Signs of a bitterly divided country? On the contrary. The insults (and the low turnout) actually indicate a degree of consensus unusual in the history of this giant nation. The political parties need to disagree on something besides whether the BJP deserves praise for the recent military victory over Pakistan in Kashmir, or blame for letting the Pakistanis sneak into India in the first place. But on the fundamental question of how best to win prosperity for India’s 1 billion people, there is wide agreement that the country is finally on the right path. Food-grain production was a record 200 million tons in the year just ended. GDP growth is projected to top 7 percent this year, yet inflation is a minuscule 1.3 percent. The stock market is still close to the record high it reached last month, and foreign exchange reserves are at a more -than-comfortable level of nearly $33 billion.
Best of all, India looks increasingly well positioned in everyone’s favorite 21st-century industry: information technology (IT). The country’s hundreds of thousands of Ph.D.s are well known, as are its legions of programmers in Bangalore and Hyderabad. What’s less widely noted is that India is succeeding in the choicest parts of the market. Tech powerhouse Taiwan frets about how to climb the value-added curve, from components to software–but India already boasts a world-class software exporter (box). Total software exports were $2.6 billion last year, and Dewang Mehta, president of the National Association of Software and Service Companies, predicts that by 2003 software will pass textiles, jewelry and leather goods as India’s biggest foreign-exchange earner. No wonder both the major parties outline significant information-technology programs in their manifestoes.
In the past, of course, political manifestoes produced more problems than solutions. For the first 44 years of its independent life India was a socialist state; red tape strangled private business, and foreign investment was treated with suspicion. It all began to change in 1991, when the Congress government of P.V. Narasimha Rao introduced a broad series of free-market reforms. But the real turning point came in a widely followed battle mid-decade. In 1994, Enron, the big American energy company, began work on a giant electrical-power plant in Maharashtra state–only to have a new BJP state government cancel its contract. Enron persevered, and after a 16-month renegotiation the government–mindful of the country’s crippling lack of electrical power–signed a new deal. The plant started generating last May.
Enron’s victory mattered on two levels. First, it foreshadowed the willingness of the BJP–which was still making noises about economic nationalism when Vajpayee became prime minister in 1998–to make development the priority. Second, it signaled that India was a viable place for foreign investment, especially in the crucial power sector. India still doesn’t attract anything like the $30 billion in outside money China will likely draw this year. But both the BJP and Congress say they hope to boost India’s 1999 total of $4 billion up to $10 billion within a few years. Enron will help: having played the major role in what is now a $2 billion power plant, it plans to participate in projects ranging from telecommunications to gas pipelines and power transmission, worth up to $10 billion more. “We didn’t lose heart,” says Sanjay Bhatnagar, head of Enron’s operations in South Asia. “Our top management had a commitment to doing business in India.”
And luckily for India, the commitment is catching. It wasn’t a foregone conclusion that the country’s celebrated higher-education system and flair for English would produce a payoff in information technology. All those bright young computer experts who had migrated to the United States by the tens of thousands in the 1980s and 1990s could have turned their backs on their homeland for good. Prime Minister Rajiv Gandhi, who had worked with computers in the airline industry, introduced them in his government in the mid-1980s. But lowering tariffs on imported computers and keeping the new software sector out of the hands of the bureaucrats was a long fight. “Customs really tried to get some control,” says Mehta. “They actually did some investigations to see whether it would be possible to measure the flow of information, so that some sort of duty could be levied on units of ‘imported’ information.”
Now, for proof that the bureaucrats failed, take a look at the Bombay Stock Exchange. Fifteen percent of market capitalization is in IT companies, which were recently worth a combined $18.3 billion. Or visit Bangalore and Hyderabad, once sleepy southern state capitals that have become bustling, prosperous places, with 200 IT companies and 150, respectively.
Hopes are high that IT, broadly defined, can now become an engine of economic and even social change in India. India’s basic infrastructure–roads, ports and so forth–remains a weakness. But given good communications and power, two sectors where the country is making strides, software and service companies can locate almost anywhere. They could help reverse the current headlong rush from the towns into India’s vastly overcrowded cities. India’s top 600 tech companies employ a total of 700,000 people. They are well paid; programmers start at $100 a week and can earn up to $5,000 a week. Such workers can give smaller towns a middle-class core, with the spending power to attract service industries–and with them, still more jobs.
If it happens, it will be companies like Selectronic Equipment and Services that deserve the credit. Selectronic employs 250 young men and women, who work in an obscure suburb of New Delhi, doing overnight transcription of patient reports for American doctors. Veer Sagar, the company president, says his costs are between 25 and 35 percent lower than an American service’s. And he thinks his business, whose current sales are about $750,000 a year, is just in its infancy. “I could see us extending the service to billing, payment follow-ups, bed management, inventory control,” he says.
Information technology might even help India catch up with China in the competition for foreign investment. Still run by the Communist Party, China remains uncomfortable with the free flow of information. India not only welcomes such flows, it enjoys them in abundance with the United States, its biggest customer and the heartland of high tech. It’s no secret why: fully 25 percent of Silicon Valley start-ups are by Indians, according to Arindam Bhattacharya, the head of management consultant A.T. Kearney in India. Every year, America issues 150,000 special fast-track work visas for highly trained scientific and technical personnel. Forty percent of these visas go to Indians, most of them software engineers, according to the U.S. Embassy in New Delhi. “We’re seeing a radical change here in India,” says Bhattacharya. “This last part of the century was an era where capital was paramount. But with the development of IT, knowledge and not capital will be paramount. Knowledge will attract capital. We’re seeing a new paradigm of growth in India.”
Even a new paradigm isn’t the same as a magic elixir. Hundreds of millions of Indians remain more focused on clean drinking water than on the Internet. Vajpayee and the BJP, who according to polls are likely to form the new government, will have to keep that in mind. Still, it’s worth noting how much even the BJP’s promises have changed since the 1998 vote. This time around, the party is pledging to open the state-controlled insurance industry to private investors and allow insurance and pension funds to invest in stock markets. It also aims to further deregulate electrical power and ease restrictions on foreign-exchange transactions.
A year ago the BJP was known mainly as the right-wing Hindu nationalist party whose supporters had provoked bloody religious riots in 1992 by wrecking a mosque in the northern town of Ayodhya. The event stands in sharp contrast with a scene that recently unfolded in New Delhi. Hindus had built a small temple directly in the path of a bridge a Japanese company was constructing across the Yamuna River. Earlier this month, while Hindu holy men howled their protests, laborers demolished the temple–and BJP-controlled police made sure no one stopped them. India wants bridges, both literal and, in the case of the promising high-tech sector, virtual. And the way to win elections these days is to let people get on with building them.
