INDIA UNBOUND, by Gurcharan Das, Alfred A. Knopf , $27.50, 388 pages
No per-capita-income figures, no indices of calorie consumption, can capture the wretchedness that is the lot of the poor in India. Whether destitute amid the dust of countryside or begging on the sidewalks of its teeming cities, to be poor in India is to be born of a malnourished mother in conditions where your survival is uncertain. It is to survive with inadequate food, clothing and shelter, without the stimulation of learning or play; it is to grow unequipped intellectually or physically to be a productive member of a striving society. That such conditions afflict 350 million Indians is worse than a tragedy: It is a shame. It was in the name of India's poor that the Congress Party, which ruled India for all but three of its first 42 years of independence, sought to create a "socialist pattern of society" led by a state-controlled public sector that would dominate the "commanding heights" of the economy. This approach combined nationalism and idealism, seeing economic self-sufficiency as the only possible guarantee of political independence. It was less a strategy, however, than a reaction to the days of the British East India Co., which had come to trade and stayed on to rule. (One of the lessons you learn from history is that you often learn the wrong lessons from history.)
Gurcharan Das, a Harvard-educated businessman who has managed to run Procter & Gamble's Indian operations successfully while authoring three plays, a novel and a stream of newspaper columns, has seen Indian socialism up close and personal. When George Bernard Shaw famously wrote that "if all the economists in the world were laid end to end, they would never reach a conclusion," he clearly didn't have Das' book on the Indian economy in mind. Das weaves accessibly written history, thumbnail biographies of legendary Indian industrialists and entrepreneurs, his own experiences as a young executive building up the Vicks brand in the Indian heartland and accounts of Kafkaesque encounters with bureaucracy, into a book that traces "the struggle of one-sixth of humanity for dignity and prosperity" and comes to pretty clear conclusions.
Untangling the knots of India's democratic socialism is not easy. Because the assumption was that the public sector was good in itself, performance was not a relevant criterion: Inefficiencies were masked by generous subsidies, and a combination of vested interests--socialist ideologues, bureaucratic managers, self-protective trade unions and captive markets--made bad economics good politics.
Das is, in tempered and measured prose, scathing about this. The combination of internal controls and international protectionism gave India an economy hobbled by red tape, underproductive and grossly inefficient, making too few goods of too low quality at too high a price. Regulations made investment difficult and production beyond licensed quotas illegal. The resultant stagnation led to snide comments about the "Hindu rate of growth," averaging some 3.5% in the first three decades after independence, when countries in Southeast Asia were growing at 8% to 15%. The sector of the economy that grew most was neither the agricultural nor the industrial, but the bureaucratic; regulation became a more important economic activity than production. It is sadly impossible to quantify the economic losses inflicted on India over decades of entrepreneurs frittering away their energies in queuing for licenses rather than manufacturing products, paying bribes instead of hiring workers, wooing politicians instead of understanding consumers, "getting things done" through bureaucrats rather than doing things for themselves.
There is a certain poignancy in Das' story of Aditya Birla, establishing a string of successful companies in Southeast Asia because the impediments placed in his way by his own government made it impossible for him to invest in India. Conversely, Das tells us of Dhirubhai Ambani, a schoolteacher's son and former shipping clerk, who worked the system skillfully enough to build a petrochemical and rayon empire.
Das writes in an engaging style, sprinkling his text with a well-chosen array of quotations. There are layman-friendly discussions of economic theories of poverty, and his arguments are leavened with a close reading of economic texts, both classic and contemporary. But what shines through is the telling anecdote, the personal example, the remembered conversation. Only occasionally does Das let his restrained indignation run away with him, as when he writes that India had "too much democracy and not enough capitalism." Surely one can never have too much democracy, especially in a country of India's vast differences and disparities.
Having constructed a comprehensive indictment of India's economic failures, Das is optimistic about the liberalization that has opened the economy in the 1990s. He sees India on the brink of a great transformation, fueled by the Internet, that will rival Japan's after the Meiji Restoration. "Never before in recorded history," he concludes, "have so many people been in a position to rise so quickly."
A new Indian economy based on "globally competitive companies in software, Internet, IT-enabled industries, generic pharmaceuticals, and entertainment" is, he says, supplanting the old family businesses that had made their peace with the license-quota system. Das sees the emergence of "a new social contract of post-reform India where talent, hard work and managerial skill have replaced inherited wealth." Yet the reforms have yet to reach the poor: The market does not appeal to those who cannot afford to enter the marketplace. And Das overlooks the powerful forces of reaction, grouped under the banner of economic nationalism, that have united right-wing Hindu chauvinists with communists and socialists on an anti-foreigner, pro-self-reliance platform. Indian politicians, dominated by short-term expediency, looking hesitantly over their electoral shoulders and anxious to preserve their deniability should the reforms misfire, have not stood up for liberalization with either conviction or consistency. One hopes that Das' staunch optimism will infect India's political decision-makers, but it is an uncertain hope. For as Das himself acknowledges, the weakness of capitalism in India lies in the timidity of its defenders.
Shashi Tharoor is the author, most recently, of "India: From Midnight to the Millennium." His new novel, "Riot," will be published in the fall.