In Spite of the Gods: The Strange Rise of Modern India Hardcover – January 16, 2007

Edward Luce ​reported from New Delhi for The Financial Times and has an Indian wife. He is now the newspaper’s chief U.S. correspondent based in Washington D.C. Luce appears qualified to comment on the New India. He is sympathetic but honest. “In Spite of the Gods” was first published in 2007, but a concluding chapter was added in 2011. He mentions that many forecasters predict that India could achieve double-digit growth for the next 30 years, which will transform it into a superpower. Luce predicts that sometime in the 2020s it will overtake Japan to become the world's third-largest economy. Luce presents “an unsentimental evaluation of contemporary India against the backdrop of its widely expected ascent to great power status in the 21st century.” He summarizes India's strengths and weaknesses.

Luce discusses many of India’s problems: the poverty, pollution, population growth, and the corruption. Luce also examines the rise of Hindu nationalism; the dynastic nature of its politics; its relationship with Pakistan and its Muslim minority; its often difficult relationships with the U.S. and China; its sensitivity to real and imagined slights; and its caste divisions. Luce describes the issues and provides a helpful resource for outsiders trying to understand how India works.

When this book was first published Western intellectuals, like Tom Friedman of the New York Times were touting India as the next superpower. I spent a lot of time in the country in the 1990s and I was skeptical. There are a lot of smart people in India but it was badly run. I was shocked by the poverty and the large numbers of child beggars. The 2010 Commonwealth Games held in Delhi was shambolic. The Commonwealth Games is a mini-Olympics hosted every four years by former members of the British Empire. India held the event for the first time in 2010. The original budget was $7.5 billion but the eventual cost was ten times that amount. Luce blames corruption and larceny. By comparison, Britain spent $13 billion hosting the 2012 Olympics a much bigger event. The Games turned into an embarrassment because the Western media complained about shoddy infrastructure, dirty bathrooms, and poor hygiene. Luce claims that India now has many world class private companies and it should have done better, but he blames the mentality of the old India, where greed often took priority.

Navigating the corruption is often a problem for Western companies. I was told by an Indian partner at a global accounting firm, who was advising my company on a proposed acquisition, that all Indian businessmen were crooks, it was just a question of degree. During due diligence, he advised us against buying a particular company. The CEO was later sent to prison. It seems that about 20% of the members of India’s parliament have been indicted for a crime. I was also told by our U.S. lawyers that Indian judges could be bought, so going to court was risky. My company’s senior management eventually concluded that although India might be a growing market, it was not for us. Luce believes that India is trying to fix the problem, but he notes that government officials still supplement their income with bribes.

Luce notes that India will soon have a larger population than China and more educated persons speaking English than the United States. On the other hand, the poverty is still with us. In 2007, the Indian labor force was 470 million people but less than 7% of that labor force was employed in the formal economy. That means only 35 million people had job security. He claims that that only about 35 million Indians pay income tax in a country with a population of 1.1 billion. Luce explains that even “in 2006, almost 300 million Indians can never be sure where their next meal will come from.” India still had only 84 television sets per 1,000 people (America had 938); 7.2 personal computers for every thousand people (Australia had 565); and the internet reached only 2 per cent (Malaysia's figure was 34 per cent). Roughly 35% of the country remains illiterate.

He discusses the country’s 150 million Muslims, who he believes are loyal to India but don’t have equal status. I visited Ahmedabad many times in the 1990s and it seemed like a quiet, heavily polluted city, with appalling roads. The people were usually polite and friendly. The population has doubled since I first went there. Alcohol was officially banned, but our hosts were able to offer beer and whiskey. However, Ahmedabad became the scene of riots in 2002 where 2,000 Muslims were slaughtered while the police looked on (or collaborated).

Luce explains that India has remained “an intensely religious, spiritual and, in some ways, superstitious society.” Luce discusses Kashmir in Pakistan vs. India terms but doesn’t give a satisfactory explanation as to why the people of Kashmir, who are predominately Muslim, cannot decide their own fate. The people of Kashmir seem to want self-determination but neither India nor Pakistan are offering that. India has 500,000 troops the state and has been accused of appalling crimes (e.g., rape, murder, torture). India’s leaders get upset when the subject is raised.

Unlike China, India has not undergone an industrial revolution. Its economy is powered not by manufacturing but by its service industries. India is a country with large numbers of poor farmers, a highly competitive if small, technology sector and a lot of service businesses. Its growing middle class is materialistic and it has a new billionaire entrepreneurial class. Luce writes: “If Gandhi had not been cremated, he would be turning in his grave.” The impression that many people have of India is that software, IT and call centers are transforming its economic prospects. India has an IT workforce of just three million and only 350,000 work in its call centers. Luce believes that this modernity is not really touching the lives of most Indians.

Luce points out India's contradictions. It is a nation in which a woman can become Prime Minister or be stoned for suspected adultery. Most budding superpowers are good at sport but India only really excels at cricket. At the 2012 Olympics, the U.S. won 46 gold medals: China 38; Britain 29; Russia 24; and India 0. Although it has the world's 7th largest economy, India is excluded from the G7 because it is not considered a developed country.

“In Spite of the Gods” gave me a better understanding of India. I found the Indian people easy-going and friendly, but I quickly discovered that I did not really understand the culture or how business was done. You had to quickly become cynical to avoid being taken for a ride. I wish I had read this book in the 1990s.

Edward Luce begins IN SPITE OF THE GODS with a terrific chapter on what he calls India's "schizophrenic" economy. This features both competitive global corporations and thousands of poor villages, where he uses the word "medieval" to describe the existing systems of labor and ownership. In chapter two, Luce next examines the practices of Indian governance, which is hampered by widespread corruption, stifling bureaucracy, and poor-policymaking. In his next four chapters, Luce then shows how four big players in India's democratic culture--caste-based politicians, Hindu nationalists, the Congress Party, and Muslims--promote or defend their interests in this global/medieval economy, where corruption and parochial policy-making dominate. Altogether, these six chapters are first-rate and gave this reader a sense of the forces that both drive and constrain India today, as its economy and influence expand.

The overarching theme of ISotG is India's democracy, which enables these diverse groups to find political voice and standing. While democracy is a messy process--witness America's recent gridlock and no-compromise politics in Washington--Luce does make this system seem even more problematic in India, largely because of high levels of graft, red tape, and patronage. Nonetheless, he persuasively argues that: "India can teach Europe, Southeast Asia, and other parts of the word a great deal about how to keep a multinational and multiethnic entity together without imposing uniformity on its people or denying them basic freedoms."

Luce emphasizes that India is following a unique path to development. In booming China (as well as in America and Europe during their industrial revolutions), economic growth derives primarily from manufacturing, where an unskilled labor force finds work and begins a virtuous economic cycle. The slower growing Indian economy, in contrast, depends on services and its vibrant IT sector for growth. While the seeds of this difference date from the Anglophile Nehru, Luce also attributes India's slower and unique economic growth to the multicultural necessities of Indian democracy, not a lack of authoritarian government. Here, Luce writes:

o If intentions can be ascribed to nation-states, you could say that India has given a higher priority to stability than it has to efficiency. In many ways, the opposite could be said of China.

o The contrast between India and China is selective. Although China has much better economic and social indicators, this arguably has little to do with their contrasting political systems. The Indian state of Kerala, which is as democratic as any in India, has a life expectancy of 74 and a literacy rate above 90 percent, compared to 70 years and 90 percent in China. There is nothing to indicate than any of China's policies are inconsistent with greater democracy.

o There is a better answer to those who argue that India suffers from a lack of autocracy: Pakistan, [where] the freedom of citizens has been limited. ...As the economist Amartya Sen points out, India's economic growth rate has consistently outperformed that of Pakistan in the last two decades. ...Because of their ethnic and cultural similarities, Pakistan offers India a much better mirror than China.

The last chapter of ISotG is prescriptive and a trifle preachy; but otherwise, this is a fine and informative book.

This is a good review of how India decentralized and reformed much of its economy starting in 1991. India under the Congress Party was similar to Israel under the labor Zionists in the 1950s and 1960s, or various Greek governments. It had the standard modest "Indian rate of growth" at 4 percent annually, which was just enough to keep up with population growth but not enough to get ahead and really improve the standard of living of the masses in the Indian countryside. Luce writes very well on the effects of corruption on India's economic system and the lives of ordinary peasants. I bought this book for an update to all the books that I had read about the Congress period starting with Nehru and ending with Rajiv Gandhi. This gives a good overview of the period from 1991 to 2005.