India and the claws of the crab

It is only 200 kilometres from New Delhi to Agra, the first capital of the Mughal empire and the site of the Taj Mahal, which I am to visit, by all accounts a breathtaking spectacle. Given the state of the roads it is at least a four-hour journey, the driver says. But the traffic is not the reason we only get halfway there.

It is the ‘Licence Raj’, the tentacles of bureaucracy that are still threatening to stifle India’s efforts to match China’s economic expansion, which derails our journey. At the border between the states of Haryana and Uttar Pradesh we stop. The driver grabs some papers and disappears. Some travel formality, I deduce. He returns half an hour later. "This car is not going any further," he says in his broken English. The travel visa to go into Uttar Pradesh expired the previous day.

We turn around, passing a 400-metre line of trucks and their sleeping drivers waiting patiently to complete the formalities which would allow them to cross from one Indian state to another. We head off into the dusk on the three-hour drive back along National Highway 2 to New Delhi, more conscious than ever of why India is today in the middle of a high-level policy debate about its future.

In the last five years the economic reforms which began in the early 1990s seem to have bitten deeper into the economic fabric of the country. The old ‘Hindu’ rate of growth of the 1960s and 1970s of around 3%, which seemed to condemn a country with a rapidly expanding population to permanent poverty, was left behind in the 1990s as the pace of expansion accelerated to around 6%.

In the past three years growth has accelerated again, to around 8%. But is it sustainable ? Is it realistic for India to be, as one businessman, put it, "chasing China" whose economic take-off started almost twenty years before India launched its reform programme?

This debate is often couched in terms of India’s battle against poverty. At least a third of the country’s 1.2 billion population live in unimaginable poverty. Most of them lack access to clean water, health care, and education. Half of them, perhaps, says a top Indian economist, are condemned by discrimination and the remnants of the caste system to be prisoners of their current circumstances. No matter how talented they may be, they will never themselves escape poverty, or, as things stand, live to see their children achieve a tolerable standard living. Sustaining an 8% growth rate for 10-20 years and implementing the reforms needed to do this, would transform the lives of tens of millions of these people.

For some Indians, however, there is a much less publicly discussed motivation which helps to explain why sustaining the current rate of growth is so important, why India is so committed to "chasing China". It is to do with the "claws of the crab", says a former government minister.

The crab is China and, he says, its claws are encircling India. China’s phenomenal economic growth and the business and diplomatic links that it has built up, are, he says, pulling into its orbit a group of countries, Korea, Japan, Taiwan, Australia, Vietnam, the despotic regime of Myanmar and India’s western neighbour Pakistan. If democratic India remains poor, if its growth stalls, its influence in Asia will diminish as authoritarian China’s grows, he fears.

Sustaining its recent growth will not, however, be easy. Over the past 15 years China’s take-off has been fuelled by conditions that have either already, or will soon, end. Global energy prices have been low, but not anymore. Following the defeat of the great inflation of the 1970s and early 1980s, global interest rates have been low too, but for how much longer? In the 1990s low interest rates and a surge in productivity growth helped to boost American growth, the US became the consumer of last resort to the rest of the world, insatiably sucking in imports, especially Chinese imports, and accumulating an annual, and unsustainable, trade and current account deficit currently running at around $800 billion (€626bn).

Today it is not just higher energy prices which India will have to cope with as it chases China. Higher inflation, higher interest rates, slower American growth and, critically, intensifying protectionist pressures, are all going to make India’s task harder.

On the road back to New Delhi, my journey to the Taj Mahal aborted by the tentacles of the Licence Raj, I wondered how India would cope with the challenge it faces. The traffic on this main road was slow. In a couple of major towns we crawled along, surrounded by ageing cars, even older buses and trucks, generally newer motorbikes, often with women dressed in saris riding pillion side-saddle, ancient bicycles and scores of open three-wheeler taxis, some with half-a-dozen or more customers clinging on precariously as the driver wove around trying to get through the jam. We stopped at one point, unable to move forwards backwards, or even sideways. We certainly did not want to upset the line of camels with carts attached that had halted alongside us. Getting the camels, as well as the bikes and three-wheeler taxis, off India’s already dangerous major highways, is also part of the challenge of "chasing China". If the EU does not want to see China emerge as ruling the region, it is in the EU’s interests to support India as it tries to modernise its creaking infrastructure and sustain its economic growth.

• Stewart Fleming is a freelance journalist based in Brussels.

It is only 200 kilometres from New Delhi to Agra, the first capital of the Mughal empire and the site of the Taj Mahal, which I am to visit, by all accounts a breathtaking spectacle. Given the state of the roads it is at least a four-hour journey, the driver says. But the traffic is not the reason we only get halfway there.

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