Winston Churchill once observed that “India is just a geographical term with no more a political personality than Europe”. That remark sounds increasingly relevant today. Voters look less and less to the central government for answers to their problems, and increasingly the momentum for economic reform comes from the chief ministers of the country’s 28 states. As Indians come to see themselves first as citizens of Bihar or Tamil Nadu, they are turning to regional parties, or the few strong regional leaders of national parties such as the BJP and the Congress party. Voter turnout runs 10 per cent higher for regional elections than for national elections, and the gap is growing. Voter showing for the last three general elections has been in a tight band of 57-59 per cent, but state election turnouts have progressively increased, signifying the rising participation of the electorate at the regional level.
As central power fades, India is again starting to look like a commonwealth of states with distinct identities and a waning national consciousness. However, the growing strength of regional political forces is not tearing the country apart, as Churchill thought it might. True, the diminishing of central power is making it more difficult for New Delhi to champion breakthrough reforms, but secession movements in states like Kashmir, Punjab and Tamil Nadu peaked decades ago.
What the rise of the regions has done is to have spread the economic boom into every corner of the country, allowing new consumer subcultures to emerge (which is good for growth) alongside the rise of more unchecked cronyism (which isn’t). The complexity of regionalisation is a big reason why the future economic growth of this country is so tough to call, with some regions gaining and others losing momentum, and why its chances of remaining a breakout nation are 50/50.
The North-South Divide
The centre of economic dynamism is shifting from the south and parts of the west to the major population centres of the central and northern heartland. If the corruption issue has discouraged many businesses from investing, there are many exceptions in provinces where competent new governors are actually cleaning up the local business scene, and where the consumer culture is exploding. In the 1980s, when India first began to reform, economic growth increased from 3 per cent to 5.5 per cent, propelled mainly by the emergence of technology and outsourcing industries in Karnataka and Tamil Nadu. Back in 1981, incomes in the most-developed states were 26 per cent higher than those in undeveloped states, and that gap had grown to 86 per cent by 2008.
The rise of the rest in India resulted from a number of factors, perhaps most important the election of better leaders. In a recent analysis, Credit Suisse showed that over the last 20 years many Indian states have undergone rapid growth spurts, but only once under a Congress party chief minister. This helps explain why the Congress is now the main governing party in only two of the 10 major Indian states, down from eight in the 1980s and all 10 in the 1960s. Meanwhile, there are dozens of examples of economic growth led by rival parties.
Honk, honk Traffic jams on a water-logged Bangalore road. (Photograph by Reuters, From Outlook, May 07, 2012)
The most striking example comes from Bihar, a state that V.S. Naipaul once described as “the place where civilisation ends”. Chief minister Nitish Kumar stormed into office in 2005 on a wave of voter frustration with the general chaos, and launched an aggressive campaign to bring order and common sense to a lawless territory. Bridges and roads got built, Bihar started to function, then to fly. Now its economy is growing at 11 per cent, the second fastest in India, and Nitish is lauded as a model of what a straight leader can accomplish in a crooked state.
Meanwhile, India as a whole was going the opposite way, as the formerly dynamic southern states seemed to a hit a wall of complacency. The economy in six Indian states grew faster than 10 per cent in 2010, but none of them were in the south. Even when India’s growth dipped to 6.9 per cent in the fiscal year ended March 2012, the northern states as a whole showed a slight year-on-year acceleration, with the bulk of the deceleration attributable to the west and the south.
The southern states have also seen a decline in the competence of their leaders, and growth has fallen accordingly: over the past 10 years, Karnataka, Andhra Pradesh and Tamil Nadu have seen growth rates slip, in some years to about half their previous double-digit pace. Some southern Indians explain this away by saying that they already had their big boom, but this is hardly the way to follow China. In China, the rich southern states experienced a boom for three decades, not just one, and have reached annual per capita income levels of $15,000-20,000 while India’s southern states still have a per capita income only slightly above the national average of $1,400.
To an extent, isolation set up the remote states in the northern and central parts of India for success: the global credit boom of the last decade passed them by, which meant the crisis that followed didn’t leave them broke, and they have room to borrow to build new enterprises. The global commodities boom has also worked to the advantage of these regions, which are home to rich reserves of coal and iron, and most of India’s new steel and power plant projects. Nitish Kumar and other new leaders are taking the simple steps required to start growing from a poor base—particularly building new roads and wireless telecom systems. Literacy rates are rising faster in the north than the south, evidence that the new leadership is taking advantage of their demographic potential: half of India’s under-15 population resides in just five underdeveloped states—Uttar Pradesh, Bihar, Madhya Pradesh, Rajasthan and Orissa.
The New Map of the Middle Class
There are three layers of life in India: the increasingly cosmopolitan cities, the faceless towns and the often desperate villages in which, at first glance, not much seems to have changed in recent decades. I’ve travelled the back roads all over the country, from the southeastern coastal boomtown of Nellore to the aptly named Bhagalpur (“abode of refugees”) in Bihar, and everywhere I’ve seen the same wild variety of vehicles with and without motors, from motorbikes to the colourful tempos, all pouring through teeming streets into a central square graced by the bust of a major political figure, surrounded by shops built in the same utilitarian-concrete style.
Expressway in Greater Noida, UP—as smooth as “Basanti’s cheeks”. (Photograph by Sanjay Rawat)
It appears to be a nation without much sense of modern aesthetic, a stretch of sameness that runs 2,000 miles north to south, yet look more closely, and diversity abounds. Beauty parlours mushroom at every corner, all offering regional spins on the latest hairdos and betraying a deep inner individuality and local personality. Walk in any door, scan any store shelf, and the stunning variety of regional tastes and styles jumps out: from local brands of cooking oil to hair oil, but the ingredients differ from state to state. Even within cities, the favoured style of rice or pickles can vary from neighbourhood to neighbourhood. This is India at its tradition-minded extreme, still clinging to local codes, in baldness cures as in language.
But a one-size-fits-all chain store won’t always work in India. The CEO of a large Korean consumer company recently told me that while Chinese consumer tastes are growing more homogeneous, India’s are not. In China, he says, he was surprised to find that magazines like Vogue and Elle are doing well in all major cities, while in India a different array of new publications is blossoming in every state. In China, everyone is learning to speak Mandarin, which is even displacing Cantonese in its traditional heartland along the southern coast, including in Hong Kong. As Beijing relocates members of the Han Chinese majority—who constitute 90 percent of the population—to minority regions, even once-remote areas like Xinjiang and Tibet are entering the Han consumer mainstream. The growing sense of Chinese nationalism, based on pride in the revival of China as a major power, has helped to solidify the emergence of a unified national consumer culture, while the rise of provincial political powers in India is having the opposite effect. “When people say, let’s go to India, I say, ‘Okay, but where?’” says the CEO. Brand managers need to think of India as a United States of Europe and deal accordingly with the problem of selling goods in a nation where even the dates and names of the holiday seasons—as well as the peak seasons for brand advertising—shift state by state.
At the same time, rising incomes in the north have been accompanied by rising incomes in rural areas all over the country, partly a result of higher prices for rice and other crops, generous government support to farmers, and large salary increases for public and rural workers. This has allowed the new consumerism to penetrate the most rural and traditional corners of the country, where low incomes would have appeared to bar entry a few years ago. Demographers traditionally expected consumers to start asking for non-essential “aspirational” goods like deodorant and hair conditioner only after they entered the middle class, so they mapped demand for these goods by plotting the location of neighbourhoods where incomes were rising to middle-class levels. That generally meant the cities and the south.
Instead, as access to modern media has spread, demand for aspirational goods has grown in regions that have not yet reached those income levels. Car sales are increasing faster in the north than in the south. As recently as 2006, one of India’s largest carmakers spent only 20 per cent of its marketing budget outside the cities; today the share is split 50/50, with much of the new growth in the northern states. Among increasingly brand-conscious young men in northern India, it is popular to flaunt the red band of Jockey underwear over low-waisted denim jeans. In rural Bihar, where the Jockey brand is still out of reach, discount knockoffs with labels such as “Obama” enjoy brisk sales.
How the ‘Population Bomb’ Became a Competitive Edge
The northern states are the epicentre of India’s newfound excitement about population growth, just as they were once the focus of fear about the population bomb. During the 1970s and 1980s, the growing population was seen as a threat to the economy, and this fear inspired extreme population control measures during the Emergency. Even into the 1980s, the new government kept urging Indians to embrace population control as a civic duty.
Low connectivity Queues outside a job fair in Hyderabad
In the last decade, however, the government dropped this theme, and the overwhelming consensus holds that population growth means more workers who can drive economic growth. Yes, a growing pool of young workers can be a huge advantage, but only if a nation works hard to set them up for productive careers. A recent survey by the consulting firm Aon Hewitt shows that salaries of urban workers are rising faster in India than anywhere else in Asia, with average wages increasing by nearly 13 per cent in 2011—a symptom of the fact that when so few workers are highly skilled, those who are can charge a premium. The growth in demographic analysis as a global industry is striking. I can’t count the number of demographers who have come to my offices in recent years, all offering some spin on the basic idea that population growth drives economic growth, and proffering tips on which nations will enjoy the biggest “demographic dividend”. These fads come and go on Wall Street. In the 1970s and 1980s, every investment house had its own political economist, as a kind of coup and war forecaster, but they were gradually phased out in the 1990s as wars became more localised and political stability spread in the developing world. For now, the demographers rule, and they love to talk about India. Consulting trends like these should be treated with the amused detachment they deserve, and the knowledge that this fad, too, shall pass. No doubt the phrase “population bomb” will be rediscovered before too long.
India’s hope for a big payoff from population growth ignores where people are living. Rising population helps drive growth when people are moving to higher-paying and more productive factory jobs in the cities, not languishing in farm regions. In China, 23 cities have grown from a population of 1,00,000 to more than a million since 1950. India has only six cities in this explosive growth category, and a more aggressive effort to encourage urbanisation might have boosted India’s long-term growth rate to double digits.
India Is a Political Chameleon, in a Good Way
None of this seemed to matter too much to India’s policymakers, who until recently were supremely confident that their country would become the fastest-growing major economy this decade. Even if they were ignoring the basic dynamics of how demographics, debt and corruption can impact long-term growth, the optimistic view of India may still be right. China’s economy is likely to slow down as the law of large numbers catches up with it, thereby more or less ceding the number one spot to India, which still has plenty of room to grow from a low base. The wild card for India is its freewheeling democracy, an environment in which the zeitgeist can change very quickly. It was only in the last decade that India came to see itself as the next China, and came to see its growing population as a competitive advantage rather than as a threat. Only now is the southern sense of superiority over the north giving way to a newfound respect. The recent case of national overconfidence could give way just as fast to a healthier sense of urgency, with new leaders who see the complex picture of India for what it is.
(Ruchir Sharma is head, emerging markets, Morgan Stanley Investment Management and author of Breakout Nations.)
In his deceptively-toned piece The North Face (May 7), Ruchir Sharma puts down a Kashmir-Bihar joke and claims it originated in the south. I defy him to prove this. The rest of the piece is also filled with this sort of stereotypes-made-to-look-good-by-throwing-in-some-numbers buffoonery. And what is Outlook’s deal, posting photographs of ‘smooth expressways’ against Bangalore’s traffic blocks? Do you really want to go down this road, playing up the gap created by regionalist forces?
Elvin Jacob, Bangalore
Sharma’s focus on quantitative details and numbers makes him miss out on qualitative ones. It’s the same difference between mutual fund guys like John Paulson and true-value investors like Warren Buffett.
Arun Bharadwaj, Mumbai
There are economic, temporal and situational reasons for the south’s rise as also the north’s latent surge. But the author colours it with a divisive tinge.
Commentspaper, on e-mail
It’s sordid, the way you use photos to illustrate the story.
Bihar’s economy is too small to compare with the big states. You have to analyse growth in terms of capital and gdp to judge. And in that, north India is really not in the picture.
Pranao Hingnekar, Wardha
Bihar is more east India than north India. Why is everything other than four south states north India? Don’t east and west count as directions?
A glance through the industrial development and investment data of the last two decades is enough to blow holes in Sharma’s theories. I grant that political leadership has a significant role, but having systems in place is what matters.
Manish Desai, Mumbai
This is the problem with our democracy: free will, to publish whatever and not be taken to task. We really need a bill to revoke a few media rights.
Aakash Raju, on e-mail
Growth rate? If you grow from 90 to 99 per cent, it’s 10 per cent and if you grow from 10 to 25 per cent, it’s 150 per cent.
Adal Arasu, Coimbatore
After all the media buzz, I had almost placed an order for Sharma’s book. But after the reams of misleading ‘facts and figures’ and his absurd conclusions, I no longer have faith in his “scholarship”. Thanks, Outlook, for the money saved.
Shankar Pandian, Kuwait
Reading Ruchir Sharma makes me want to question his motives. Why does he choose facts cherry-picked to suit his purpose? While it cannot be denied that Gujarat is developing at a higher-than-average rate, Sharma does stretch the argument too much. When did southern states make any arrogant claims at all? Is this the time to start an unnecessary and unhealthy controversy? It’s a negative theme for a cover story.
I searched for ‘Maharashtra’ on the webpage for Sharma’s article and couldn’t find it. This is surprising. Maharashtra is certainly not too insignificant to ignore or to be kept out of the statistics totally.
Ajit Welling, Pune
It’s good the poorer northern states are growing. But isn’t it too early to talk of a convergence between them and the southern states? Here are the latest per capita annual income figures: Andhra Pradesh: Rs 36,345; Karnataka: Rs 37,464; Kerala: Rs 46,511; Tamil Nadu: Rs 46,823; Bihar: Rs 11,558; UP: Rs 15,182. Anyone with basic training in economics or statistics knows that growth rate comparisons depend on the periods chosen. Indeed, from financial years 2006-07 to 2009-10, northern states witnessed higher growth rates in per capita incomes. But official data says, from 2008-09 to 2009-10, the highest growth rate in per capita income was for Kerala and Tamil Nadu. The author has chosen Karnataka and Andhra Pradesh to suit his absurd thesis.
Subin D., Delhi
The arrogance of the south? Can anything match the arrogance of Manu in branding those who live south of the Vindhyas as barbarians? Can anything match the arrogance of the Gandhi clan, which thinks an Iranian complexion and a Roman nose are licence enough to lord over a nation?
Senthil Sekar, on e-mail
Ruchir Sharma’s article makes a superfluous comparison. From the late 1960s, the south never got its fair share of central funding. Remember, almost all the northern states had double-tracked railway routes; it wasn’t till the 1980s that double-tracking began in the south. May I also ask why this article (or extracts) was published in the first place?
Akila Alagappan, on e-mail Perception triumphs over analysis in Sharma’s article comparing north and south India.
Rajesh, Phoenix, US
The comparison between north and south India is preposterous. What’s disappointing is the total amnesia for the East and the Northeast.
H.N. Ramakrishna, Bangalore
Bihar has proved that it is not the appendix but the liver of the nation.
Rajneesh Batra, Delhi
As an Indian, north, south, east and west don’t matter to me. The country, as a whole, must make progress. Let each part of the country, with its unique strengths and contributions, rise as one.
S.S. Kere, Virgina, US
Why pit the south against the north at all? It’s not as if growth in the north is at the south’s expense, as in a zero sum game. Growth anywhere’s win-win.
Kishore Dasmunshi, Calcutta
The important point here is that the growth rate in the northern states is catching up with those in the south and sometimes beating it. This shows complacency on part of the south as much as it shows positive development in the north.
Ruchir Sharma would have done well to compare per capita growth, instead of overall economic growth, of each state. Another important measure of comparison would’ve been income distribution.
R.V. Subramanian, Gurgaon
For heaven’s sake, kindly avoid publishing such silly and shallow articles. Healthy debate on contemporary topics is welcome, but deliberately creating rifts—“Arrogant South” indeed—is mischief.
G. Niranjan Rao, Hyderabad
What’s crippling the northern states is shortage of power. To generate power on a large scale requires sustained political will. Has Ruchir Sharma seen what UP roads are like? What’s the point of showcasing a 25-km-long Noida expressway?
M.K. Saini, Delhi
In a large country like India, regional disparity in levels of prosperity is bound to persist. Regrettably, this tiny extract of a 300-page book has been positioned rather sensationally. Unless read in the total context of the book, one comes away with the wrong impression.
Manish Banerjee, Calcutta
Going by the extract you’ve featured of his book (The North Face, May 7), it looks like Ruchir Sharma has equated development with nothing but bijli, sadak, pani and on that basis made out north India to be a winner. He ignores sanitation, access to legal help, women’s safety and other issues—in all of which the southern states score much higher.
Nirupama Kotru, on e-mail
If the so-called development and progress in the north can prevent a southward migration, it would be really nice. Kannadigas are tired of being pushed to the sidelines in cosmopolitan Bangalore.
B. Shivarudraiah, Bangalore
Sharma makes it seem as if south Indians have always thought of north Indians as backward. He must remember that, despite the anti-Hindi movement of the 1950-60s in Tamil Nadu, by and large, south Indians have always remained a patriotic lot.
C. Rajagopalan, Bangalore
There is growth, no doubt, but is limited to a selected few. Look at the number of people living below poverty line. They are sad 37.2%, even as the criteria of BPL is very loose and lenient. A person who earns less than 32 Rupees per day in urban areas and below 28 rupees in rural areas is supposed to be below poverty line. (Please correct the data, if there is any minor mistake)
Very well said.
There are some gentlemen talking about maharshtra tycoons. While most of the indstrialists and rich men live in mumbai but counting them as purely maharashtrian tycoon will not be correct. They have their ventures all over India and should not specific. Tatas, Ambanis are living in mumbai but tagging the with maharashtra is not correct.
First of all, Bihar is more of East India than North India. I don't understand why we are so particular about labeling everything other than the four southern states as "North India"? Don't east and west count as directions?
Secondly, even if the non-southern states are all labeled as North India, it does not make sense to benchmark just four states against the remaining 24 and try to draw meaningful comparisons.
All this hoopla about the article/the book seems to be much ado about nothing. I agree with those who rightly pointed out that it is an investment bankers analysis, with their own commercial objective. It would be futile to treat it as an economic analysis. Again to take umbrage of some loose comments made by the author is unwarranted.
It is clear that, some of them who posted comments, could not understand that, the article is the discernment on economic stats and not related to discrimination between the regions.
We at Outlookindia.com welcome feedback and your comments, including scathing criticism
1. Scathing, passionate, even angry critiques are welcome, but please do not indulge in abuse and invective. Our Primary concern is to keep the debate civil. We urge our users to try and express their disagreements without being disagreeable. Personal attacks are not welcome. No ad hominem please.
2. Please do not post the same message again and again in the same or different threads
3. Please keep your responses confined to the subject matter of the article you are responding to. Please note that our comments section is not a general free-for-all but for feedback to articles/blogs posted on the site
4. Our endeavour is to keep these forums unmoderated and unexpurgated. But if any of the above three conditions are violated, we reserve the right to delete any comment that we deem objectionable and also to withdraw posting privileges from the abuser. Please also note that hate-speech is punishable by law and in extreme circumstances, we may be forced to take legal action by tracing the IP addresses of the poster.
5. If someone is being abusive or personal, or generally being a troll or a flame-baiter, please do not descend to their level. The best response to such posters is to ignore them and send us a message at Mail AT outlookindia DOT com with the subject header COMPLAINT
6. Please do not copy and paste copyrighted material. If you do think that an article elsewhere has relevance to the point you wish to make, please only quote what is considered fair-use and provide a link to the article under question.
7. There is no particular outlookindia.com line on any subject. The views expressed in our opinion section are those of the author concerned and not that of all of outlookindia.com or all its authors.
8. Please also note that you are solely responsible for the comments posted by you on the site. The comments could be deleted or edited entirely at our discretion if we find them objectionable. However, the mere fact of their existence on our site does not mean that we necessarily approve of their contents. In short, the onus of responsibility for the comments remains solely with the authors thereof. Outlookindia.com or any of its group publications, may, however, retains the right to publish any of these comments, with or without editing, in any medium whatsoever. It is therefore in your own interest to be careful before posting.
9.Outlookindia.com is not responsible in any manner whatsoever for how any search engine -- such as Google, Bing etc -- caches or displays these comments. Please note that you are solely responsible for posting these comments and it is a privilege being granted to our registered users which can be withdrawn in case of abuse. To reiterate:
a. Comments once posted can only be deleted at the discretion of outlookindia.com
b. The comments reflect the views of the authors and not of outlookindia.com
c. outlookindia.com is not responsible in any manner whatsoever for the way search engines cache or display these comments
d. Please therefore take due caution before you post any comments as your words could potentially be used against you
10. We have an online thread for our comments policy:
You are welcome to post your suggestions here or in case you have a specific issue, to directly email us at Mail AT outlookindia DOT com with the subject header COMPLAINT