India's continuing economic failure lies in creating an internationally competitive economy, one that taps into an expanded global market to sell labor-intensive products. That competitiveness failure, in turn, is the consequence of a woeful neglect of public goods—education, health, cities, a clean environment, and a fair and responsive judiciary. In turn, the failure to provide public goods on the scale needed arose because politics became increasingly narrow-minded, tuned to the short-term interests of political leaders. In this story, the damage to economic and political prospects gathered pace with the prime ministership of Indira Gandhi, who started chipping away at democratic norms and political accountability. From there on, the damage gathered pace.
The early post-independence years opened up but did not resolve some of the key questions that India has dealt with ever since. The uncertainty arose because the two principal leaders, Prime Minister Jawaharlal Nehru and Deputy Prime Minister Vallabhbhai Patel, had very different personalities, with Nehru more of a thinker and Patel more of a doer. As a doer, Patel's signature achievement was incorporating all the princely states into the Indian Union. But Kashmir's position in the Indian Union, the construction of India as a secular society, and the country's guiding economic ideology remained undefined. With Patel's early death, Nehru became India's undisputed leader. And the question was whether Nehru the thinker could also be a doer.
From the very start, it was clear that employment was India's number-one economic problem. This required simultaneously improving productivity in agriculture and creating urban jobs. Higher agricultural productivity would move people out of agriculture with a reduction in farm output, and urban jobs would help people build new lives. Japan was the country that had achieved this transition in the previous hundred years. And tantalizingly, India seemed inclined to pursue that path. Ensuring success on that path needed public goods, especially education and cities, both of which the Japanese had actively promoted. But India never seriously tried to get on to the Japanese path. Because of that early failure, India never caught up with providing its citizens with adequate jobs.
Instead of taking the Japanese economic path, Nehru embarked on his "temples strategy" of economic development. These were high-visibility projects that had few social and political moving parts. The most important examples were multi-purpose dams and heavy industries. These did not require social consensus and could proceed with minimal administrative support. Both these features—limited social consensus and administrative needs—fit in with Nehru's personality of being a thinker rather than a doer. The result was a development strategy that created few jobs. The strategy failed quickly because it generated a very heavy demand for foreign exchange, which India did not have. But the ideology underlying the strategy lived on in a false rhetoric of "socialism," when in fact it did little to serve the true goals of socialism: equal opportunity for all.
With the foreign exchange crisis of 1957, it was obvious that India's heavy industrialization strategy was not working, and India needed to change course. But it was a moment of fortuitous geopolitical constellation. The Soviets seemed to be asserting a lead over the United States in science and technology. The Americans were worried that countries such as India might be attracted to the Soviet Union, which could lead to the spread of communism in Asia. John F. Kennedy, first as a senator from Massachusetts and then as U.S. president, pushed hard to provide India with the funding needed to complete its second Five-Year Plan and the even more ambitious third Five-Year Plan. Hence, instead of changing course, India continued on a path that did not create sufficient jobs.
The neglect of primary education is a striking feature of the Nehru years, despite Nehru's many statements that recognized the crucial importance of mass education. Striking also was the forceful case for education made by Rabindranath Tagore, a towering Indian poet and mentor to Nehru. Tagore had studied the administration and quality of school education in a number of countries. Tagore made the case that education was the cure for all of India's problems. Education was, for him, the best—possibly the only—way to overcome the handicaps of India's caste system. But the Nehru government persisted in dedicating insufficient funds to primary education and spending those scarce education funds on higher education. Thus, India acquired a lopsided education system that did not serve the people and created the incentives among students for acquiring degree certificates rather than acquiring education. Corruption infiltrated the administration, especially, of colleges and universities.
Nehru believed in the norms of equality, tolerance, and shared progress, and he nurtured India's democratic institutions. But Nehru's administrative and political skills fell well short of his idealism. The fundamentally flawed heavy industrialization strategy made a mockery of his ideal of shared progress. Dire poverty persisted through his years as prime minister. And while he contained the rise of Hindu nationalism, the forces of Hindu nationalism lurked just below the political surface and occasionally burst out in episodic communal riots. The spreading tentacles of corruption steadily undermined the norms and institutions of democracy. Nehru's tragedy was that he meant well for India, but he could not deliver. India fell behind on every metric of progress that Nehru had hoped for.
With Nehru's death in May 1964, a new chapter of modern Indian history began. Nehru's death coincided with a severe drought. International financial aid donors were demanding greater attention to improving agricultural productivity and devaluation of the rupee. The new prime minister, Lal Bahadur Shastri, also inherited an increasingly fractious Congress Party and a rise in Hindu nationalist sentiment, both within the Congress and outside. Tensions were on the rise in southern India, especially in Tamil Nadu, at the prospect of Hindi being declared the national language. Despite these political headwinds, Shastri began navigating a course correction on economic policy, giving more emphasis to agriculture and less to heavy industry. He set in place a new agricultural policy, which has remained India's agricultural policy ever since. But he died an early death with his task barely begun.
Indira Gandhi became India's third prime minister in January 1966. Mrs. Gandhi inherited the post-Nehru problems of a poorly functioning agricultural sector, poor job creation in urban areas, and inflation, which a second consecutive drought aggravated. Student and worker unrest were on the rise. Two aggressive movements emerged as a challenge to the state: Shiv Sena in Bombay and the Naxalites in Bengal. Mrs. Gandhi's immediate economic task was devaluation of the rupee. The devaluation was too timid and did not have the stimulative effect that a large devaluation would likely have had. That lack of a beneficial effect encouraged the naysayers. Mrs. Gandhi quickly turned away from economic policy tasks and devoted herself increasingly to building her image as a national savior. She also used draconian state powers to crush the Naxalite movement. With that, the coercive power of the state became an essential tool of Indian governance.
Lacking any ambition in economic policymaking, Mrs. Gandhi continued from where she had left off in 1967 to test the guardrails of democracy. She was on her way to becoming India's empress. As she ascended to her throne, democratic norms and accountability fell victim to intensifying political corruption. Mrs. Gandhi's plans for maintaining her hold on power now included her son Sanjay, the prince-in-the-making. India looked less and less like a democracy. Neglect of economic policymaking had a cost: India fell further behind East Asian economies. In December 1975, The Economist crowned Mrs. Gandhi the "empress of India."
Rolling economic crises ratcheted up the struggle Indians faced to find work and pay for life's necessities. And the simmering clash between angry Indians and Mrs. Gandhi's repressive power boiled over. The clash between protestors and the India's police and army spilled over into the political arena as opposition leader Jayaprakash Narayan contested Mrs. Gandhi's authority. In that inflammable mix, a high-level court, judging that Mrs. Gandhi had engaged in corrupt practices during her campaign in the 1971 election, voided her election. Mrs. Gandhi responded by imposing a state of internal emergency in June 1975, which gave her dictatorial powers.
With near-absolute power over India, Mrs. Gandhi and her son Sanjay showed little interest in education, health, and social welfare. Instead, Sanjay's plan for India's job crisis was to forcibly sterilize men, and his plan for urban revival was to throw slum dwellers out of their homes. Not surprisingly, given his history and sense of grandeur, violence was his trademark. Mrs. Gandhi's promise that the Emergency would improve people's lives proved a cruel illusion. When she called for new elections in January 1977, believing she would win, the people decided that they had had enough of her. A motley group of politicians under the newly formed Janata Party came into power in March 1977.
The Janata Party quickly restored the checks and balances of democracy that Mrs. Gandhi had undone. But the party's leaders soon trapped themselves in petty squabbles with one another. The absence of a sense of personal morality and civic consciousness in the Janata Party's leadership meant another wasted economic opportunity. The squabbles finally brought the government down in August 1979. Voters reelected Mrs. Gandhi as the least bad alternative. Sanjay's star rose, but he died when attempting a foolhardy maneuver while piloting a plane over Delhi. Mrs. Gandhi's corruption grew. And a painful textile workers' strike in Bombay ended in crushing the workers while shifting business incentives from manufacturing to property and construction investments.
Jawaharlal Nehru left his daughter Mrs. Gandhi a poor national inheritance. She responded to the troubled economic and social conditions by making a corrupt and unabashed play for power, imbuing Indian politics with pervasive violence. In turn, she met the force of violence from Sikh terrorism, spearheaded by Sant Jarnail Singh Bhindranwale. Sikh youth with poor job prospects became Bhindranwale's foot soldiers. The stand-off could not end well. Mrs. Gandhi's Sikh bodyguards assassinated her on October 31, 1980. That evening, her 40-year-old son Rajiv was sworn in as India's prime minister. Indian democracy seemed to be drifting into dynastic rule.
Although not democratically elected, Rajiv Gandhi inspired goodwill. Indians were desperate for change. Rajiv planted the seed for the Indian information technology industry. He won international kudos for lowering tax rates in the manner U.S. president Ronald Reagan had recently done. And he authorized his finance minister V. P. Singh to identify and prosecute tax dodgers and thereby begin rooting out corruption. But these early efforts ran into political headwinds. While the information technology industry continued to prosper, established Indian industrialists pushed back against the effort to attract foreign capital. And not surprisingly, Indian industry also pushed back against efforts to rein in their tax dodging. Rajiv gave into these pressures, allowing corruption to reestablish itself. On the economy, the Rajiv-run government spent well beyond its means, endangering domestic public finances and placing India at risk of an international financial crisis.
Hindu nationalism—Hindutva—had been a powerful but latent political force since the early years of the twentieth century. Veer Savarkar, who wrote the text Hindutva in 1923, established the political ideology as a battle between Hindus and non-Hindu enemies. In 1925, Keshav Baliram Hedgewar founded the militant Rashtriya Swayamsevak Sangh (RSS), which became the principal organizational driver of Hindutva. But first Gandhi and then Nehru kept Hindutva at bay by the force of the commanding political presence. Hindutva began emerging after Nehru's death but made only modest headway until Mrs. Gandhi's waning years. It drew its foot soldiers from the pool of young Indian males with poor economic prospects, much as Bhindranwale had drawn his troops. Rajiv did not comprehend Hindutva's historical potential; in an effort to make electoral gains by pandering to both Muslim and Hindu activists, he unleashed the Hindutva force in its modern form.
Rajiv lost the 1989 national election, and a series of coalition governments pushed India closer to the brink of an international financial crisis. The government under Prime Minister V.P. Singh also introduced reservations of government jobs for new claimants: other backward castes. The coalitions did not last, and a Sri Lankan suicide bomber assassinated Rajiv while he was campaigning for a fresh election in 1991. On the verge of a crisis, the new government under P. V. Narasimha Rao and his finance minister Manmohan Singh sought a massive IMF loan and dismantled the controls on imports and production introduced by Nehru to prevent the outflow of foreign exchange. This long-overdue reform brought new hope for economic progress, although contemporary economic analysis made it clear that sustained long-run growth required investment in human capital. China, armed with such investment, was beginning to establish itself as a global export powerhouse.
To Indian policymakers, the path ahead seemed clear: more reforms to work the magic of the market. However, menacing threats to democratic institutions and long-term economic growth worked against that promise. In public and private life, moral and social norms were badly tarnished. Trust and cooperation were victims of the rush to personal gratification. A dark Indian underbelly nurtured surging Hindutva, a deepening relationship between criminals and politicians, and a corrosive misogyny. The question in the mid-1990s was whether the recently revealed promise would defeat the forces of darkness. Or would the dark underbelly drag down the Indian promise? Although Indian GDP growth picked up, employment generation remained weak and both reality and perception of corruption were widespread. Despite the reform efforts, the Narasimha Rao–led Congress Party lost the 1996 election.
After more coalition governments, the Hindu nationalist Bharatiya Janata Party, with Atal Behari Vajpayee as prime minister, finally came to power in 1998. India's GDP growth rates accelerated, the Indian information technology industry prospered, and India's global "soft power" grew. GDP growth, however, did not provide a firm footing: the boost from the reforms could be expected to fade, the rapid growth in world trade—which lifted all boats—could not last, and the growing finance-construction bubble would surely deflate. More deep-rooted problems lay in agriculture, where the green revolution could no longer drive growth and subdivision of property with successive generations was making farming uneconomical and risky. A jobs crisis was brewing. Yet, bewitched by superficial success, the Vajpayee government fought the 2004 election on the "India is shining" slogan. India was not shining, though, for too many Indians.
In the run-up to the April-May 2004 elections, India faced its long-standing problems of insufficient employment, poor education systems, and creaking cities. Added to this list by then were problems of severe air and water pollution. Many Indian rivers were dying. The Congress Party–led United Progressive Alliance (UPA) came to power in May 2004 on the promise to balance material progress with social justice. And although the new government did advance the social justice agenda, its economic strategy promoted a hugely unequal growth process, one that also depleted minerals, forests, and water. Economic inequality became a feature not just of the growth process but also of Indian democracy. The sums of money—much of it "black" money—spent in the April-May 2009 elections scaled new heights. Rich businesses acquired more influence in politics, weakening the prospect of public goods provision to serve the common good.
To India's liberal and conservative elite, Narendra Modi was an attractive candidate as India's next prime minister. He had spun a mystique around the so-called "Gujarat model" that he promoted as the state's chief minister. The elite believed the election as prime minister would tame Modi's Hindutva agenda. As prime minister, Modi perpetuated the unequal growth process. The rich continued to prosper. Modi's rash demonetization and poorly executed Goods and Services Tax severely hurt India's most vulnerable: those working in agriculture and the urban informal sector. With global trade no longer providing a boost, Indian GDP came to rely increasingly on a finance-construction bubble. That bubble finally deflated in August 2018 and Indian GDP growth went into a slow but steady decline. While Modi hurt rather than helping promote economic growth—and, as employment, in particular, suffered—Hindutva forces made steady gains.
A democracy works for the people when it provides public goods that help everyone enhance their own well-being. By that test, Indian democracy definitively betrayed its people. When Narendra Modi became prime minister, Indians suffered from poor quality education and health services, cities were chaotic, the judicial system worked only for some, and rampant environmental pollution was depleting the inheritance of India's children. The centrality of construction as a growth driver was contributing to corruption and the injection of criminals in politics; this was true for even progressive states such as Tamil Nadu. With Modi's ascent, an intolerant Hindutva became an added impediment to democracy. Modi's initiatives to provide more toilets and gas stoves helped but made no dent in the broader lack of public goods. The 2019 election brought election spending, legislators facing criminal charges, and Hindutva to a new crescendo, sending Indian democracy into possibly irreversible decline.
COVID revealed the fragility of the Indian economy and society—and brought out some of the worst instincts of officialdom and ordinary people, A severe lockdown with virtually no notice marooned urban immigrants desperate to flee to safety of their village homes. Hindutva adherents injected poisonous "fake news" to stir up hatred against Muslims. The economic shock crushed vulnerable workers, still reeling from the earlier onslaught of demonetization and the Goods and Services Tax. The government vastly underestimated the spread of infections and the number of deaths. The more infectious second wave caused many more deaths. Almost 4 million Indians died in the two waves, ending in June 2021. The government continued its assault on democratic rights of individuals and the media. An international think tank concluded India had transitioned from a democracy to an "electoral autocracy."
India needs to create about 200 million jobs over the next decade to employ those who currently want jobs and those who will come on to the job market during the decade. That India created virtually no jobs in the past decade dramatically illustrates the size of the challenge that lies ahead. The same development pattern that has done so poorly in job creation has also caused nearly irreparable damage to the country's rivers, further endangering lives and livelihoods. And although India has been only a minor contributor to global warming, the effects of global warming are an added immediate danger to lives and livelihoods. India is in this dismal condition because the erosion of social norms and public accountability has prevented the design and implementation of policies that work for all. Decentralized governance, which brings power closer to the people, is essential to restore norms and accountability.