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Sep 16, 2012

There is no shortage of dramatic news this week – what with a disappearing Chinese leader, a murdered ambassador in Benghazi, riots in Cairo and protests in Madrid and Moscow. But I wonder whether less obviously world-shaking events in India may end up having a greater historical significance.

Admittedly, I am biased since I’ve just spent the last week in Delhi. (In fact, I’m still here.) But the economic future of a country of 1.2bn people – about a sixth of mankind – will shape this century. And reforms announced this week by the much-abused government of Manmohan Singh, give some hope that India may be about to rediscover its mojo.

When I arrived here, I was struck by how morose the mood was among politicians and businessmen in Delhi. One entrepreneur said that India is at its lowest point for a decade. This is partly because economic growth – which hit 10 per cent in 2007 – is now down to a little more than 6 per cent. But the depressed mood is also created by a sense that the political system is paralysed. Manmohan Singh, the prime minister and the hero of India’s economic reforms in 1991, is now widely seen as ineffective. The two-day power cut that affected almost 600m people last month was also a blow to national morale. It seemed to mock all the PR about “amazing India” that is pumped out by the India-boosters.

By the end of the week, however, the mood among business-people had been transformed. That is because on Thursday and Friday, the government announced some much-demanded, long-deferred, economic reforms. On Thursday, it was a decision to start cutting fuel subsidies. That, in turn, sends a signal that the government is serious about trying to rein in the budget deficit – so warding off the threat of a credit-downgrade. Business people are already hoping for lower interest-rates, in the near future.

The next day came the announcement that retailing is to be liberalised – allowing large foreign supermarkets, such as Walmart, to expand in India. The measure should boost foreign investment, lower prices for consumers, improve the distribution chain and provide employment. Naturally enough, it is bitterly opposed by a wide variety of interest groups and political parties.

Perhaps the most bizarre meeting I had in Delhi this week was with one politician, who will be prominent in the fight against the multi-brand retailers. Brinda Karat has a rather aristocratic bearing. But, as well as being a member of parliament, she is also on the Central Committee of the Communist Party of India (Marxist) . (The phrase Marxist in brackets is to distinguish her branch of the party from the Maoist and Marxist-Leninist factions.) The Communists have recently lost power in the state of West Bengal, after decades running the state government. But they are still well represented in the Indian parliament. And they are not backing down from the old faith. There is a large bust of Lenin, just by the entrance to party HQ in Delhi.

Ms Karat was adamantly opposed to any suggest of retail liberalisation, arguing that it will destroy the livings of small shopkeepers all over India. Indeed, that very day, she was working on a critical article on Walmart, for a publication back in West Bengal.

The disputatious nature of Indian politics is both inspiring and sometimes infuriating. The Communists are all part of the rich tapestry. But, I hope that – when it comes to the latest round of economic liberalisation in India – the Communist Party (Marxist) once again finds itself on the wrong side of history.