from Asia Unbound

India’s Rise: The Role of the Diaspora

February 5, 2010

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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My long-standing friendship with Prime Minister Manmohan Singh began when we were both students in Cambridge in the mid-1950s. One personal anecdote in particular underlines dramatically why the Indian diaspora has a critical role to play in the country’s present and future.

Recall that the Indian policy framework had degenerated into an unproductive, even counterproductive, set of policy choices that had produced the abysmal growth rate of approximately 3.5 percent per annum over nearly a quarter of a century. With an average population growth at 2 percent per annum, that translated into a per capita growth of roughly 1.5 percent per annum! We can readily see that, compared to the growth rate at 7-8 percent per annum which countries in East Asia had registered (and which our reforms have led to since the reforms began in earnest in 1991), we had lost growth by roughly 4 percent percentage points annually and that our income level would have been 2.5 times larger than in 2010 if only we had registered this higher growth throughout the last 45 years rather than only after the 1991 reforms. We would have been at the center of world attention far more dramatically, and indeed sooner.

The slow growth of the Indian economy had also undermined the assault on poverty that had been our central objective since planning began in 1951. It is only commonsense that a stagnant economy cannot pull people out from poverty through job creation, even though a growing economy may still not create enough jobs. So, when we failed to grow, we also failed to make a serious dent on poverty. It is not that we were wedded to growth per se and did not pay attention to poverty. Growth was in fact regarded correctly by us at the time as the principal way to make a sustained impact on poverty. The problem was that our pre-reform policies had failed to generate the growth.

While the external payments crisis in 1991 was the occasion for changes that would systematically begin to discard the policy framework that had failed to increase growth and to diminish poverty, the fact that we did not lapse back into it after we had surmounted the immediate crisis underscores the fact that thoughtful Indians had finally understood that we just could not go on the way we had, that change was necessary.

Needless to say, the ceaseless writings of economists such as myself, going back to the 1960s, had made an impact. In the end, our arguments had prevailed against the fierce anti-reform orthodoxy among the economists, including our most eminent ones.

But Prime Minister Singh told me that an important part had also been played by the diaspora. He told me that, when he was spearheading the reforms as the Finance Minister, Prime Minister Narasimha Rao had lent his full support largely because many members of his own family who were abroad had told him that India’s policies made no sense and that they had diminished our standing in the world. Coming from his own family’s immediate experience abroad, the message carried great salience and cemented the resolve of the Prime Minister to pull India out of the rut into which it had fallen.

The Diaspora as Contributor to Our Reforms

Indeed, the policymaking elites were finally shocked into the reforms by two factors that acted like a pincer movement against the status quo.

First, these elites increasingly experienced, at first hand when they went abroad, the disjunction between their sense of India’s ancient culture and glory and their realization that our foolish economic policies had led to a situation where few took us seriously. The worst kind of psychological situation is where you have a superiority complex and an inferior status!

Second, our diaspora ceaselessly brought home to these elites the fact that these policies had little rationale; they lived often in countries where our policies would have been laughed out of court. I recall writing an op-ed in the New York Times when Prime Minister Rajiv Gandhi was coming to the United States and I had mentioned how he represented a force for change and how the licensing system had been softened to allow for product diversification. The Times editor asked me what that meant; and I explained how the Indian licensing system had gone so far as to insist on specifying whether one produced knives or forks! The editor was incredulous: how could anyone think that good planning meant that one could not diversify production without permission? I, a member of the diaspora, did mention this at the time to several friends in the Indian government, to their chagrin. Indeed, over time, the flood of such stories coming from the diaspora helped to lay the groundwork for the abolition of the senseless licensing restrictions on capacity creation, product diversification, on import competition, that became part of the liberal reforms.

In the case of Japan, its transformation through major initiatives throughout the Meiji era was accomplished rather by sending gifted Japanese abroad to bring back ideas that were adapted to Japan’s culture and needs. In our case, the diaspora has served that function.

The Diaspora’s Achievements Abroad Contribute to India’s Image

But the diaspora has also contributed to India’s achievement of world-class status by its achievements in a variety of fields of science, arts and culture. Noting this growing trend in the United States, I once remarked that we were the next Jews of America: a high-achieving diaspora that would soon dominate the scene as the Jews, once discriminated against brutally, had managed to do. Today, that forecast has come true.

Not a day goes past when there is not a story in the major media of some notable scientific breakthrough where an Indian is a lead player. Our achievers have also made it in literature, music and films: Salman Rushdie, Zubin Mehta and Mira Nair are household names. In business, the Silicon Valley and Wall Street CEOs like Vikram Pandit are as often Indian as they are Chinese and American natives. The media also now have stars like Fareed Zakaria and Tunku Varadarajan.

Just as the Chinese have changed their traditional image as laundry operators in the United States, and one thinks instead of major architects like I.M. Pei and stellar musicians like the cellist Yo-yo Ma, we are no longer represented by the Eastern gurus like the free-love-celebrating Rajneesh - once, when I was in Pune where Rajneesh had an Ashram, the hotel had a poster which said: "Disco Dance Tonight: For Sanyasins Only" - and the dimpled Deepak Chopra who has splendid lines like: “You may think I am standing before you; but it is only a bunch of molecules” which make witless middle-aged Americans reach for their purses. These were the dispensers of revenge on the West by the East as brilliantly portrayed in her penetrating essays in Karma Cola by Gita Mehta. No longer are they anything but boutique operators on the fringes, jostling for the America dollars with the Moonies. Today, therefore, in place of snake charmers, we charm the American public with our splendid achievements.

We have also demonstrated that, if only we are given the chance and the opportunity, we can work our way to the top: a possibility that the United States, a land made by immigrants which welcomes immigrants more than any other country, offers us in spades. This too has reinforced the lesson that the diaspora has offered us directly through instruction: clearly, there was nothing special about India that doomed it to its low growth rate, not its size, not its culture, not its geography, not its history. The problem lay in our choice of wrong policies; when the policies were good, Indians could perform at the most enviable levels, second to none. The diaspora’s astonishing performance gave us therefore the shot in the arm, the confidence that had been lost by many as we sank into failure until our reforms began.

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