India’s Innovation Front Lines 2009 (Part 4): Billionaire Democracy

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Delhi, December 29, 2009—The ruling Congress Party turned 125 years old today to muted fanfare. Founded in 1885, it became the main opposition to British rule, eventually coming to power in 1947 when India reclaimed its independence. The party remained in power for 30 years, until losing its position in 1977. Since then it has been in power off and on. One constant has been the leadership of the party, an unbroken line of Jawaharlal Nehru, his daughter Indira Gandhi (assassinated by her Sikh bodyguards), her son Rajiv Gandhi (assassinated by Sri Lankan Tamil separatists), Sonia Gandhi (Rajiv’s Italian born wife), and soon, if his mother (Sonia Ghandi) has her way, Rahul Gandhi. Apart from a brief period of emergency rule brought on by Indira Gandhi in the 70s, India’s messy democracy has somehow kept the country together.

Nehru ruled India for close to 20 years after independence. People have faulted him for taking India down a socialist, planned economy path called the License Raj, with most industries nationalized and bureaucrats deciding who produced what. Free market liberalization began when Rajiv Gandhi came to power in 1984, bringing in a new generation of bureaucrats. True market reform was forced on India in 1993, when the country almost ran out of foreign reserves; the prime minister today, Manmohan Singh, was finance minister then. Nehru is now recognized for establishing world-class institutions that are now bearing fruit: the armed forces research centers, post-secondary educational institutes (Indian Institutes of Technology, Indian Institutes of Management, All India Institute of Medical Sciences), the Indian Space Research Organisation, Central Drug Research Institute, and the Bhabha Atomic Research Centre.

These were institutions of hard power. India has a rich cultural history that was nearly extinguished during British rule. After independence it began to be revived, patronized by the newly wealthy in India and the Indian diaspora primarily in the U.K. and U.S. There were the classical arts and then there was Bollywood cinema. Practically every Indian, rich or poor, knows the words to all the popular film songs from movies of their generation. In a country as diverse linguistically and economically as India, Bollywood has been as instrumental in keeping the country together as democratic politics. As I have traveled around the world, in Asia, the Middle East, Russia, I have been astonished that people have known all the old time Bollywood stars. This is the projection of India’s soft power.

The political class came to power in a time of Gandhian idealism, with the British relatively peacefully extricated from the subcontinent. The political class quickly grabbed most of the reins of power, nationalizing all major industries in the 1950s and 1960s. This power corrupted the political class, some of whom enriched themselves to obscene levels: this is what I mean by the headline “billionaire democracy.” Fortunately, the entrepreneurial middle class is slowly eclipsing the political class, and there is a feeling of inevitable reform of the government’s 40 million employees.

The Partition of India and Pakistan was painful and has been a drag on both countries’ economies and psyches’ since Independence, but India has moved on, remaining a secular democracy driven by a free market economy. Pakistan has remained a feudal state, ruled by a tight political class supported by the military. India is coming to the realization that a stable Pakistan is better for India than a breakup of Pakistan. The middle classes of both countries have similar aspirations; the problem is that in Pakistan the political class is dominant and needs the “threat” of India to stay in that position.


Vinit Nijhawan, an entrepreneur, angel investor, and former venture capitalist, is Lecturer and Executive-in-Residence in the Boston University School of Management. Follow @vinit44

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