One notable feature of many of the SMSes I received on New Year’s Eve was that they expressed relief that 2008 was finally over. Nearly everybody hoped that 2009 would be better.
Frankly, I’m not sure it will be. When people make optimistic predictions about the future I am always reminded of the words of Harold Macmillan, the former British prime minister (the man who said “let’s face it, most of our people have never had it so good”), when he was asked why he was unwilling to be optimistic. What was he afraid of?
“Events, dear boy,” he replied, “events.”
<b1>The events of the last few months have shown us that optimism is often the first casualty. When the Wall Street collapse began, we were told again and again that India would not be affected, a prediction that now seems to have gone hideously wrong. When Asif Zardari spoke at the HT Summit and promised better relations with India, most of us felt that things would now get better. In fact, Zardari’s assurances were quickly followed by the Bombay attacks.
Regardless of how 2009 turns out, how will we look back on 2008?
There is a growing tendency among writers and observers to treat 2008 as the year when the Indian dream died. And certainly, if you contrast the optimism that marked the beginning of the year to the gloom which characterised the last few weeks, that description does not seem too inaccurate.
In early 2008, we spoke about superpower India. The world was beating a path to our door. Salaries were at an all-time high. L.N. Mittal and the two Ambani brothers were among the richest people in the world. Fortunes had been made on the stock market. Our hotels were packed out with the heads of foreign companies as they looked for ways to enter the Indian market. Venture capitalists and private equity firms flung money around like confetti. We bragged about the coming Indian century. Our software companies already ruled the world. Now, our brick and mortar companies seemed set to follow their lead with acquisition after acquisition.
By the end of the year, the mood of optimism had vanished. Whereas once all things seemed possible, now we wondered whether we would hang on to what we had. The foreigners had gone. The hotels were empty. The luxury goods companies that had so eagerly set up shop were offering 50 per cent discounts. The stock market was in free-fall. The value of homes had dropped sharply but bizarrely, because the builders operated a cartel, it was still not much cheaper to buy a new house in Delhi or Bombay. Even as our fortunes dipped, our old certainties about security collapsed in the face of the effortlessness with which a mere ten terrorists were able to take Bombay hostage.
So yes, the contrast is striking. But I’m still not convinced — for all the gloom — that the wider predictions about the death of the Indian dream are accurate. I think we may well have been carried away by the euphoria of superpower India. But equally, I don’t think we should write our future off so readily.Almost all of the factors that led us to believe that we were entering the Indian century are still intact. And it would be a shame if we let the dream die.
Much of the present gloom can be traced to a single event over which we had no control: the collapse of global financial markets. The reason why our stock market has fallen is not because people have changed their minds about the soundness of the Indian economy but because cash-strapped foreign institutional investors are liquidating their holdings all over the world. As they cash in their stocks and convert their earnings into hard currency, the rupee falls on excessive selling.
Both phenomena — the drop in the Sensex and the fall in the value of the rupee — are worrying but they are due to the troubles that foreigners have elsewhere in the world. They are not a true reflection of the Indian reality.
And they may have some happy consequences. I hope the cult of the stock market, where everyone could make a killing without having to do any hard work, is over. I’m pleased too that the supply of easy money has dried up. For the last three years or so we have lived in the cloud cuckoo-world of investment banks where millions of dollars were poured into ventures that would never turn a profit only because investors and promoters wanted to raise huge valuations and then float their companies. At least now, prudence and profitability will guide investment again.
I hope also that the sudden exit of foreign money and the public demonstration of the foolishness of Wall Street will make us wary of relying too much on the West. Too many Indians were seduced by the charms of Western financial institutions who came here and told us that globalisation was the answer; that India should open up its economy even more, drop tariff barriers and follow the Wall Street prescription.When our civil servants and ministers seemed reluctant to go as far as these know-alls wanted, we were lectured on how India was being held back by the myopia of its bureaucrats and politicians.
Above all, I hope the events of 2008 serve as a reality check for our middle class. I’ve written consistently over the last five years — in this column, mainly — about how worried I am by the growing disconnect between the newly prosperous middle class and the rest of India. Too many of us were taken in by the designer handbags, high-priced cars and plasma TVs that have flooded our market places to the extent that we conned ourselves into believing that we didn’t really live in India at all but in some mobile republic where we could forget India’s problems and worship at its new malls.
As we watch the global crisis unfold and the unemployment figures for America and the UK shoot up, we should be grateful that we are different. With a growth rate of seven per cent we are still better off than most of the world — and far better off than the West, certainly.
And while I was as horrified as anybody else by the Bombay attacks — perhaps the defining moment of 2008 — and believed that their immediate impact resembled the effect 9/11 had on America, I am now coming around to the view that the 9/11 parallels have run their course.
The New York attacks marked a fundamental change in the way America looked at the world. Suddenly, Americans felt threatened and vulnerable. They retaliated by supporting pointless invasions of such countries as Iraq, which had nothing to do with 9/11.
Our response has been much more measured. I don’t think any of us looks at the world very differently after 26/11 or feels the need to invade some third country.
But yes, there is one sense in which the Bombay attacks changed us as a nation. They ended the complacency of the middle class which believed it could opt out of India and live in its parallel reality. The truth is that nobody can opt out of his or her country’s foreign policy or security structure. These are not things we can buy our way out of.
In my view, it’s not a bad thing for the middle class to come to terms with this reality. Already, the collapse of the Wall Street model of global capitalism has shown us that, ultimately, the only country that India can trust is India itself. And the only solutions that work are our own, derived from our ingenuity.
I remain dully pessimistic about 2009 and am as glad as you that 2008 is over. But I don’t think the dream is dead. We are still ahead of the rest and still on course for the Indian century.
What is dead, however, is the complacency and shallow superficiality of much of the middle class. We followed the wrong gods and were swayed by the wrong mantras.
Now, we are back on track — as Indians, together.
On that cautiously cheerful note: Happy New Year.