About the Author
CLAY CHANDLER is Asia editor for McKinsey's global publishing division. He is former Asia editor of Fortune magazine and has covered global economics for leading publications including the Washington Post, where he served as Washington, DC-based chief economic correspondent and Hong Kong-based Asian economic correspondent, and The Wall Street Journal, where he was Tokyo correspondent. Clay is a graduate of Harvard University, and was co-editor of the McKinsey-led volume Reimagining Japan: The Quest for a Future That Works (Shogakukan, 2011).
Excerpt. © Reprinted by permission. All rights reserved.
ADIL ZAINULBHAI is chairman of McKinsey India. Over the course of his thirty-four-year career at McKinsey he has served clients around the world and in a wide range of industries—among them public companies, government-owned companies, entrepreneurs, and startups. He also has advised governments on social and development issues. A Mumbai native, he returned to his hometown in 2004 as McKinsey's managing director for India. Adil holds an engineering degree from the Indian Institute of Technology, Mumbai, and an MBA from Harvard Business School.
McKINSEY & COMPANY is a global management consulting firm, deeply committed to helping institutions in the private, public, and social sectors achieve lasting success. With over 100 offices in more than 60 countries, the firm is a trusted advisor to 90 of the world’s top 100 companies.
Reimagining India foreword
Dominic Barton and Noshir Kaka
By the time Alexander the Great reached the Indus River Valley in 326 BCE, he had vanquished three formidable empires: Syria, Egypt, and Persia. But on a rainswept night on the banks of the Jhelum, an Indus tributary, the Macedonian conqueror’s quest for global domination collapsed at the hands of a Hindu king. Greek historians called Alexander’s Indian foe Porus. According to their record, he stood seven feet tall and commanded an army of thirty thousand soldiers and two hundred war elephants. After an all-night battle waged in a howling monsoon, Alexander eventually forced Porus to surrender. But it was a hollow triumph. By Indian standards, Porus was a minor raja. The Magadha emperor, who ruled the lower Ganges River to the east, had many times more men and elephants. Alexander’s men, exhausted and terrified by the prospect of battling another giant Indian army, mutinied, compelling Alexander, the most successful military commander in ancient history, to turn back home.
Modern visitors, too, can find India overwhelming. Passengers disembarking at Indira Gandhi International Airport’s gleaming new third terminal are greeted by the Nine Mudras, an installation of colossal metallic hands looming above the Immigration counter. The hands, according to their designers, are arranged in delicate gestures from yoga and Indian classical dance to symbolize reassurance, benevolence, “the oncoming of novel tidings,” and the “linkage between the individual . . . and the ever-throbbing life force of the universe.” Travelers proceed under the Mudras, through baggage claim and customs, along the air-conditioned arrival hall adorned with posters celebrating “Incredible India” and then out onto the curbside, where they are plunged headlong into “ever-throbbing” life—and plenty of it.
An abundance of life—vibrant, chaotic, and tumultuous—has long been India’s foremost asset. As Western economies struggle to recover from global recession, India’s multitudes earn it a place alongside China as one of the world’s two indispensable emerging markets. India, with 1.2 billion people, half of them under the age of twenty-five, is expected to overtake China as the world’s most populous nation before 2025. In good years, India’s sprawling economy has shown itself capable of growing as rapidly as China’s; in 2006 and 2007, Indian GDP surged 8.5 percent. In 2012, according to the Organisation of Economic Cooperation and Development, India likely eclipsed Japan as the world’s third-largest economy.
Asia’s “other superpower” has many strengths. Indian business leaders, unlike their Chinese counterparts, are at ease in global markets; many, if not most, are fluent in English and graduates of leading business schools in the United States and Europe. With increasing confidence, CEOs of India’s leading companies are venturing overseas, making headlines with high-profile acquisitions such as Tata Group’s purchase of Jaguar and Land Rover or Bharti Airtel’s acquisition of Zain’s African telecommunications business. Indian software giants like TCS, Wipro, and Infosys have emerged as global technology leaders, thanks partly to the skills of the thousands of world-class engineers who graduate each year from the country’s famed Indian Institutes of Technology. Indian companies are thriving in other key sectors such as pharmaceuticals, petrochemicals, and steel, demonstrating a capacity for efficiency and innovation that is changing the global competitive landscape. India’s banking system and equity markets are well regulated and far more open to foreign participation than China’s. India’s currency, unlike China’s, trades freely. It is often argued that India, with its wildly pluralistic society, fractious democratic political system, and boisterous independent media, has the potential to show the world’s other emerging markets that ethnic homogeneity and authoritarianism aren’t the only—or even the best—path to successful economic development.
But there it is, that word “potential”; it crops up all too often in conversations about India. As consultants we hear it again and again, from business executives, government officials, and opinion leaders inside and outside India. Today, almost seventy years since shaking off the yoke of British imperialism, India is reclaiming its historical prominence in the world economy. It has congratulated itself for “rising” and “shining”—but is it doing so as quickly or as brightly as it should?
As Reimagining India goes to print, there is growing anxiety, fueled by a severe market downturn, that the burst of economic liberation of the 1990s and the decade of rapid growth that followed have given way to deadlock and complacency. Manmohan Singh, the celebrated architect of the 1990 reforms and now India’s prime minister, has vowed to “take all possible steps” and do “whatever is necessary” to curb government spending and stabilize the economy. But the questions linger: What steps are possible for India? What is the nation’s true potential? And what can be done to unlock it?
This book is an effort to encourage discussion and debate about those questions. Reimagining India follows the spirit and format of Reimagining Japan, a McKinsey-edited essay collection published in the wake of the “triple disasters” of earthquake, tsunami, and nuclear crisis that struck Japan in 2011. As with the Japan book, we have sought wisdom from many dimensions, social and cultural as well as economic and political. We have solicited essays from India’s leading business executives, CEOs of some of the world’s largest multinationals, economists, investors, entrepreneurs, scholars, journalists, artists, and athletes. Readers will, of course, find essays here on the strengths and weaknesses of India’s political system; growth prospects for India’s economy; the competitiveness of Indian firms; and Indian foreign policy. Other contributions explore how India might harness the power of new technologies, improve its infrastructure, expand access to health care, revamp its educational system, rethink its energy strategy, and halt destruction of its environment. But there are also essays on “softer” topics such as Bollywood, cricket, Indian cuisine, chess, classical dance, and India’s bid for a stronger performance in the Olympics. The result, we think, is a collection of ideas and expertise without parallel in any other volume.
These are independent voices. McKinsey made no effort to censor or influence the views of any contributors other than to press them to express their ideas as sharply and clearly as possible. While McKinsey consultants have contributed a few essays to this volume, Reimagining India is not the product of a McKinsey study; neither is it meant as a “white paper” nor coherent set of policy proposals. Rather, our aim was to create a platform for others to engage in an open, free-wheeling debate about India’s future.
No vision for India’s future can be complete without an awareness of India’s extraordinary past. The subcontinent was home to some of the most sophisticated early human civilizations. Critics of India’s modern infrastructure would do well to recall that inhabitants of Mohenjo-Daro and Rakhigarhi built the world’s first-known urban sanitation systems five thousand years ago and may have been the first to use wheeled transport. For centuries after Alexander’s departure, India was governed by powerful Hindu dynasties who patronized the arts and took keen interest in religion, philosophy, and practical science. Megasthenes, the first Western historian to venture beyond the Punjab into the Gangetic plain, described a land so verdant and fertile that “famine has never visited India and there has never been a general scarcity in the supply of nourishing food.”1 Venetian traveler Marco Polo, who claimed to have visited several ports in India during his 1292 voyage from China to Persia, declared Malabar (now Kerala) on India’s southwest coast to be the “richest and most splendid province in the world.”
In 1603, when English merchant John Mildenhall presented himself at the court of Akbar, the Mughal emperor, clutching a letter of introduction from Queen Elizabeth, Mughal India was the world’s richest nation, accounting for as much as a quarter of the global economy.2 Akbar, whose empire stretched from Kabul in the north to the Deccan Plateau in the south, was by far the world’s most powerful man. At his court in Fatehpur Sikri, notes British historian Alex von Tunzelmann, Akbar lived in “unmatched opulence . . . in rooms done out with marble, sandalwood and mother-of-pearl, cooled by the gentle fanning of peacock feathers.” By comparison, Elizabeth was “a weak and feeble woman” who ruled over a “grubby, unsophisticated, cold, dismal little kingdom.”3
And yet, a century and a half later, that dismal little kingdom was a rising naval power and the Mughals in disarray. By 1757, the East India Company, the fledgling British firm Elizabeth granted a royal charter to trade with India, was strong enough to seize control of the entire subcontinent. Direct administrative authority for India was transferred to the British crown after a bloody uprising in 1857, where it remained until India emerged as an independent nation in 1947.
Many of our authors cite the transition from colony to nation as India’s original act of imagination. With its riot of different races, religions, languages, and castes, India was, in its first decades, mostly an idea in the minds of its founders. As Fareed Zakaria reminds us in this volume’s opening essay, pre-independence India was a loose confederation of shifting power centers, alliances, and local traditions—nothing like the single-religion, single-culture nations of Europe. There was no guarantee modern India would hold together. The efforts of Jawaharlal Nehru, India’s first prime minister, to portray India as a diverse but unified polity, tracing a line from the early years of Indus Valley civilizations all the way to modern day, were mostly wishful thinking.
In its first three decades, India was beset by wars on multiple borders and numerous tribal insurgencies and separatist movements that threatened to pull the nation asunder. The overwhelming preoccupation of its leaders was consolidating control of the central government. That effort overreached most spectacularly under the prime ministership of Nehru’s daughter, Indira Gandhi, whose efforts to weaken regional political rivals and tighten the central government’s grip only fanned the flames of rebellion.
Early approaches to economic policy followed a similar dynamic. Nehru’s thinking about the relationship between the state and private enterprise was steeped in ideas of Fabian socialism that had captivated him as an undergraduate at Cambridge; he was an ardent admirer of Soviet-style central planning. Indian business leaders contributing to this volume can attest to the difficulties of trying to run a business under India’s “license raj,” the elaborate tangle of permits, permissions, and regulatory red tape that stifled nearly any form of entrepreneurial activity in the first four decades after independence. A 1991 balance of payments crisis—and the humiliation of the Reserve Bank of India being required to airlift sixty-seven tons of gold to London to secure an emergency loan from the International Monetary Fund—forced the government of Prime Minister Narasimha Rao to loosen its stranglehold on a host of key industries.
Those reforms may have been compelled by crisis but, as Reliance CEO Mukesh Ambani points out, they were “visionary and bold”—as the rapid growth of Reliance itself underscores. Indeed, liberalization, and the burst of entrepreneurialism and growth that followed, can be described as India’s first effort to “reimagine” itself.
The premise of this book is that powerful forces at work since the 1991 reforms—and partly accelerated by them—have created another moment for “visionary and bold” change. Growth, globalization, and the spread of technology are bringing India together in a way that facilitates new conversations about a collective national future—conversations that might not have resonated twenty or even ten years ago. Zakaria is one of many observers who hails the expansion of India’s middle class—a group “whose interests transcend region, caste and religion”—as a powerful force for unification; indeed, he sees the recent spate of mass demonstrations in India, protesting official corruption and the brutal rape of a young woman in Delhi, as calls by a unified middle class for the Indian government to fulfill its basic duties. Popular culture, too, has played an important role in bringing Indians together, as explored in the essays by writer Jerry Pinto on Bollywood and sports broadcaster Harsha Bhogle on cricket.
But it must also be said that the idea of India itself has inherent power. Over time, Indians have embraced the notion that, whatever their other differences, they are part of a single nation. Brown University political science professor Ashutosh Varshney argues in his essay that “regional diversity no longer poses an existential threat to India. The primary objective of India’s federal design was to weave a nation out of its many diverse parts and protect national integrity. In that, India’s federalism has largely succeeded.” As Indian Express editor Shekhar Gupta puts it: “It is only now when India has subsumed its many rebellions and moved on from the politics of anger and grievance to the politics of hope and aspiration, that our nation is in a position to leverage its success as a liberal, diverse democracy.”
What better moment, then, for a new round of reimagining?
The essays in this volume make clear India has no shortage of urgent challenges. Among the issues raised by our contributors:
The role of the state: Gurcharan Das, a libertarian and former head of Procter & Gamble’s India operations, argues that India can’t fully unleash the creative power of its businesses and entrepreneurs without help from a strong liberal state. For decades, he argues, India’s private sector has celebrated its ability to succeed despite overregulation and bureaucratic meddling, an idea expressed in the aphorism that “India grows at night” when the government is sleeping. “How,” he asks, “can a nation maintain robust economic growth with a weak, flailing state? Shouldn’t India also grow during the day? . . . Succeeding despite the state may be heroic, but it is not sustainable.”
Morgan Stanley emerging markets expert Ruchir Sharma, however, argues that the solution for India is further decentralization. India’s states and regions must be left to pursue their own economic policies, he contends. “The rise of the states is a sign of India’s maturity. . . . In an increasingly federal nation, the dynamism of the state leaders is countering the ineffectiveness of the center.” Industrialist Anand Mahindra agrees: “The best way to propel the economy may be to encourage different parts of the country to go their own way.”
MIT scholar Yasheng Huang, for his part, takes issue with the oft-heard assertion that the reason China’s economy has grown more rapidly than India’s is that the former has one-party rule and an authoritarian government while the latter is a democracy. Democracy does no harm to growth, Huang insists; he dismisses the notion that authoritarian regimes are better able to engineer economic miracles as a “fable” predicated on a flawed analysis of political and economic data.
Embracing competition: Many contributors lament India’s ambivalence about competition. Several note India’s ...
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