Subcontinental Drift

A slowing economy, an exploding submarine, corruption scandals -- what's happened to India?

Barely a decade ago, the National Intelligence Council's Global Trends 2020 report highlighted the imminent rise of India, outlining its likely impact on a host of international regimes ranging from climate change to trade. More recently, during his maiden visit to the country in November 2010, President Obama stated that India was not merely a rising power but had actually risen. Indeed, in a subsequent statement that left many of his Indian interlocutors almost breathless, he even proffered qualified American support for India's entry as a permanent member of a reformed and expanded U.N. Security Council. Neither the NIC report nor President Obama's affirmation was out of step with conventional wisdom. For over a decade, India had been one of the four BRIC nations, destined to play a major role in the global economy.

Such characterizations now seem inaccurate, if not downright fatuous. In the last quarter, the Indian economy grew at a mere 4.5 percent (anemic by BRIC standards), and even the most optimistic of analysts do not believe that it will fare much better in the next. More recently, the Indian stock market plunged by 4 percent, falling to an 11-month low last week. Other economic indicators also offer cold comfort. Inflation is now hovering around 6 percent and is unlikely to abate.

Sadly, its economic woes are not the only challenge confronting India. In early August, one of the country's recently retrofitted, Soviet-era, Kilo-class submarines blew up and sank off a naval base in Mumbai, emphasizing India's military vulnerability at a time when China's navy is making steady inroads into the Indian Ocean. Days before the tragedy at the naval base, a carefully negotiated ceasefire along the Line of Control (the de facto international border) in the disputed state of Jammu and Kashmir was breached, resulting in the deaths of five Indian soldiers. Subsequent clashes suggest that the ceasefire may well be at an end.

Not only does India now face renewed external threats at sea and on land, but it is also witnessing a resurgence of ethnic and religious strife in critical parts of the country. In early August, riots swept through Kishtwar, a town in Jammu in the southern part of the contested state. Such communal violence apart, a Maoist insurgency has become endemic to significant parts of the country. Earlier this summer, notably in June and July, the insurgents struck at will against police and paramilitary posts in the states of Jharkhand and Chattisgarh.

Other troubles are also besieging the United Progressive Alliance coalition government, which is dominated by the Congress Party. Over the past several years, it has been buffeted with one corruption scandal after another, including one involving the sale of the 2G spectrum that may have cost the exchequer as much as $40 billion. Though charges were leveled against the then telecommunications minister, A. Raja, and other associates, he and many others are now out on bail. The telecom scandal, however, was not the last that plagued the regime. A government investigative body, the Comptroller and Accountant General of India, issued a report in March 2012 that questioned the dubious allocation of coal seams to a number of Indian companies at throwaway prices. Most recently, Robert Vadra, the estranged husband of Sonia Gandhi's daughter, Priyanka, faces accusations of impropriety in some highly lucrative land deals around New Delhi.

How did the country abruptly reach this very sorry pass? The answers are complex and are rooted both in India's political culture as well as its institutional structures. It needs to be recalled that, in the midst of an unprecedented financial crisis in 1991, India undertook a spate of economic reforms. These reforms quickly spurred growth, making India's the second-fastest growing economy in the world after China's.

Despite this spurt, significant segments of India's slothful bureaucratic apparatus, as well as an entire generation of politicians, remained either hostile or unconvinced of the utility and significance of the reforms. Furthermore, even as India liberalized its economy, it did not move with dispatch to create new institutions that could adequately monitor and set transparent rules for a more open market. The resistance to reforms from segments of India's bureaucracy, the failure to create new institutions, plus a new propensity for populist programs using new revenue sources have conspired to produce disastrous consequences for both the economy and the polity.

For the bureaucrats, the reforms signaled an end to what eminent Indian economist Raj Krishna had sardonically referred to as the "license-permit-quota raj" -- a labyrinthine set of regulations, rules, and restrictions over which they had exercised considerable discretion. With the advent of these reforms, they lost their ability to extract rents from hapless businessmen and industrialists. Not surprisingly, in an attempt to protect their entrenched interests, they sought to stall the implementation of new rules at every turn.

The post-reform generation of politicians was pleased with increased revenues that ensued from greater growth and productivity. However, they showed scant regard for fiscal rectitude as large segments of the population, which were hitherto economically disenfranchised, sought improved living standards in a booming economy. To ensure continued political support, the political class resorted to a host of populist schemes without the slightest regard for their financial soundness. These included the creation of guaranteed work schemes for individuals below the poverty line. In principle, such an assurance of work was a desirable public policy goal. However, without mechanisms in place to ensure that this system actually benefited the targeted population, its actual implementation became yet another source of corruption and a drain on the exchequer.

Despite the highly uneven impact of this work scheme, the present regime is now in the midst of debating new legislation that would assure access to a minimal caloric intake for every Indian citizen. The goal of this proposed legislation is laudable, but a number of prominent economists have warned that the government simply cannot afford it. Nevertheless, because of the program's political popularity, the regime remains committed to implementing it, even though the fiscal deficit already stands at nearly 5 percent of the country's gross domestic product. The exigencies of winning elections are now making populism run amok with disastrous economic consequences.

One other feature of the political landscape helps explain India's current straits. Even as the economy dramatically expanded between 1991 and the present day, only piecemeal efforts were made to develop new institutions, mechanisms, and procedures for dealing with the ramifications of its expansion. Consequently, well-connected businessmen could still find ways to corner critical resources as the state withdrew from or opened up new economic vistas. The growing need for campaign funding in a political arena increasingly dominated by electronic media also led politicians of all stripes to turn to commercial elites for money. Not surprisingly, this nexus resulted in endless questionable deals. When, thanks to India's watchdog institutions and a feisty press, at least some came to light -- for example, the decision to purchase Agusta helicopters from Italy was allegedly influenced by bribes -- political cynicism and distrust with the government grew. Meanwhile, the permissive environment that enabled high-level scandal had also encouraged corruption among petty officials who believed that only an unfortunate few would actually face punishment.

This virtual collapse of probity at practically every level of governance has afflicted other critical sectors. Owing to the long history of shady defense contracting, the current minister of defense, A.K. Antony, has actually instituted a series of internal checks to ensure that money does not routinely change hands as the country purchases huge amounts of military hardware from abroad. These regulations, however, have proven so draconian that they have now made it exceedingly difficult to execute a single defense contract. Despite the Indian air force's acute need for a strike fighter, final stage negotiations to acquire the French-built Rafale remain suspended in mid-air. Meanwhile, India's domestic defense industry, largely free from competition, is faced with vast cost overruns, interminable delays, and consequent technological obsolescence. A combination of these factors is leaving the country dangerously vulnerable to threats from China and even Pakistan.

Finally, thanks to a weak national government and a constitution that splits law enforcement responsibilities between federal and state authorities, the country has abjectly failed to develop a clear-cut strategy to combat terror in all its forms. Despite the creation of a new organization, the National Investigation Agency, in the wake of the Mumbai terrorist attacks of November 2008, it remains understaffed, underequipped, and lacks clearly defined jurisdictional powers. Consequently, the country remains acutely vulnerable to yet another terrorist strike.

The fond hope of some Indian political commentators is that next year's national elections will end much of the policy paralysis that has currently gripped the nation. Yet such hopes may be little more than mere wistfulness. The problems that the country now confronts are the result of years, if not decades, of institutional slackness and neglect, dubious political choices, and flawed policies. Fixing them will require more than a changing of the guard.

Andrew Caballero-Reynolds/AFP/Getty Images


The East Is Still Red

Bo Xilai's downfall doesn't mean China is moving away from Mao.

The downfall of Bo Xilai -- the Chongqing Communist Party boss who will almost certainly be convicted on charges of bribery, graft, and abuse of power in a trial that opened Thursday in the provincial capital of Jinan -- was supposed to move China away from its Maoist past. And yet, judging from Chinese President Xi Jinping's evolving political platform, Bo's Maoist-flavored agenda has its attractions -- even for princelings (the sons and daughters of top officials) whose families suffered horrifically during the chairman's disastrous Cultural Revolution.

Appointed party secretary of Chongqing in 2007, Bo was widely seen as a rising star and a contender for a seat on the Politburo Standing Committee, China's top-decision making body. He re-popularized "red culture" -- songs, poems, and iconography popular in the third quarter of the 20th century, when Mao Zedong ran China -- across the city and then the nation, becoming the pin-up boy for the new left, the old left, the Maoist left, and, to a degree, all those attracted to the allure of rising power. Together with his police chief Wang Lijun, he tore up the colorless template of Chinese politics by waging war against the Chongqing underworld, exposing a hidden mass of corruption, violence, and decadence beneath the Communist Party's shiny veneer. Bo and Wang waged war against the party in the name of saving it.

Nationwide resistance to Bo's red-tinged agenda started soon after, when liberal lawyers, journalists, and intellectuals began speaking out against the repression that followed his political campaigns. When Bo arrested prominent lawyer Li Zhuang in December 2009, civil society leaders started framing the debate over Bo's political experiment in Chongqing as a proxy battle for the future of China: Would it move right, toward economic liberalization and universal values, or left, to the ideals of Communism? Those on the left believed that only a stronger Communist Party could solve the country's problems of corruption, inequality, and moral torpor. Those on the right believed unbridled state power was actually the problem, as China had learned during the Mao years.

Li's re-arrest, in March 2011, prompted his lawyer Chen Youxi to warn publicly that Bo's disregard for law recalled the Cultural Revolution. Chen was joined by another renowned and courageous lawyer, He Weifang, who had studied law in Chongqing in the idealistic years following Mao's death in 1976. "So many things have happened in this city with which we are so intimately familiar, things that cause one to feel that time has been dialed back, that the Cultural Revolution is being replayed, and that the ideal of rule of law is right now being lost," He wrote in an April 2011 open letter.

The lawyers' warnings struck a chord with Hu Deping, the eldest son of Hu Yaobang, China's most popular reform-era leader, so he invited them in for talks. As Party chief in the 1980s, Hu Yaobang had warned his children that the lessons of the Cultural Revolution had not yet been learned. But Hu himself was purged in 1987 -- without a trial or legal process -- before he could do much about it. Xi's father, Xi Zhongxun, who worked alongside Hu, was the most senior elder who stood up for him.

Throughout 2011, Hu Deping rallied his liberal princeling allies -- including two of Xi Jinping's sisters -- with a series of unprecedented seminars. "There seems to be a 'revival' of something like advocating the Cultural Revolution," said Hu in August, a short time before Bo's wife murdered English businessman Neil Heywood. "Some do not believe in the Cultural Revolution but nevertheless exploit it and play it up," Hu explained, referring to Bo, whose mother was murdered or forced to commit suicide during the Cultural Revolution. Privately, Hu repeated a similar message to two of his father's protégés: the then president and premier, Hu Jintao and Wen Jiabao, according to a source familiar with those exchanges.

Bo was seemingly on the ascendant until he fell out with his police chief Wang, who was under great pressure from investigators in Beijing. Wang fled to a U.S. consulate in February 2012, fearing for his life. He told U.S. diplomats his version of the Heywood murder, which included the allegation that Bo had attempted to prevent him from investigating the incident. Bo's rivals thus had ammunition to move against him. On March 14, then-premier Wen Jiabao indirectly framed the future of Bo's "Chongqing Model" as a choice between urgent political reforms and a return to "such historical tragedies as the Cultural Revolution." Bo was sacked the following day; he hasn't been seen in public since. 

Wen's intervention and Bo's dismissal prompted other princelings to break their silence, as the elite descended into factional warfare. Wang Boming, publisher of the pathbreaking investigative magazine Caijing and son of one of Mao's most important diplomats, told me that Bo's "Chongqing Model" was funded and enforced by a mafia-style shake-down of the city's entrepreneurs. "Basically, the twenty richest guys in Chongqing, he sent them all to jail and confiscated all their assets," he told me in April, in an interview for a book I was writing, The Rise and Fall of the House of Bo.

Fu Yang, whose father Peng Zhen worked alongside and above Bo's father as a top Party official, was apoplectic that Li, the lawyer Bo controversially arrested, was an employee of his law firm. Bo Xilai and Fu were classmates; Bo even asked Fu for legal advice when divorcing his first wife. And then Bo disregarded a legal system -- however flawed -- that Fu's father had built, as the head of China's National People's Congress in the 1980s. My father "attached great importance to the fact that the legal system had been completely destroyed during the Cultural Revolution and that people's rights, particularly human rights, were trampled underfoot," said Fu in an interview. 

The men and women who make up China's political elite came of age in an environment of psychological and physical brutality that is unimaginable for their counterparts in the developed world. Especially cruel ordeals were reserved for "children of high cadres," as they were then known, when Mao's courtiers accused their parents of disloyalty to the revolution. What seemed most troubling, among princelings who knew Bo well and agreed to speak with me, was that he had glorified the same Mao-era movement that killed his mother.

The Bo family was not the only one that suffered. Many princelings bear grim tales of family members who were tortured and murdered during that period in China's history. President Xi cannot attend a family funeral, wedding, or Spring Festival event without facing the absence of his oldest sister, Xi Heping. She committed suicide near the end of the Cultural Revolution, in 1975, according to close family friends. For Yu Zhengsheng, currently the fourth-ranking member on the Politburo Standing Committee, it is even worse. "My mother was jailed in 1968 and released in 1975," Yu said in July 2012, according to state media. "When she came out I felt that she was not right; she always felt like she was being persecuted. She refused to submit to a physical examination right up until her death last year. At the start of the Cultural Revolution my younger sister was a high school student, and was ‘struggled against' at school. Afterwards, afflicted with schizophrenia, she killed herself. There were six or seven deaths amongst our close relatives during the Cultural Revolution."

At a broader level, Bo offered a powerful legitimizing story at a time when the Party was in desperate need of one. Earlier than any other leader besides Wen, Bo affirmed the country's growing crisis of injustice and inequality, and shifted the blame to faceless apparatchiks who lacked his inherited revolutionary credibility. ''Corruption is the Party's mortal wound and degeneration of its working style is its chronic disease,'' Bo said on television in December 2009, echoing the words of Mao. ''Without help the disease will become fatal.'' Bo, like Xi, grew up in a household steeped in the communist ideals of equality, personal austerity, and the emancipation of all mankind. Resurrecting Mao symbolized old ideals while reminding people of the contributions their own families made to the founding of the People's Republic of China. 

And while Bo's methods were not pretty, they certainly worked. His control over propaganda, ability to mobilize the masses, and disregard for legal process and institutions kept the Chongqing population in check. "He's trying to mobilize society like Mao did during the Cultural Revolution, and to do that you usually have to brainwash people first," said Wang, the Caijing publisher, in our 2012 interview. Bo's resurrection of Maoist iconography and methods offered a way of preserving the power of the ruling families, in a post-communist nation that was growing more cynical and fractious by the day.

Similar patterns can be seen across the Xi administration as it battles to preserve uncompromising one-party rule over an increasingly pluralistic nation. "Western forces hostile to China and dissidents within the country are still constantly infiltrating the ideological sphere," says a document issued by Xi's central office, which takes aim at a list of seven "perils," beginning with Western constitutional democracy. Propaganda outlets have attacked the idea of constitutional law, security forces have arrested activists calling for the party to enforce its own laws, and Xi has launched a Mao-like campaign to impose an ideological "mass line" and rectify the party's work style.

Bo's case has split the princeling elite. In 2012, Wen was winning converts as he sought to frame Bo's downfall as the last opportunity to set China on a smooth transition toward accountable governance and rule of law. But then the Hu-Wen faction hit its own political turbulence -- compounded by an October 2012 New York Times article revealing that Wen's family members have controlled assets worth at least $2.7 billion -- leaving Bo supporters to ask why he was singled out for treatment. It seems the families dominating Chinese politics abide by Benjamin Frankin's warrior's code: they can hang together or hang separately.

Ironically, perhaps, many of those associates say they are opposed to Bo's imminent conviction not because he did no wrong, but because he will not receive a fair trial.

"I also do not agree with what he did but I think he should be afforded proper legal process," says one of Bo's princeling associates, who was close to Xi in the 1980s. "Wen and his family were so greedy, so why not examine him?" Even Bo's most ardent opponents agree that the critics have a point.

In the eyes of liberal lawyers, journalists, and intellectuals, and descendants and protégés of the deceased reformer Hu Yaobang, this trial is a unique opportunity for Xi and their Politburo colleagues to move China away from its lawless and Maoist past, where imagined utopian ends can be used to justify any means.

But they know that's unlikely. The trial, which will probably take place over just two days, will be choreographed down to the finest details. The verdict, likely to be released in September, has already been pre-determined; the judgment largely pre-written. And it will be framed in narrow, criminal terms, which cannot easily serve to push China toward rule of law. Bo's erstwhile colleagues are set to banish him to at least a decade in jail, while borrowing much of what he stood for.  For now, at least, the scars of the Cultural Revolution remain red raw. He Weifang, the lawyer who raised the specter of the Cultural Revolution in Chongqing, said it best: "It's not a fair trial, but rather just evil to fix evil and violence to fix violence."