Indian blackout a metaphor for India’s political, economic and infrastructure growing pains

With some pluck, The Guardian begins an editorial on India’s world-record blackout — nearly 700 million people without power — with the following joke:

Q. What do you call a power failure in Delhi? A. Manmohan Singh.

Womp, womp.  But the joke — and the blackout as a metaphor for India’s governmental and infrastructure impotence — cuts deep.

While authoritarian China pushes onward with so much of the world’s attention, India — a chaotic democracy of 1.2 billion — and its political leadership seem stalled.

As The Times of India writes, dubbing yesterday “Terrible Tuesday,” in “powerless and clueless” India, most of north India — including 684 million Indians — was submerged into a power-less world for the second day, with accusations levied at Uttar Pradesh, Haryana and Punjab for over-drawing power.  But that does not hide the fact of India’s antiquated grid system nor the fact of a domestic coal supply that can’t keep up with domestic demand.

On the day of the biggest power failure in, well, human history, power minister Sushil Kumar Shinde was promoted to home minister.

As The Times notes:

Moving Sushilkumar Shinde out of the power ministry now is like changing the captain of the Titanic when it’s reeling after hitting a giant iceberg. The country is in the midst of an unprecedented power crisis. For two days in a row, the grid has collapsed. This doesn’t cover Shinde with any glory. Yet he’s promoted as home minister. Even if that’s ignored, what’s pertinent at this point of time is that Shinde is likely to have some clue about the power problem; a new minister – who will be holding additional charge of the portfolio – will possibly have none.

The international view is not much better. The Guardian writes:

Whatever the unadmirable qualities of contemporary British politics, imagine any cabinet minister failing to apologise for presiding over such a first-class foul-up, then being awarded a promotion. Such, sadly, is the typical high-handedness of India’s political classes, who too often lack any sense of obligation to their voters.

It’s a brooding time for India today, with its most recent quarterly growth rate of 5.3% a nine-year low, its eight straight quarterly decline — while the United States or any Western European country would be elated at 5% annual growth, it means a slowdown of alarming proportions for a country that averaged nearly 8% growth in the past decade.

Banyan, The Economist‘s Asia column, points its finger at Coal India — a bloated, state-run disaster that cannot keep pace with demand:

Not enough coal is being dug up by the state monopolist, Coal India. As a result, generating companies, which own power stations, face the prospect of buying expensive imported coal, with ruinous consequences for their finances. Many are in danger of going bust. As this week’s cuts have shown, the national transmission system that shifts power around the country needs modernisation and investment—some $110 billion according to a McKinsey study. And finally the “last mile” local distribution companies, usually state-owned and which deliver power to homes and businesses, are all but bankrupt. Their tariffs are held artificially low by politicians more keen to win votes than balance the books. They have also chronically underinvested.

Tyler Cowen has also been out way ahead in sounding the alarm on India’s economic slowdown, as evidenced in an op-ed in The New York Times just last May, where he pointed to several causes to the slowdown.  

Not least among those causes have been an inefficient state-owned coal company, a difficult environment for foreign business and investment (that includes not only strong barriers to entry, but retroactive taxation on profits) and few improvements in agricultural performance since the 1970s and poor water infrastructure. Echoing other commentators, India’s areas of success seem to have come in spite of its poor government, not because of it:

Another worry is that India’s services-based growth spurt may have run much of its course. Call centers, for example, have succeeded by building their own infrastructure and they often function as self-contained, walled mini-cities. It’s impressive that those achievements have been possible, but these economically segregated islands of higher productivity suggest that success is achieved by separating oneself from the broader Indian economy, not by integrating with it….

India also has one of the world’s most unwieldy legal systems, and one that seems particularly hard to reform…. One undercurrent of talk is that the days of “the license Raj” have returned, referring to the country’s earlier subpar economic performance under a regime of heavy government regulation.

In an equally prescient piece in Foreign Policy earlier this month, Sadanand Dhume points the finger squarely at Singh, who has been prime minister since 2004, but has not accomplished nearly the same level of economic reform as in the 1990s, when Singh served as finance minister:

All this has led commentators to reevaluate Singh’s place in India’s history. With the benefit of hindsight, credit for India’s first burst of reforms belongs less to Singh and more to the prime minister who hired him, the dour and largely forgotten P. V. Narasimha Rao, who held the country’s top office for five years in the early 1990s….

For now, it looks like history will not judge Singh kindly. Over the course of his prime ministership, he has gone from being admired for being self-effacing and honest to being derided for his lack of courage and leadership skills…. In a nation of political princelings, whose constituencies are handed down like family heirlooms, the prime minister stood out as an advertisement for effort and intelligence. In a land of rabble rousers, where caste and religion remain the surest tickets to political power, the respected economist embodied quiet technocratic efficiency. And Singh’s Sikh faith — shared by only 2 percent of his compatriots — showcased India’s storied pluralism.

The piece also points the finger at newly elected president Pranab Mukherjee, Singh’s longtime finance minister:

Meanwhile, the business newspaper Mint dubbed Pranab Mukherjee, Singh’s finance minister until his recent elevation as frontrunner for the presidency, “the worst finance minister India’s had.” The popular news website First Post called Mukherjee “a relic of that long-ago time, when we had peak income tax rates of 97 percent.” On his watch, prompted by howls of protest by a mercurial coalition ally, New Delhi reversed a long-awaited decision to allow foreign companies such as Wal-Mart to own a majority stake in so-called multi-brand retail stores.

The problems within India are not unknowable or unconquerable — as commentators both within India and outside India make clear.

When the lights come back on, though, the only question is whether Singh and his Indian National Congress party (Bhāratīya Rāṣṭrīya Kāṅgrēsa) will use the final 18 months in office (federal elections are due in spring 2014) to address those problems with real solutions.

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