THE INDIAN RENAISSANCE INDIA’S RISE AFTER A THOUSAND YEARS OF DECLINE TThhiiss ppaaggee iinntteennttiioonnaallllyy lleefftt bbllaannkk THE INDIAN RENAISSANCE INDIA’S RISE AFTER A THOUSAND YEARS OF DECLINE Sanjeev Sanyal World Scientific NEW JERSEY • LONDON • SINGAPORE • BEIJING • SHANGHAI • HONG KONG • TAIPEI • CHENNAI Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Cover image courtesy: Smita Barooah Sanyal THE INDIAN RENAISSANCE India’s Rise after a Thousand Years of Decline Copyright © 2008 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. ISBN-13 978-981-281-877-5 ISBN-10 981-281-877-4 Typeset by Stallion Press Email: [email protected] Printed in Singapore. Sandhya - The Indian Renaissance.pmd 1 9/19/2008, 6:51 PM b660_FM.qxd 7/14/2008 10:44 AM Page v Contents Acknowledgements vii 1. Waiting for a Thousand Years 1 2. From Independence to Freedom 33 3. The Entrepreneurial Explosion 61 4. The Great Indian Middle Class 93 (and its Limitations) 5. Poverty, Inequality and the Last Bastion 113 of Control 6. The Two Revolutions 141 7. The Importance of Institutional Reform 171 8. How India will Change 191 9. Is India’s Rise Inevitable? 225 Index 239 v b660_FM.qxd 7/14/2008 10:44 AM Page vi TThhiiss ppaaggee iinntteennttiioonnaallllyy lleefftt bbllaannkk b660_FM.qxd 7/14/2008 10:44 AM Page vii Acknowledgements There are many people without whom this book would never have been written and published. I would like to acknowledge with gratitude the debts I owe to friends, family and the staff at Penguin who helped me at various stages of the process. Let me begin by thanking my editors Sandhya at World Scientific and Heather Adams at Penguin who kept me going through the various drafts. I am also grateful to Manu Bhaskaran, Chapal Mehra, Krishan Chopra, Max Phua, Ravi Singh and Mimi Choudhury for their faith in my ideas. I would not have embarked on this project without their support. A special thanks to Ramkishen Rajan, Shashi Tharoor, Amit Prakash, Vikram Khanna,Vijay Kelkar, Anupam Yog, Rajeev Suri, my brother Saurav and my father for reading through the drafts and providing many valuable comments. Last, but not the least, I must thank my wife Smita for putting up with an anti-social author over 18 months and for patiently reading and re-reading the chapters as they took shape. Of course, I take full responsibility for any errors and omissions. vii b660_FM.qxd 7/14/2008 10:44 AM Page viii TThhiiss ppaaggee iinntteennttiioonnaallllyy lleefftt bbllaannkk b660_Chapter-01.qxd 7/14/2008 10:40 AM Page 1 C 1 HAPTER Waiting for a Thousand Years When future generations of Indian school-children read history, they will be made to memorize two important dates from the 20th century — 1947 and 1991. The importance of the first is obvious. It was the year when India gained independence from Britain, a colonial power that had dominated the country since the 18th century.1 Despite the bitterness of the sub-continent’s partition into Muslim-majority Pakistan and Hindu-majority India, the year 1947 was undoubtedly an important turn- ing point in the country’s history. What of 1991? It was the year that India decided to liberalize its economy, but can it be said to be a turning point comparable to 1947? For almost half a century, the country had been held down by self-imposed constraints that had hampered economic development and stunted its international stature. Liberalization has clearly unleashed the country’s economic potential. However, the shift in 1991 was not just about changing economic poli- cies but about gaining freedom from a cultural attitude embodied in the old inward-looking economic regime. 1 The Portuguese held on to their enclaves in Goa, Daman and Diu till 1961, till they were forcibly evicted by Indian troops. They had been the first European colonial power in Asia and they were the last to leave. In 1999, they peacefully handed back Macau to China. 1