Material well-being was posited as one of the goals of life in ancient India and the king?s dharma was to nurture

the productive forces in society, including the market. Then

why is 21st century India getting throttled by a weak state?

Rising on the back of free markets

That India is rising in the twenty-first century on the back of free markets is not surprising. It has a long tradition of encouraging and promoting markets. Since ancient times the merchant has been a respected member of society, one of the ?twice-born?, a high caste in the social hierarchy. Merchants and bazaars, however, emerged even earlier as centres of exchange in the towns of the Indus Valley (3300?1500 BCE) or even in the Neolithic age, soon after Indians first engaged in agriculture and there was a surplus. As Jean-Jacques Rousseau has taught us, inequality also had its origins with the birth of agriculture because with it was born private property.

There was purpose to economic activity and the ancients were acutely aware of it when they posited artha, ?material well-being?, as one of the goals of life. They believed that the pursuit of money is justified to the extent that it leads to the good life. That good life also had other goals, in particular, dharma, ?moral well-being?, which was higher than artha. This meant that there was a right and a wrong way to pursue wealth, something that Lalit Modi forgot. Moreover, the pursuit of artha was meant to make the world a better place. In today?s language we might interpret this to mean that business has a purpose?for example, to take a society from poverty to prosperity, a goal that many contemporary Indian entrepreneurs subscribe to. Because the state was historically weak, regulation in India was generally light. An exception to this was the heavily regulated state in the political economy text Arthashastra. The king?s dharma, we are told in the Mahabharata, was to nurture the productive forces in society, including the market: ?The king, O Bharata, should always act in such a way towards the Vaishyas [merchants, commoners] so that their productive powers may be enhanced. Vaishyas increase the strength of a kingdom, improve its agriculture and develop its trade. A wise king levies mild taxes upon them? (Mahabharata, XII.87). Practical advice indeed?otherwise, the epic goes on to suggest, Vaishyas will shift to neighbouring kingdoms and the king will lose his tax base. The merchant was generally well thought of. He is often the hero in the animal and human stories of the Panchatantra, the Kathasaritsagara and other texts, where he is sometimes a figure of sympathy and at other times of fun. The Mahabharata speaks of Tuladhara, a respected trader of spices and juices in Varanasi, who surprisingly instructs a high Brahmin about dharma and how to live.

Speaking modestly, he compares his life as a merchant to a ?twig borne along in a stream that randomly joins up with some other pieces of wood, and from here and there, with straw, wood and refuse, from time to time?. The analogy of the twig brings to mind the picture of a real-life trader who has multiple suppliers and buyers, and whose gains and losses are not in his control but depend on the impersonal forces of the market. A classical liberal in the eighteenth century, Adam Smith, taught the same lesson. He observed in The Wealth of Nations that a businessman was at the mercy of an ?invisible hand? of the market, which determined his prices and profits. In a competitive market, an entrepreneur is more like Tuladhara?s twig randomly swept along the flow, not an oligarchic ?crony capitalist?. Despite a general sympathy for the merchant, commerce in India had a bad odour at times, not unlike in other societies. The Vaishya, after all, is third in the caste hierarchy, and somewhat suspect in the minds of the ruling castes. This is typical of all agrarian societies. Even in Babylon of the sixth century BCE, Jean Baechler, the great economic historian, tells us that firms took in money deposits, issued cheques, gave loans at interest and invested in agricultural and industrial enterprises. Yet they were looked down upon and commercial activities were universally held in low esteem. In India the negative image scaled a peak during its socialist decades between 1950 and 1990 when the state was placed at the ?commanding heights of the economy?. ?Nehru the Brahmin? combined with ?Nehru the aristocratic Fabian socialist? and this deadly blend set a tone for the rest of society in its view of the businessman. That image has gradually changed after 1991, but even today when there is the wondrous spectacle of thousands of young Indians starting business ventures, the idea that their struggle for personal gain might actually promote the common good is still too fantastic for people to accept. This prejudice is partially behind the animus against the commercial nature of the IPL. Even sophisticated Indians continue to distrust the market?perhaps because no one is in charge. This is also why market-based reforms are hard to sell during elections. No wonder Samuel Johnson used to say, ?There is nothing which requires more to be illustrated by philosophy than trade does.??

A sense of possibilities

I first met Shashi Kumar in early 2000. He was twenty two and had just joined a business process outsourcing (BPO) call centre in Gurgaon. He came from a tiny village in Bihar; many of his friends at work did not know that his grandfather had been a low-caste sharecropper in good times and a day labourer in hard ones. They had been so poor that on some nights they had nothing to eat.

Somehow his father had escaped from bondage and found a job in a transport company in Darbhanga. Since they could not manage on his father?s salary, his mother had gone to work. She taught in a tiny school in their neighbourhood where she earned R400 a month, and she would take him with her to the school, where he was educated for free under her watchful eye. Determined that her son should escape the indignities of Bihar, she tutored him at night and got him into college. When he finished, she presented him with a railway ticket to Delhi. Ten years later Shashi Kumar had risen to a middle manager position, and exuded the self-assurance of a young man with a future. He earned R65,000 a month and spoke confidently in English to customers in America. He lived in a two-bedroom flat, which he had bought four years ago with a mortgage from a private bank. He drove a nice car and sent his daughter to an expensive private school. He had just returned from an assignment in Boston where his company had sent him for training at their customer?s office. ?It?s a good time to be alive,? said his mother, who has been living with him in Gurgaon ever since her husband died. ?I don?t know how he managed it. I just saved a few paise each day and gave him a railway ticket. He did the rest.? Shashi Kumar had turned out to be an affable, diligent young man. What made his life different from those of the previous generations was a real sense of life?s possibilities.

He was a product of the new middle class, the fastest growing segment of Indian society. Had his grandfather dared to dream of another kind of life he would have been beaten up by his landlord in Bihar. Shashi Kumar?s story goes back to 1991 when India opened its economy and the first reforms in the telecom sector made it possible for a company in America to ?outsource? its back office jobs to India. It was the engineers in information technology who showed that they could write software at a fraction of the cost, and during their day hours while America slept; in the morning, the American companies would have IT solutions waiting for them. They provided a valuable activity to their customers for which they were richly rewarded. Gradually the customers realized that they could also send other back office jobs to India, jobs that could be attended to via the telephone. For many of these low-end jobs, you did not have to be an engineer. All that was needed was a modest knowledge of English and familiarity with computers. The jobs involved customer service, and the time slots for these were America?s daytime hours?India?s night-time?when customers called the helpline. These jobs had never migrated before, but India?s companies were ready when the opportunity came. Gradually, they also hired accountants, lawyers, scientists and advertising professionals as outsourcing moved up the knowledge chain. If the government had not liberalized and had remained closed, Shashi Kumar would not have got a break. This is how several million youngsters found jobs in glass-enclosed office towers in places like Gurgaon.

Before 1991, there had been little possibility of upward movement. The only way to break into the middle class was to get a government job, which was not easy. So, if you got educated and did not get a job, you faced a nightmare that was called ?educated unemployment?. ?Now anyone can make it. All it takes is basic education, computer skills and some English,? said Shashi Kumar. ?But why have these jobs not come to Bihar?? asks his mother mournfully. Her son had the answer.

?I am a Yadav, and so was Lalu,? he said, referring to Lalu Prasad, the former chief minister of Bihar who was apparently of the same caste. ?You educated me but Lalu did not educate Bihar. He dismissed computers as toys of the rich and kept his people backward. Eventually, he realized his mistake. By then it was too late.?

Last year I ran into Shashi Kumar on the spanking new platform of the Guru Dronacharya station of the Delhi Metro. I was surprised to see him in a Gandhi cap. He was surrounded by friends from his middle-class neighbourhood in Gurgaon and he introduced them enthusiastically. They also wore the same cap. All winners in India?s economic rise, they were headed for the Ramlila ground where Anna Hazare was holding another anti-corruption rally. They looked an unlikely band of revolutionaries. With good jobs and nice families, they lived in comfortable flats in Gurgaon, drove cars and sent their children to good schools. What were they doing waving flags on a platform of the Metro line between Gurgaon and Delhi?

Shashi and his friends belonged to the new middle class, which voted daily in the bazaar but hardly ever at election time. India?s middle class had great economic clout in the marketplace but that did not seem to affect the nation?s political life where the countryside still determined the outcome of elections. The power to consume had got divorced from political power, and looking at them I wondered if this was about to change after Anna Hazare. Shashi Kumar explained that his modest turn to political activism began with Ruchika Girhotra, whose tale I have recounted in Chapter Three. He was acquainted with her family?they had come from Chandigarh on a visit to his neighbour?s home. He was vaguely aware that her case had languished in the courts for almost two decades. When the verdict finally came, and he saw it on television, he was outraged and he wanted to do something. The train came and we squeezed in. A young man got up and made a place for me. I smiled at him, happy that some of the old courtesies of the road persisted in the razzmatazz of a rising India. The young men found places near me. One of Shashi Kumar?s friends explained that all these years they had been intent on their careers and had had no time for anything else until Anna Hazare roused them.

India Grows at Night: A Liberal Case for Strong State

Gurcharan Das

Penguin Books

Pp 320

R599