Five Truths About India -Carnegie Endowment for International Peace

Five Truths About India
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Carnegie Endowment for International Peace

Five Truths About India

Milan Vaishnav Article, November 2, 2012

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For over sixty years, India, a low-income country occupying a sprawling geography and serving as a home to a dizzying diversity of ethnic and linguistic groups, has managed to survive—indeed, thrive—as a functioning democracy. Its political system in particular has the capacity to confound even the most knowledgeable and insightful Indian, so it should come as no surprise that for outsiders, interpreting Indian politics can be downright daunting.

But trying to fit India into neat categories to get a handle on the South Asian behemoth misses much of the nuance at the heart of the Indian polity. For instance, India’s politics have grown more regionalized, yet powerful forces of centralization remain intact. Old caste divides have lost social relevance but often thrive in the domain of politics. Five trends playing out in India today highlight the tensions between continuity and change in the country.

India’s party system is fragmented, but centralization has not disappeared

A dominant narrative about Indian politics over the last few decades has been the increasing regionalization of the political party system. One way to measure this fragmentation is to compare political competition in India’s first general elections in 1952 to the most recent parliamentary elections of 2009. In 1952, 55 parties contested general elections, and in 2009, there were 370 competitors (see figure 1).

Of course, these numbers overstate the level of fragmentation because they do not account for the actual support political parties have among the electorate, but the changes remain large even when parties are weighted by the actual seats they win. In 1952, this measure of effective number of parties in parliament stood at 1.7, and it has exhibited a more-than-fourfold increase over the past six decades, reaching 6.5.
The emerging federal nature of India’s electoral politics was given a shot in the arm in the early 1990s thanks to the rise of coalition governments in New Delhi, which provided a new set of incentives for aspiring regional politicians to abandon the dominant national parties and establish their own political outfits. While some of these new “regional parties” have strong links to subnational, separatist, or regional cultural markers, most simply draw support from a narrow (subnational) geographically defined territory. In this sense, several Indian parties formally classified as “national” by the Election Commission of India are actually regional in nature, such as the Nationalist Congress Party, whose success is largely confined to the state of Maharashtra. As a result of these shifts, state-level politics are now the principal settings for political contestation, while national elections are increasingly “derivative.” While this does not mean that national elections are merely a sum of state-level contests, state-level politics is often the prism through which voters make decisions about national elections. For example, when state-level elections are held less than two years prior to national elections, voters are prone to reaffirm their state-level decisions when they vote in parliamentary elections. But when national elections take place midway through a state government’s tenure, more often than not voters punish the ruling state party or parties in national polls.
Moreover, fractures have developed within the two major national parties. Fragmentation within the ruling Indian National Congress (Congress, for short) is largely due to the leadership’s “dyarchic” nature. Ever since the Congress Party’s current president, Sonia Gandhi, refused to assume the position of prime minister after the Congress came to power in 2004, handing over the reins to former finance minister Manmohan Singh, dual power centers revolving around these two figures have persisted. In reality, Singh occupies the throne, but Gandhi is perceived to wield the power. The wheels came off the arrangement during its second term. Now, the “divided leadership” within the Congress Party may be the most significant political hurdle to implementing badly needed political and economic reforms.
The problem for the Bharatiya Janata Party (BJP) is far more complicated. The party boasts a surfeit of leaders clamoring for the post of prime minister. Many of the BJP’s most well-known personalities continue to jockey for greater visibility and stature within the party hierarchy—leading to frequent internal disputes. Complicating this picture even more is the fact that the BJP exhibits a significant amount of diversity at the state level. In the words of scholar Pratap Bhanu Mehta, the BJP “is, for all practical purposes, a collection of six or seven state parties.” Furthermore, the leaders of the BJP in the states pledge their political loyalties to different national-level BJP leaders.
Yet, it would be premature to sound the death knell for the two major national parties. In the 2009 general elections, the Congress and BJP won a combined total of 322 seats—or 60 percent of the overall count (543). Indeed, Congress’s vote share in national elections has essentially remained constant since 1996—hovering around 28 percent. (Yet due to the peculiarities of India’s winner-take-all electoral system, the number of seats the Congress has won with a roughly similar vote share has fluctuated wildly from election to election—see figure 2.) Both parties also continue to have a considerable presence at the state level. Nearly two-thirds of states (19 of 30) are presently governed by either Congress or BJP chief ministers, though several are in a coalition with regional parties.

States are the solution to India’s policy dilemmas, but also the problem

When India’s central government is unwilling or unable to take action on policy reform, its states are often heralded as the solution to gridlock or “policy paralysis” because Indian federalism gives the states considerable space for policy innovation. When the center fails, the respective states can usher in and lead intra-Indian competition for resources, investment, and talent, which produces a dynamic process of policy diffusion.
What complicates the picture is that the degree to which “good policies” are adopted often varies considerably within states. For instance, Gujarat has enjoyed fantastic economic growth rates and enormous investment inflows under Chief Minister Narendra Modi’s tenure. In this sense, it is one of India’s most highly developed states. Yet, while Gujarat’s economic “model” is heralded, it a lags on health and family welfare, scoring near the bottom of India’s states on basic indicators of malnutrition.
The coexistence in Modi’s Gujarat of economic vitality with endemic malnutrition illustrates, in a nutshell, the promise and the peril of state-level leadership. Indeed, while there is a generally positive correlation between the level of development and malnutrition across India’s states, the states that thrive economically often “underperform” on addressing malnutrition (see figure 3 with Gujarat highlighted in red).

And when it comes to natural resource management states have strongly opposed reforms that would minimize their discretion and, therefore, their rent extraction possibilities. Consider the recent corruption scandal known as “Coalgate.” A blistering report from the comptroller and auditor general accused the central government of using an opaque, uncompetitive, and ad hoc discretionary process for allocating nearly 60 licenses for captive coal mines across India. The report estimates that the policy led to $33 billion in lost revenue.
The central government is surely to blame for dithering in establishing a new, competitive policy for allocating coal licenses. But the states themselves played a starring role in the scandal. The chief ministers of several mining-intensive states strongly opposed a change of policy and lobbied the government to maintain the status quo. And state governments played a prominent role in recommending which private sector firms should receive licenses.

The Indian state is often overbureaucratized yet undermanned

Given the corruption, cronyism, and abuse of government authority that have come to light in recent years—ranging from the discretionary allocation of licenses governing 2G telecommunication spectrum to the procurement scandals which plagued India’s hosting of the Commonwealth Games—there is a strong sentiment within India that the powers of the bureaucracy have to be substantially curbed. There is certainly a considerable need to curtail the worst excesses of the state, especially where the state’s heavy-handed role distorts economic incentives. For instance, transactions involving land—construction, mining, and infrastructure—remain a hotbed of corruption and malfeasance. The regulatory intensity of the state with respect to land is extremely high, allowing politicians and bureaucrats to trade regulatory forbearance for bribes and kickbacks.
Yet, while the Indian state needs to cede authority over certain realms, it simultaneously needs to expand its authority in others. Notwithstanding the widely held image of India as a country overburdened by a massive bureaucracy, India has one of the lowest rates of per capita public sector employment of any G20 country. Furthermore, government employment in India (across local, state, and federal levels) is in decline.
The Indian state suffers from debilitating weaknesses that hinder its ability to raise revenue, adjudicate disputes, guarantee public order, and provide public goods. It has the lowest tax-to-GDP ratio of any BRIC country (a grouping that also includes Brazil, Russia, and China). Indeed, it has one of the smallest ratios of any country in the G20. Admittedly, it is difficult to disentangle issues of policy choice from capacity, but there are ample signs that India is failing to enforce the taxes that are on the books. For instance, a new investigations unit of the income tax department dedicated to recovering lost tax revenue has barely gotten off the ground one year after setting up shop thanks to a personnel shortfall.
The relative incapacity of the judiciary has been well documented. The Supreme Court reported in late 2011 that the country’s courts are saddled under the weight of 32 million pending cases. Courts at all levels—the Supreme Court as well as various high courts and district and subordinate courts—see their dockets grow rather than shrink year after year.
Meanwhile, India’s security forces suffer from endemic personnel shortages. As of the end of 2011, only 77 percent of available posts in the civil police force were occupied according to the National Crime Records Bureau. Even if the state governments were to boost their recruitment and close the vacancy gap, India would still have one of the smallest ratios of police per capita anywhere in the world. The armed forces too struggle with manpower shortfalls: the Indian army faces a shortage of 12,000 officers, or roughly 20 percent of its overall sanctioned strength.
Finally, India also struggles in its ability to provide basic services such as healthcare and education. On education, for instance, it is true that India is growing ever closer toward achieving universal primary enrollment. Yet, the quality of those activities that regularly take place in schools is, on average, abysmal. According to the last several rounds of the Annual Status of Education Report conducted by the nongovernmental organization Pratham, the proportion of children aged six to fourteen who can read a simple paragraph has stagnated around 40 percent—with only marginal improvement over the past several years.

India’s economic crisis is largely self-inflicted

After over a decade of booming growth, the Indian economy was recently brought down to earth. In the quarter ending in June 2012, the economy grew at a rate of 5.5 percent—down from 8 percent the same quarter one year ago. While the International Monetary Fund now projects that growth in 2012 will dip below 5 percent, most independent observers forecast a quick rebound in 2013. A sustained period of growth at 5 percent or below, if such a situation materialized, would constitute a serious social and economic crisis for India.
In many ways, the particular success of India’s economy may have planted the seeds of its future slowdown. Reforms of the early 1990s, which involved industrial delicensing, reducing tariffs, and removing barriers to foreign capital flows, created a powerful new class of entrepreneurs who leveraged their political connections to entrench their positions in a newly liberalized economy. These private sector winners, and their political allies, believed it was in their self-interest to obstruct follow-on, second-generation reforms that would further increase international competition in the economy or introduce more transparent and competitive processes for natural resource contracts. Crony capitalism may have helped fuel rapid economic growth, but the rot in the system now threatens to swallow the whole thing up as the economy struggles in the wake of revelations of gross misgovernance and corruption.
There is also a perception that the roots of the current economic malaise are deeply political, from two years of unrelenting corruption scandals to a divided ruling party. The situation was further compounded by the government’s missteps on key policy issues at critical junctures. For instance, the government announced aggressive new anti-tax-avoidance policies that would retroactively levy taxes on business deals it perceived were structured to circumvent tax compliance. This move rattled investor confidence and contributed to an atmosphere of heightened private sector uncertainty.
In an encouraging move, in mid-September the government announced a slew of long-awaited reforms, notably raising the price of diesel (which is heavily subsidized) and increasing foreign investment caps in a range of sectors such as broadcasting, multibrand retail, and civil aviation. The government referred to these reforms as a “big bang,” but the current changes can best be described as a collection of modest steps. Most political parties acknowledge the need for more fundamental structural reform; India’s administrative, regulatory, and legal machinery is hopelessly out of date. Yet the implementation of such reforms carries with it great political risk, discouraging bolder action.

Caste in India is declining socially, but remains strong politically

Social relations in India have long been defined by the peculiar tenets of Hinduism’s hierarchical caste system. But according to a recent study, the social inequalities that have historically defined relations between Dalits (lower castes) and non-Dalits have declined precipitously in the market-reform era. Indeed, India now boasts a talented crop of “Dalit millionaires” who have formed their own Dalit Chamber of Commerce. Moreover, several groups have benefitted from reservations (or ethnic quotas) in government jobs, higher education, and political representation.
Yet caste hierarchies are alive and well in other areas. In one study, economists sent fictitious online job applications to firms, randomly manipulating the caste-based surnames of the fake applicants. Large and significant differences in the treatment of applicants was seen in competition over call-center jobs, where “soft” or intangible skills are difficult to effectively signal through resume credentials alone, suggesting the persistence of discrimination against disadvantaged groups in certain sectors.
And there can be no doubt that a significant amount of political mobilization still occurs along caste or communal lines. This is most glaring in north Indian states such as Uttar Pradesh, where rival political parties vociferously court opposing “vote banks” and speak of “caste equations.” Yet, political mobilization along identity lines is hardly confined to north India: politically motivated communal violence in Kerala and the persistence of political divisions between the Kamma, Reddy, and Kapu communities in Andhra Pradesh are evidence of this.
Moreover, caste seems to still influence voter behavior across India. Some observers have heralded the delinking of ethnicity and vote choice by examining national-level aggregates of voter behavior, finding little evidence to suggest that a majority of any given ethnic community favors one political party over another. But when one disaggregates the data at the state level—which is the prime venue for political contestation—a majority of a caste group in many states votes in favor of one political party.
A closer look at state-level realities also suggests that some prominent leaders who have been celebrated for their perceived willingness to transcend caste divides in fact embrace caste—albeit in less overt, divisive ways. One prominent leader who is said to have risen above caste politics is Chief Minister Nitish Kumar in the state of Bihar. In reality, Kumar has not ignored caste; he has simply played the caste card shrewdly. In his first term, Kumar instituted a “Mahadalit” scheme—earmarking government transfers for certain Dalit segments, namely those that fell outside of the traditional vote banks of his opposition—and established quotas in government jobs for lower caste Muslims.

Looking Ahead

Over the past two decades, India’s politics have grown far more complex. Economic liberalization, growing political competition, and increasing decentralization have fundamentally remade India’s political economy. Yet these new shifts have not completely displaced prevailing ideologies and proclivities.
In today’s India, liberalization coexists with the remnants of state-driven planning. Regionalization has expanded but has not completely taken over. And the bureaucracy’s authority has receded in many domains while becoming more entrenched in others. Those looking to make sense of where India’s political project is headed in the years to come would be well-served to heed the words of Cambridge economist Joan Robinson: “Whatever you can rightly say about India, the opposite is also true.”
The author thanks Reedy Swanson for excellent research assistance, Ashley Tellis and Frederic Grare for comments, and Devesh Kapur for useful conversations.