India’s economy may have enormous future potential to grow. There may even be enough money available to create the infrastructure needed to facilitate that economic potential.
India’s economy may have enormous future potential to grow. There may even be enough money available to create the infrastructure needed to facilitate that economic potential. But does India, with its storied recent history of political fragmentation, and in some cases outright gridlock, want economic progress and prosperity enough to overcome its inhibiting political legacy?
Following independence in 1947, the Congress Party enjoyed a long period of rule from 1952-77. Congress’ loss of power led to a period where a multitude of parties vied for power, the successful ones ruling through coalition governments. However, these governments were fractious, and were more often than not often dissolved before their term expired due to the collapse of coalitions, and in the wake of major events including assassinations. This tumultuous period stretched from 1977 to 1999, and unfortunately is in large part the only political system that many in modern-day India know.
Why is India’s politics so unsettled? Today, India has over 1000 registered political parties, and the vast majority are regional parties representing India’s 28 self-governing states. As such, regional interests loom large in political discourse, and federal governments have been forced to rule through compromise, juggling in some cases radically different demands. Coalescing around a common vision for the nation is complex at the best of times, raising key questions about the political system’s ability to cope with a sustained period of rapid macroeconomic expansion. A serious situation.
Recent developments have ignited hopes that economic progress and the political system are not completely at odds. First, federal governments appear to have become more stable. The last two governments managed to serve out their full terms, the first back-to-back complete terms since 1967. Second, in May 2009 the incumbent party was returned to power after serving a full term, again the first time this has occurred since 1967. Third, in those latest elections, the Congress-led United Progressive Alliance strengthened its hand considerably, with Congress alone winning 206 of the seats. This outcome cheered India-watchers, as it marked a notable defeat for reform-averse parties, and cleared the path for advancement of the economic growth policy agenda.
By all appearances, the current government is taking the agenda forward. Last month, the Prime Minister announced the intention of expanding infrastructure spending from $500 billion in the current Plan to $1 trillion in the upcoming 12th 5-year Plan. The Planning Commission’s recent report noted that much infrastructure spending is below target, and sees the need for more funds and higher private sector participation – a 50-50 share, up from the current (unmet) target of 36%. The government is looking at introducing measures that will free up private capital for this purpose, and has also acknowledged the need for a revival of foreign direct investment.
Canada faces great opportunities in India, given our international expertise in power systems and transportation infrastructure. This is recognized in India, and is being supported by movement toward a bilateral nuclear agreement and negotiations toward establishment of a Canada-India FIPA.
The bottom line? Recent progress on India’s political front has opened up key opportunities in India that the local economy cannot fully service. For Canadians that want to participate, the time is now.
