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MUST READ. . .



In Spite of the Gods: The Strange Rise of Modern India By Edward Luce A torrent of books about the rise of China has deluged business readers of late. Will Hutton's superb The Writing on the Wall, the author interviewed in these pages last week, is one not to be missed. Another is the book that upset Chris Anderson's The Long Tail - the Rosetta stone text of web-enabled economics - for the Financial Times/Goldman Sachs Business Book of 2006, China Shakes the World: The Rise of a Hungry Nation by Beijing-based former FT reporter James Kynge.

But one of Kynge's former FT colleagues, Edward Luce, has penned a compelling account of another Asian mega-power on the rise. It might be a stretch to say that India is the new China, but the very things that cause concern to Hutton and Kynge about the durability of China's rise - a lack of democratic accountability, property rights and rule-of-law traditions - may actually prove more solid foundations underpinning a rise of India.

Luce, who reported for the FT from New Delhi from 2001 to 2005, offers a myriad of scenes that attempt to embrace India's contradictions. The country's growth rate has been roughly 6% since 1991, second only to China over that period. The year is not insigni"cant, as it saw the beginning of India's economic reforms that opened its doors to the world. The results, Luce reports, are mixed.

Luce's India isn't limited to the gleaming Bangalorebased techno-powerhouse poised for world-beating status in software, consultancy and computing of Thomas Friedman nor the hopeless mass of misery that so dispirited John O'Shea of GOAL that he has given up entirely on the country. It is both, and neither, and a lot besides. A country that produces 1 million engineering graduates per year also has a 35% illiteracy rate. In which just 1 in 10 workers is part of the formal economy and there are just 35 million taxpayers in a country of 1.1Bn people.

Yet its middle class is the size of the population of the United States and its members enjoy mega-weddings that would make your highest-end Hibernian Bridezilla blush.

And, Celebrity Big Brother horror shows aside, Bollywood has grown into a con"dence-boosting, if quirky, export for the country.

It is also a country that has the largest Muslim population of any in the world and has witnessed an alarming rise in Hindu nationalism, but through its "endishly complex politics manages to keep something approaching the peace. More or less.

The author is at his best when describing the factor which, perhaps more than any other, continues to hold India back. The civil service it inherited from British rule has probably kept India from falling apart, but it is thoroughly corrupt and, Luce argues, helps perpetuate in new forms India's class system.

While it does share the problem of corruption that Hutton and others think might be the Achilles' heel of the Chinese model, the Indian experience is on a much less stultifying scale. Entrepreneurs in India complain endlessly about red tape, but the Indian Army doesn't regularly take over 'private' companies it deems strategic. The Chinese Army does.

Noting that India's potential is still so vast that, even assuming it cannot achieve a step change in its agricultural ef"ciency or in expanding the middle class, it is still set to overtake Japan by 2020 as the world's third-largest economy, Luce concludes on a hopeful note: ''India is not on an autopilot to greatness. But it would take an incompetent pilot to crash the plane.''




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