Democracy holds India together as country and economy: BS Panel

India has done remarkably well in its 75-year journey since independence, with democracy being the lifeblood of the nation, including of its businesses and economy. The march of start-ups we see today is an ode to the democratization that is making it possible for new entrepreneurs to challenge the established order, leading to overall growth, development, and employment.

However, the journey is not without its challenges and contradictions. Though democracy stands out as a major virtue and a matter of pride, it is being challenged by the weakening of the country’s institutional framework. The first 75 years created and strengthened many a fine institution, but some of this structure now appears to be – in a manner of speaking – fraying at the edges.

These were the key messages to emerge from a star-studded panel that came together on Tuesday as part of an event titled, “Business Standard Platinum Perspectives”. The topic of the discussion was India@75 – Past, Present and Future. The panellists were Akhil Gupta, Vice Chairman of Bharti Enterprises, Yamini Aiyar, President and Chief Executive Officer of the Centre for Policy Research, Shekhar Shah, Vice Chairman of ISPP Academic Advisor Council, and Andrew Holland, CEO of Avendus Capital Alternate Strategies.

From 1947 to 1990, the fostering of the democratic spirit was the most remarkable thing across the different areas represented by the panelists.

“We embedded the idea of democracy in a country that was seen with skepticism when we adopted the democratic path. Most believed it was impossible. But our democracy became increasingly competitive, moving from single-party dominance to a multi-party competitive system with new pulls and pressures from states and regional parties,” said Aiyar.

However, she pointed out that democracy deepened its roots more in the form of capture of state power, and did not really translate into a substantive democracy that could deliver on socioeconomic rights for all citizens.

Shah pointed out that the snail’s pace of economic growth during the first 45 years, along with the rising population, led to discontent. “This was a period when we could have done better,” he said.

Akhil Gupta, too, conceded that the corporate sector was a mess in the period up to 1990, as the country embraced socialism. “Nothing could have been worse than the nationalisation of banks from the corporate sector’s point of view,” he said.

However, Gupta pointed out that this was also the period when our institutions became strong. “We remember emergency. But the same country overthrew Mrs. Gandhi and had a smooth transition of power,” he said, highlighting the separation of the judiciary and executive as a critical accomplishment for the young nation.

Things began to change dramatically with the onset of the economic reforms in 1991, but the markets took time to create an impact. “It took India 60 years to have a $1-trillion economy, the next trillion came seven years later, and the next trillion after another seven years,” said Holland.

What the markets did create early on was scams. But Holland does not see them as a major disruption. “In the UK, investment bankers, knowing deals coming through, were buying shares. That was rife through the 1980s. Before the dotcom fall, analysts were writing research reports knowing the companies they were writing about were terrible. Regulations take time to evolve and tighten,” said Holland. 

For the corporate sector, the 30 years after 1991 changed everything for ever.

“The 1990s were the golden period for not only the sector I come from (telecom) but also for many other sectors. Our first IPO (initial public offering) was in 2002, when we raised Rs 653 crore. It was the biggest IPO in India till then. The scales have changed since then,” he said with a chuckle. “The private sector has started getting celebrated.”

With the opening up of the economy, the word in the corporate sector was that if you did not change quickly, someone will overtake you. And that applied to everyone. “That was a great sign of success for India Inc,” said Gupta.

Shah, however, pointed out that in this period India started seeing the rise of inequality, not only among households but also between states. “India has had to deal with low-income traps as well as the middle-income trap, where you are not only worried about providing basic amenities such as clean water and air but also worry about innovation and competition. That creates complex problems for politicians as well as citizens,” he said.

According to Aiyar, somewhere down the line, India forgot to continue making investments in institutions. “The failure to build robust regulatory institutions opened us up to the obvious pressures of democracy and led to the twin balance sheet problem,” she said.

Naturally, for the next 25 years, the panellists picked equitable wealth distribution as the biggest issue to be addressed. And that will require, as Aiyar pointed out, investing in an accountable and capable state.