Imagining India

"He is one of a group of six persons who founded one of India’s biggest and most successful software companies, Infosys. He was an engineer to start with and, as he says in this book, if it wasn’t for a stroke of luck where he decided to try his hand at entrepreneurship, he would probably be a software engineer based in New Jersey, commuting to New York City. In India, there used to be a tradition of business houses, where children go into their parents’ business. Infosys was one of the early companies set up by people who had no experience in business, and it became a whopping success. Nilekani, after writing this book, has actually come into the Indian government. He’s in charge of developing a social security system for India, where individuals will be identified electronically using biomarkers. I get to interact with him a lot, both of us being outsiders now working inside government. This book for me is a very unusual economics book because it is written by someone who is neither an economist nor a professional writer. He’s an engineer-turned-entrepreneur, and he writes about the ideas revolution that can cause India to take off and do well. It’s not entirely prophetic because India was already beginning to do well when he was writing it – but it’s a very enthusiastic book. He says that he is an incorrigible optimist and that comes out. It’s a bit in the tradition of [ New York Times columnist] Tom Friedman. The book is teeming with little ideas that India can do. He talks about his father’s belief in Nehruvian socialism. He rejects this, but it’s not an ideological book. It’s really much more of a workman’s book. You have to recognise that the market is an important instrument and India has to use this instrument to do well, he reminds the reader. He gives a whole slew of advice. He talks about Nehru, like most Indians do, with a lot of admiration. While he is critical of Nehru’s policies, he has a lot of admiration for Nehru as a person. It’s a corporate person’s take on India, and, unlike some recent authors who are gung-ho and chauvinistic about the nation, this is not. It’s optimistic about India, but not in a chauvinistic way and that’s what I like about the book. It’s really a pleasure to read. Let me talk about this, because it is not just part of the book, but also my current job. I have pushed this issue about bureaucracy into government documents. The World Bank, [its private finance arm] the IFC in particular, puts out data on doing business. They’ve developed an index, not too badly done, which talks to the amount of paperwork and bureaucratic hassles you have to go through – to start a business, to close a business, and, in the event of a contract violation, to have the contract enforced. By this criterion, India is ranked 134th in the world, and China is 79th. It’s very visible in India. Lots of ordinary people just feel fed up with the bureaucratic ropes. It’s also related to corruption. India has been in the news of late because of corruption. Very often you have to bribe to get something done. Support Five Books Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by donating a small amount . But one of my big surprises when I joined the government of India was to see the quality of the top civil servants in India. They really are very talented people, because it is a highly competitive system of recruitment. But the efficiency of the bureaucracy leaves so much to be desired. It’s like getting a bunch of ace drivers and then getting caught up in a traffic jam and leaving them there. There is something in the system which makes it go very slowly and sluggishly. I’ve felt this frustration as an ordinary citizen before I joined government, and I feel it now because I feel that if we can do better then India’s economy can really take off. There are two major things that can hold back an economy. One is the physical infrastructure, and the other is this soft infrastructure, which is the bureaucracy. On the physical infrastructure, I’m very optimistic that India is going to change. Even within the next four to five years, you’ll see the change. There is investment happening, the government is putting in money, and it will improve. On the bureaucratic side, it’s very tough. Everyone frets about it, but you don’t quite know where to begin. I’m less hopeful on that. However, the economy has done well despite that because, mercifully, one big difference with China is that India’s government, despite the inefficiency, doesn’t quite have the power of the Chinese government. I’ll give you a simple number that illustrates this. Of the total national income, the fraction that comes out of the state-owned sector in India is about 14%. In China it’s over 40%. So the state is much more all over the place in China than in India, but China’s is a more efficient state. In India, fortunately, the state is not quite as big and all-encompassing, so despite the fact that it is slow and sluggish, there is still a lot space for private enterprise. People who are learning to work the system are doing well and that probably explains why India has been growing almost at the rate of China in recent times. But there is still a great distance to go on the bureaucracy. There isn’t an easy solution. I talked to the British High Commissioner to India. He’s a very interesting person. I told him, “Look, we inherited the British system and we remain with it, whereas Britain has nicely got rid of a lot of the old bureaucratic system. What did you do?” He assured me that he’ll get me to talk to people who worked on the revisions of the old system. But, getting back to your question, I don’t see a quick end to this, whereas I can see the physical infrastructure developing in leaps and bounds over the next couple of years. High-speed rail has been talked about, but no decisions have been made. There will be a total revamping of ports and airports, and we already have big investment going into roads. All this is beginning to take place and in the next five-year plan, we have mega-schemes to boost infrastructure. It’s actually being helped by the flow of people between China and India. Indian bureaucrats go to China and come back having seen the infrastructure."