This guest post was contributed by Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics. He notes two surprises in the outcome of India’s recently concluded election and suggests that India offers an alternative model of development for much of the world.
The results from the Indian elections point to a victory for the incumbent Congress party and its allies. Congress was led de jure by the economist-turned-politician Dr. Manmohan Singh and de facto by the Italian-born Sonia Gandhi, who is part of the Nehru family, which has been a force in Indian politics since the late 1800s and provided three Prime Ministers.
Two casualties of the election have been the Communists who resisted economic policy reform and opposed the nuclear agreement between India and the United States, and the Hindu nationalist party, the BJP.
Going forward, these results augur well for Indian economic policy reform. The Congress will be numerically strong enough not to have to rely on partners for political support and will be able to push through new policy initiatives.
Another likely consequence is that the Nehru family will probably provide India, not immediately but within the next couple of years, with its fourth Prime Minister—Rahul Gandhi, son of Rajiv Gandhi, grandson of Indira Gandhi, and great grandson of India’s first Prime Minister Jawaharlal Nehru.
These results are surprising for two reasons. Indian elections have traditionally been characterized by the phenomenon of anti-incumbency: ruling politicians get routinely thrown out of power. This government is the first in over 40 years that has been re-elected after a full term in office.
The second reason for surprise is that anti-incumbency has been defied at a time of global economic crisis. While India was affected by the crisis, it has been less affected than other countries for reasons explained here and here. Economic growth, while down from the 9 percent annual rate prior to the crisis, will be about 5.5- 6 percent this year. Moreover, rural India – where the bulk of voters live – has done well. Indian agriculture, which has been relatively insulated from the world economy, has been resilient (good monsoons for five years have played their part) and even thriving (sales of cell phones and two-wheelers have been perky). The ruling Congress government benefited enormously from these economic conditions.
Internationally, the Indian election results and the performance of its economy during the crisis raise the question of whether the Indian approach to globalization—not too much foreign finance like the Eastern Europeans and not too export reliant as China—has some merit. Goldilocks globalization and dynastic democracy is the model that India is offering the world.
By Arvind Subramanian