIV/AIDS is a newly emerging threat to India's public health; about 3 million people in India may be affected.

There is a concentration of poverty and underdevelopment in some northern and eastern regions, notably Bihar, the eastern reaches of Uttar Pradesh and Orissa, although the latter is developing a reputation for more innovative policy reform.

Human Development Indicators

However, as India continues to suffer from gross inequities in the delivery of basic education and health services, it is also essential that support for social infrastructure and human development be strengthened to foster sustainability of India's reform process.

The financial reforms will need to be complemented by a serious effort to improve the state of literacy and education in the country if that growth is to be broad-based and sustained over the longer term. What is perhaps most distressing is the high rates of illiteracy found among children, especially in rural areas where the bulk of India's population lives.

Fortunately, the Government is showing increasing awareness of the problems confronting the education sector in general, and primary education in particular. The Ninth Five Year Plan (1997-2002) has called for an increase in the share of GDP allocated to education from 3 percent - among the lowest in the region - to 6 percent with half of total outlays to be allocated to primary education. Although the increase in resource allocation and the greater emphasis on primary education is welcome, this alone is clearly not enough. In particular, there are serious problems in the incentive structures facing public schools with teacher absenteeism and shirking endemic in certain parts of the country.

Although since the 1970s, the well being of India's population has improved. The average life expectancy at birth has increased from 50 years to 65 today, the infant mortality rate has fallen by half to about 65 per thousand live births, and the birth rate has fallen from 6 to 3.1 children per woman. India's social indicators continue to place it near the bottom of the ladder in most measures of human development.

However, population growth and the impending strain on the environment, natural resources, and social services it will bring still pose a threat to India's development. With a total population estimated 945.1 million people in mid-1996 (second only to China's) India remains first in the world in terms of the number added to its population each year-about 16 million.

The Infrastructure Bottleneck

Improving basic infrastructure services and encouraging greater private sector participation in telecommunications, electricity, transport, and water supply can make a major contribution to growth and has been a major focus of Indian economic policy since the early 1990s.

While the potential for a stronger recovery in 1999 and beyond exists, fostered by higher investment and a rise in export growth, infrastructure constraints are likely to become increasingly binding. The Government, therefore, needs to accelerate structural reforms to remove impediments and raise the growth potential, while maintaining prudent macroeconomic management.

In key areas of the economy, particularly the power, roads and transportation sectors, investments have failed to keep pace with developments in the overall economy and thus emerged as major impediment to a higher sustainable growth path. Given the enormous resource requirement for improvement in infrastructure, the government will need to promote greater private sector participation. However, the commercialisation of infrastructure faces several obstacles, including the absence of an appropriate, long-term framework and policy incentive mechanism for private investment; poor policy co-ordination among different government agencies in implementation of large infrastructure projects; and a shortage of long-term funding. These critical issues need early resolution.

Infrastructure investments rely heavily on long-term financing in view of their long gestation periods, high costs and irregular revenue flows. However, India's debt markets are still not well developed and fail to provide the range of instruments and the liquidity necessary for infrastructure funding.

India's weak transport and communications infrastructure is increasingly seen to be a constraint on economic growth. India has the world's most extensive railway system, covering 62,800 km. India's railways suffer from extremely low labour productivity, a squeeze on capital spending and increasing prices. India's road are of poor quality, badly maintained and very congested. Roads carry around 60% of freight traffic, and demand is rising rapidly, especially for short journeys in urban areas.

There are 11 major ports: five on the east coast and six on the west. Traffic at these ports increased from 107m tonnes in 1984/85 to 227 tonnes in 1996/97, mainly in oil, iron ore and coal. Capacity utilisation is high, although labour and equipment productivity is low. India claims to have the world's largest postal system with 500,000 letter boxes and 150,000 post offices, but it has come to be seen as a social service.

The deterioration of the state governments' consolidated finances, mainly due to salary increases in response to the recommendations of the Fifth Pay Commission, slippage in compression of non-plan expenditures, and delays in implementing decisive steps to strengthen own resource mobilisation, particularly the appropriate pricing and fixation of user costs for electricity and irrigation. The renowned widening of the deficit of central and state governments has reversed some of the gains in fiscal consolidation made in recent years.

The Energy Crises

According to international development agencies India's economic growth will be hampered as long as its insufficient power supply constraints industrial development. Power shortages are estimated about 10 percent of total electricity energy and 20 percent of peak capacity requirements. National surveys of industrialists consistently rate power supply as one of their most critical problems.

A shortage of power is also a serious constraint on growth, but investors have been wary to enter a market where the purchasers - state electric state electricity boards are effectively bankrupt. India produces 90% of its energy supply, mainly from thermal stations. But demand is rising fast and is projected to reach 465bn kwh by 2000 far beyond the capacity of the public sector. Shortages are a major constraint on economic growth. At peak times, power shortages are close to 30% for India as a whole and significantly worse in some states.

With responsibility for the electricity supply shared constitutionally between the central government and the states, the government now recognises the need to improve the efficiency of supply, consumption, and pricing of electricity. This can be achieved only by reforming power sector management and financing at the state level. A few states (Orissa, Haryana, Andhara Pradesh) have initiated comprehensive power sector reform programmes. Following the enactment of the Orissa Electricity Reform Act by the Orissa State Assembly in November 1995 and agreements reached in two successive Power Conferences of the Chief Ministers in India in late 1996, the government introduced legislation in 1998 for the establishment of a Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs).

Moving from the socio-economic to the political there are key factors that contribute to India's weakness as a major power:

LandMarks to the State Communalization of India

From 1984 to 1999 there are major landmarks that betray communalization of both the Indian state. In 1984 following the 1984 Operation Blue Star -the attacking of the Golden Temple. Indira's assassination was followed by the November 1984 Sikh genocide. India's eminent social scientist Rajni Kothari argued that in the Sikh genocide ' the involvement of the state machinery was not purely through negative acts of omission but through acts of participation... of police personnel... in the actual acts of looting and rape ...the systematic movement of truckloads of rioters and kerosene from Haryana into Dehli... In the area of Delhi University pits were dug and labelled Sardar Ghat....'

The Mandal Commission: 6 years after the Sikh genocide in August 1990, the Indian society again witnessed the surfacing of a virtually a nationwide anti- backward class movement. It began with the August 7, 1990 announcement of Prime Minister V.P. Singh that his National Front government was to implement the recommendations of the Mandal Commission report. The Mandal Commission headed by B.P. Mandal former Minister of Bihar, was setup by the Janata government in 1979 'to investigate the conditions of the socially and educationally backward classes within India.' The commission had identified 3,743 Hindu and non-Hindu castes and groups as other backward classes 'OBCs', constituting 52% of the population. The commission had recommended 27% job reservations be provided by them in central government services and public undertakings. Arguing that it was a constitutional requirement to remove the difficulties and improve conditions of the backward classes V.P. Singh announced his decision with a gusto.

A violent nationwide protest against V.P. Singh's decision erupted while the young took to the streets the political parties took to point-scoring. Rajiv Gandhi accused V.P. Singh of political expediency aimed at earning political mileage and argued that V.P. Singh was 'working for the disintegration of the country and its division into caste groups.' Rajiv maintained that 'caste definition of backwardness is terrible and posed a threat to the merit system and therefore to rapid development. The BJP also called for a 'balanced approach' to the Mandal recommendations. Underscoring the name for giving proper weightage to the criteria of economic backwardness 'along with caste considerations.'

The Mandal controversy was taken to the Supreme Court which eventually in November 1992 upheld the Mandal Commission report. It had thus endorsed the philosophy of 'caste reservations'. While those dispensing justice supported V.P. Singh, the Indian democracy as much as the assertive sections of the Indian society were not accepting of V.P. Singh's attempt at dispensing social justice. He lost the battle and was removed from power in the 1991 polls.

Yet the Mandal Commission episode served as another dividing line within the Indian society. V.P. Singh and his supporters had really made the mistake of launching a mini-social revolution on non-existing shoulders - they were no warriors to fight V.P. Singh's was. The backward castes were not politically organised. However, their political platforms for their own interests. After Mandal, the Dalits in Bihar had for the first time voted independent of any pressure from the upper caste. In many states the Dalits broke rank with the Congress which they had supported in the past.

The 1992 Demolition of the Babri Masjid: On December 06, 1992 Indian secularism was buried under the debris of 450 year old Babri Masjid. The Masjid had been built by the Mughal emperor Babar's commander Mir Baqui in 1528 and was destroyed by thousands of BJP and VHP supporters. For the Indians opposed to the destruction of the Babri Mosque and for the world at large, the destruction of Babri Masjid sent out to two chilling messages. One, that the Hindu revivalist parties had enough stamina, support and muscle power to persuade their objective of settling past historical scores with the descendants of those who had ruled over them. Two, and the more disturbing was the message that key sections of the Indian states were falling pray to anti-Muslim demolition of the Babri Masjid. The contingents of the central reserve police force, of the provincial arms constabulary and the local police present in large numbers around the mosque adopted a 'hands off' attitude while the frenzied crowd moved to dismantle the 450 year old structure.

It was shocking that the crowd was allowed a free hand especially when according to an Indian columnist Kuldip Nayyar 'Rao is set to have been warned by the central intelligence bureau five days in advance that the Masjid will be destroyed'. In less than a week of communal frenzy that grid India following the demolition of Babri Masjid, the death toll rose to 1,100. Indian press largely recognise that the demolition of the mosque was far from being a spontaneous act and that extremist Hindu parties had been taught demolition techniques by a retired brigadier of the Indian army at the month long training camp in Gujarat village and that the Gujarat government had a full knowledge of it. Asghar Ali engineer commenting on the post Babri Masjid killings complained about police violence aimed at killing Muslims. Hid contention was supported by Edward Gargan of the New York Times who on February 4th wrote about the biased attitude of the police demonstrated through selective killings of Muslims. While many wise men of the Indian intelligentsia came forward to advise calm and caution to the Muslims. It were the words of R.K. Malkani that I had promptly recalled. It was in June 1990 when I had met him. Sitting in his New Delhi office I had wanted to understand why Hindu parties followed the Zionist-like political line with Indian Muslims - that we were 'wrong' committed by your ancestors, that we will destroy Al-Aqsa to build our temple.

The calm-looking Malkani, virtually leapt up to response, 'Jinnah sprayed poison all around. Do you think a Muslim can, no he cannot disown the responsibility of division of India. These things cannot be forgotten and cannot be forgiven. You think Hindus are foolish. No not so foolish. I tell you Pakistan will not exist. It will have 2 or 3 states with confederation with India. You are a child. I tell you, you can't forget history. Hindu has an acute sense of grievance. Muslims today revere Mohammad Bin Qasim as a great man. He ruled our land and brought blood here. We will not forget Somnaath. 'Bloody images had flashed across as Malkani spoke.

The 1998 killings of the Christians and the Reconversion Debate: in 1998 alone Hindu extremist parties the VHP, Shiv Sena and RSS launched over a hundred attacks on Christians and the churches in which nuns were raped, priests were murdered, churches were demolished and bibles burnt. These attacks were placed in Missionary and his two sons, 8 and 10 years old. They were burnt alive as their car was set on fire by a Bajrang Dal crowd. The missionary had been working on a lepers rehabilitation programme for the past 32 years. Adding to the shock of these crimes against the 2.5% Christian minorities of India, has been the response of the Indian government. None other than the Indian Prime Minister Atal Behari Vajpai has thought it fit to the not roundly and conclusively condemn these cries against the Christians but has in fact linked the Christian killings to the question of religious conversions in India.

Among the Hindu extremist, supported by BJP and the state governments, there is a 'believe' that forced conversions of Hindus living in tribal areas have been taking place at the hands of Christian missionaries. They subscribe to an international Christian conspiracy, facilitated by the rise of a Christian Sonia Gandhi and promoted through money pumping. They argue that from Bihar's Nagpur Paltau to Gujarat the tribal belt is witnessing a competition between Christian and Hindu missionaries who are battling for the hearts and minds of tribal Adibasis. Demands for the enactment of an anti-conversion law are being made even by BJP parliamentarians. According to one parliamentarian around 0.45 million Hindus are being converted to Christianity.

Interestingly the presented phenomena of Hindu missionaries is now surfacing educated men with political ambitious work for the conversion of the tribal in Gujarat and Madhya Pradesh through their Ashrams. Today controversy to constitutional article 25 which gives any citizen the fundamental right to 'profess, practice and propagate one's religion' the anti-Christian Hindu extremists are denying the right of freedom of religious preference to the Indians. They argue that the missionaries 'are not only changing the religion but converting nationality.'

A systematic move Hindu extremist parties has been launched in the tribal belt to reconvert Christians to Hinduism. They persuade this religious frenzy, supported by state governments and thereby intimidating the Christian community.

The classic use of state machinery to build a modern Hindu nation in Gujarat has entered a critical state. In a revealing report published in the Asian Age of February 12, 1999 a journalist reproduces a thirteen point circular issued by the state director of police to the police commissioners and DSPs in Gujarat asking them 'in your districts what type of trickery is being used by the Christian missionaries defilement activities? How are they increasing it?'

Few independent observers in India except Hindu extremist allegations against the Christian. They argue that the 'census figures do not support the theory of mass conversion of Hindus which is a complete myth. 'Clearly there is fear amongst the Christians that communists have tip upon them as their targets, after the Muslims. Also the BJPs heavy loss in November state elections calls for the revival of the Hindutva plank.

There is in India an extreme sensitivity to the issue of conversions either to Islam or Christianity. Given the social situation of the Dalits and the tribals, Islam and Christianity do hold an attraction for them. After all in 1981 when in Tamil Nadu a few Dalits converted to Islam the VHP caused a great furore and became aggressive and highly politicised. They blamed that petro-dollars and fundamentalists Muslims were responsible for these conversions. The conversions had however come, according to the Daily Hindu of January 20, 1999, 'because of their social situation and because of maltreatment at the hands of the local landlords.'

Centrifugal Tendencies

From the Anandpur resolution of 1973 demanding for greater economy on the basis of Sikh identity to the storming of the golden temple in 1984 which led to the demand for a separate state of Khalistan and from the North Eastern states of Assam, Mizoram, Manipur, Tripura, and Nagaland to the Jharkand movement which seeks to establish the independent state of Jharkand, the Indian centre continuously faces the challenge of dealing with these centrifugal forces. Many of these movements receive funds from neighbouring countries. However, decades of Indian efforts to crush these movements have failed. Even in Sikkim which was annexed by India in 1947, a strong secessionist movement had emerged in early 90s.

The Indian union faces the problem of national integration of four fronts. First, there are genuine popular movements seeking greater autonomy or as in the case of Kashmir complete independence. Second, some of the Indian states are logistically un-wielded and incapable of providing opportunities for self-expression of the numerous groups inhabiting them. Third, there is deep rooted political and psychological reluctant on the path of the Indian political elite to accept India as a multi-linguistic, multi-ethnic and multi-religious entity. Fourth is the over centralisation of power in New Delhi posing resentment among the states.

Rise of Hindu Extremism

From 1989 onwards BJP the Hindu extremist party has been on an electoral rise from winning two seats in 1984. BJP in 1988 won 181 seats in the Lok Sabha and today it heads a 14 parties coalition government in the centre and enjoys partnerships in various state governments. Although defeated in the November elections in key states of Delhi, Rajhastan and Madhya Pradesh, Hindu extremism has come to occupy centre state in Indian politics. But why?

There are internal and external compulsions for the rise of Hindu extremism in India. Internally a combination of genuine commitment within a highly organized political section to a Hinduised Indian nationalism born immediately after the creation of Pakistan and of the Indian political battling, have created the road map to a Hinduised Indian state. Today the Sang a Parivar parties from the margins have moved to the centre-stage. There are parties that have found support across India, at varying degrees and have the mandate to reassert the Hindu identity of India. While economically adhering to generally the policies of past governments, it is in the socio-cultural arena that these parties promise to deliver to the electorate the end of Indian secularism.

From a Hindu India's prospective within the external context there is also some 'validity' for the rise of Hindu extremism. In an era of religious and cultural the Indians are not deeply attached to a secularist identity therefore do face a political and psychological dilemma.

Bordered by a Pakistan which is strategically in the vanguard of a resurgent Muslim consciousness, one that gives a sense of confidence, of expanse and of a connectivity to a globally spread mass of people, India too needs a 'connectivity point'- a connectivity that can give it a sense of expanse, of power and of influence.

Such a connectivity is not available to a Hindu majority India. In a bizarre and self-destructive way a powerful and extremely organized section of the Indian polity has turned inwards, upon the Indian citizens, as if to conquer its own people. From listing 7000 mosques for destruction to the systematic attempt to 'nationalize' the non-Hindu Indians by inculcating in them the ideal of the Bharatiya culture. (Jana Sangh and India's Foreign Policy Muhammad Ali Kishore, APH New Delhi 1969 pp 18-19) there is a systematic effort to find expanse influence and power through culturally and sociologically 'conquering' its own people; the secular Hindus, the Muslims and the Christians , among the many others.

Even beyond its borders regionally and globally too the Indians experience the assertive wave of an organically linked identity amongst countries like Iran, Malaysia, Egypt etc. As a composite whole, both for its internal belonging and its external projection of power influence a major section of the Indian ruling elite appears to be convinced of the indispensability of the Hindu identity. In fact as if tearing a page out of Jewish Zionism and Hitler's Nazism the proponents of those Hindutva are seeking to indulge in a blood letting human cartography. There is a commitment to recreating the past glory of many thousand of years ago. These contrast strikingly with today's Muslim militant groups which can at most be faulted for a wrong diagnosis of the problem that ails the human civilization, ad correspondingly for proposing an incorrect prescription to treat this ailment.

India's Bleeding Wound

Bleeding with the 1989 uprising in Kashmir over 40,000 people, freedom fighters and men from India's security forces and its army have died. The Indian states failure to fulfil its international commitment made under UN Security Council Resolution to hold plebiscite in Jammu and Kashmir and the valiant struggle launched by the Kashmiri freedom fighters promises that Jammu and Kashmir is likely to dominate India's bleeding wound for at least some time to come. In the Indian held Kashmir the military might of India boasts of the highest ratio of civilian to military presence. More than 600,000 men in uniform remain engaged in a low intensity warfare.

Although the Indian states, Indian politicians and many opinion makers maintain that the survival of Indian secularism is linked to India's retention of Jammu and Kashmir, in fact the Indian atrocities committed on the Indian state of the Kashmiri Muslims have led to a grand scale alienation of Indian Muslims. The basis for an Indian majority consensus against granting self-determination to the Kashmiris is premised on four arguments i) the defence of the Indian union, ii) the Kashmir liberation movement is threat to Indian secularism, iii) the need to safeguard India's annuitant legacy, Indian historian Gopal Kirishna said to me during the meeting in 1991 that 'Kashmir is a part of our 5,000 year old history. For our civilization Kashmir is important - it is Kashmir that seats of Hinduism were sown. Don't' tell us about self-determination, there are larger issues in world' iv) is an apparently benign vision of a South Asian confederation for them. The Kashmiri demand for self-determination is an anathema. There is also the geo-strategy dimension resulting from Jammu and Kashmir's location, its proximity to China and Central Asia.

Conclusion

Economy not an Issue. The Indian Pie will Grow. It's a Dynamic Class, Will the distributive Justice Come through? Also Bosnia/Kosovo did not explode because of lack of economic prosperity.

Politics is chaotic and establishing - what is headed towards?

The basis of Polarization: From secularism through democracy and in Hindu extremism.... Towards Secularism?

India's size militates against it.

India's divisive politics militates against it

Can India come out of the divisive/reactive mode?

There exists a dysfunctional relationship between the economic scene and the political scene in India. Power holds many leverages although the content of national economic management is an aware, responsible, competent, people-friendly one. An autonomy unusual within the South Asian context, has been extricated by the economic and development managers, from a sullied political scene. Sound economic management is not backed by a sound principled politics. Although there was not IPPs fiasco, there are other problems.

From secularism to Hinduvta India is vacillating between authoritarianism and anarchy. India's opening political innings were calm and under cover. The fifties, sixties and seventies was Indian nationalism wave; the seventies Janata Dal wave was a pro-democracy wave; the nineties BJP wave is a Hindu extremist and religionism wave.

Having moved away from what emerged as democratic authoritarianism under the forty Congress rule India now sits at the edge of democratic anarchy

The return to a one-part rule in India is unlikely. A reformed party Congress will at best become a large coalition partner not the main player.

While the one party concept has failed but no alternative has emerged. What exists at present are fragmented groups coalitioning together. But for short period already between 1991 -1998 India has had five governments at the centre. The flip-side of democratic anarchy is that state autonomy can be established with the emergence of multiple power centres. Yet the creeping horror of attempting a deadly human cartography, the redrawing the ethnic and religious map in various states overshadows the positive in India's political evolution.

On January 25 the President has emphasized in his Republic Day address that the 'Unity of our nation is not based on any monolithic idea, but on our age-old tradition of tolerance.' Quoting Gandhi and Dr. Radhakrishnan on the secularism idea, Mr. Narayanan said that 'tomorrow morning when we raise the national flag it is this ideal that we will be upholding for the millions of our people and the world to see. India has believed throughout our long history in the idea of the whole world being a single family'

This is a tall order for the India, which continues to be in political turbulence. For example, the state-centre political tension remains. The bureaucracy, the paramilitary forces and the intelligence agencies operate as the Centre's 'controlling' arms at the state level. According to The Hindu of July 1983 between 1981-83 the Border Security Force (BSF) was deployed on 108 occasions and the CPRF on 119 occasions. Central Police Reserve Force, the Border Security Force, the Central Industrial Security Force, the Central Bureau of Investigation, the RAW, the Indian Administrative Service and the Indian Police Service are services controlled by the Centre.

In domestic politics and in governance India faces the same issues that are being faced worldwide in the developing countries especially. However there are key distinctions to be drawn. On the sheer size of India, and the complexities that come with massive cultural and religious diversity; and India's festering wounds of communalism and Kashmir.

Sources used for Economic Analysis

i) The World Bank Group Countries Report - India
ii) Country Profile - India Nepal - 1998-99
iii) Indian Press Clippings - February 1999

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