1980s inflation. From 1966 to 1980, the rupee stayed constant. However, the energy crisis in the late 1970s and gold's skyrocketing prices in early 1980s left India with no place to go (oil and gold were historically India’s primary imports). Indian rupee started to slowly decline. From about 7.85/$ in 1980 rupee reached about 17/$ by 1991.
1991 crisis. In July 1991, India hit another major crisis. It was the biggest event in modern Indian economic history. Overnight the rupee was devalued by another 50% from about 17/$ to about 25/$.
1993 liberalization. In 1993, Indian finance minister Manmohan Singh let the rupee float a little freely. Translation: the rupee was allowed to be traded by traders without a forced peg such as the one kept by China. Rupee value started to slide as the government was no longer controlling the prices fully and started to reflect the reality. From about 27/$ it slid to Rs.35/$ by 1997.
1997 Asian financial crisis. One of the biggest events in East Asia as economies such as Thailand and Indonesia collapsed. Panic was all over the place. From about Rs. 35/$, rupee went down to Rs.39/$ as investors were quitting Asia enmasse.
Pokhran-II 1998. Indian Prime Minister announced the nuclear testing. US, Japan and other countries immediately imposed sanctions on India, limiting investments. In just a couple of months, the rupee sank to Rs.43/$. Then the rupee started moving sideways and the lowest point was reached in 2002 at Rs.48/$ (when BSE was its lowest and real estate was listless).
Good times (2000-07). The rupee started recovering its losses and started moving up and reached about 39/$ by 2007. Then the shit hit the fan.
Financial crisis of 2007–08. The financial crisis caused investors to quit all emerging markets, including India and pushed the rupee from 39/$ to Rs.51/$ by March 2009. In the next two years, the rupee recovered most of the loss due to economic optimism and rebound in US markets.
European sovereign-debt crisis. By the fall of 2011, the world noticed another financial crisis. This time in Greece, Spain, and other places. Just like other times, investors started pulling out. Another reason was that the Indian government's budget positions were getting worse (due to profligate overspending). Indian rupee sunk from Rs. 44/$ in August 2011 to about 56/$ by June 2012.
As the fate of the rupee danced around, Indian entrepreneurs sometimes danced in joy and other times writhed in pain. No story of Indian economy would be complete without the story of its entrepreneurs.
There are many Indian Entrepreneurs worth noting. One of the icons is Mr. Dhirubhai Ambani - founder of Reliance Industries.
Story of Dhirubhai Ambani
Good entrepreneurs usually have a family background in business. Great entrepreneurs usually have none and start from scratch. Bill Gates is the son of a lawyer. Zuckerberg is the son of a dentist. Larry Page's parents are professors. Look up most great entrepreneurs in history - Larry Ellison, Thomas Edison, Steve Jobs, Henry Ford, George Soros, Jeff Bezos - they were all first generation entrepreneurs who grew from practically nothing.
Dhirubhai Ambani is an Indian icon who did that way. He is a little more special than the American entrepreneurs above as the old world relies on connections and lineage a lot, lot more than the new world.
Dhirubhai started out as a trader importing polyester fabric and exporting spices. The small dowry he got and experience he acquired working in the Middle East, helped him a bit to get started.
Trading was not a sexy thing those days. Only uneducated people and very rich kids without much drive were dabbling in there. There was not enough competition for someone as smart and as fierce as Dhirubhai. Once he mastered polyester trading, he moved upstream to start producing fabric and downstream to directly brand this fabric to customers.
His apparel brand - Vimal - created a sensation in the 1970/80s. Vimal brought in top fashion designers to build the aesthetic appeal, focused a lot on fabric quality, made really sexy promotions and got a whole bunch of top models and cricketers to endorse.
Then he expanded the polyester business and started producing the things needed to make the polyester (as India's import rules were quite harsh) such as petrochemicals.
Besides the product innovation, he also utilized the financial markets to the full extent. His company went to IPO in 1977 (when India's stock markets were very small) and really used the power of common investors. When I was young, my parents would always be chatting about how everyone should own Reliance stock - it took stock markets to the masses.
Dhirubhai had the dream to break in a market with too much connections, the persistence to stay through the Indian government's moronic policies, the innovative ability (both in product and finance) and finally the luck (from the dowry to being at a time when the Indian economy was exploding).
Just as Dhirubhai was shaking up business, a fellow Gujarati had started shaking up Indian politics.
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Chapter 12: The Great Political Tamasha
May 16th 2014
None of us at home could sleep that night. Although we were living in Boston, we felt the sense of excitement that was spreading in India. By the end of the day, history was made. Modi became the first Prime Minister in 26 years to have a decisive majority.
It was a sense of victory. Historian Patrick French did a research on Indian MPs of the Parliament elected in 2009 and found it was sliding into hereditary. It was depressing.
Every MP in the Lok Sabha or the lower house of the Indian parliament under the age of 30 had inherited a seat.
More than two thirds of the 66 MPs aged 40 or under are hereditary MPs.
Every Congress MP under the age of 35 was a hereditary MP.
Nearly 40% of the 66 ministers who are members of the Lok Sabha were hereditary members.
Nearly 70% of the women MPs have family connections.
In 2014, the situation changed significantly from the past. It was quite a break from the past as Modi, the "conservative", appealed to modernity, while Rahul Gandhi, the "progressive", was stuck in the past. In this chapter let us look at some lessons from history-defining elections.
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1. A Brief Introduction to Indian Political Parties
Broad ideology:
Since the French revolution, political parties across the world are categorized into left and right. Originally it used to mean the seating arrangement in Estates General of France (people who sat on the right supported monarchy and people on the left sympathized with the revolutionaries).
Left: Parties that support communism/socialism. Sometimes they have a progressive outlook towards science and social values, but have a huge suspicion on businesses. They want government's involvement in businesses and economy, but not as often on the society (civil liberties). CPI and CPI (M) kind of lefties, although they don't believe that much in civil liberties.
Right: Parties that are conservative and believe in the traditional values. They believe in religion, businesses, and capitalism. They want government's involvement in society, but not businesses. BJP is on the right.
No major ideology: This encompasses all the rest of Indian parties. Usually they are anti-business and thus bucketed into the "center-left" category meaning they are a confused lot who sometimes side to the left. Congress falls in it.
Size and Spread: In India, if a party has a sizable presence in four or more states, it is considered a national party. There are officially six of them in India as of 2014: Congress, BJP, Communist Party of India (CPI), Marxist Communist Party (CPI M), Bahujan Samaj party, and Nationalist Congress party. Although there are six official national ones, only two are considered truly national: Congress and the BJP.
Beyond the six national parties, there are a few hundred regional parties. These parties primarily appeal to their own region/language. For instance, DMK/AIADMK believe in Tamil superiority and Trinamool Congress does the same for Bengalis. Regional parties are in general, far more corrupt than the national ones.
Major Parties
Congress Party: A center-left
party that was founded by legendary men and women in 1885. To compensate for the positives of the great leaders of the past, the party has elected Ms. Sonia Gandhi. On a more serious note, Congress is dominated by people closely associated with past leaders (sons, grandsons, in-laws, assistants, chamchas). Positives: The party has a better record in avoiding caste-politics and is slightly neutral when it comes to religion.
Bharatiya Janata Party: An offshoot of RSS (a right wing social unit), BJP is a party that rose to power in the 1980s to represent the middle class and conservative Hindus. Somewhere they lost the way and have become a confused lot, torn between pro-business units and pro-Hindutva units. Many of their new crop of leaders are clean and agile (such as a CMs of Goa and Chhattisgarh). Given its conservative stance on a few issues, it is the party that Indian media loves to bash the most. Disparagingly called the Brahmin-Baniya Party, although the party has recently brought more of other castes. Positives: The party has a good development record and tries to avoid regional fightings.
Communists: They are traditionally dominant in the states of Kerala, West Bengal, and Tripura. Mainly backed by worker unions, student organizations, and confused elites. They are typically anti-business and anti-West. Positives: Arguably they are pro-environment and worker rights.
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2. Defining elections
1951 Elections
This was the first national election with the new Constitution. Nehru was virtually unopposed as his primary rival, Patel, passed away the previous year. The elections were held over a very long period - about five months from October 1951 to February 1952. Very few parties had energy to campaign over such a long period.
A range of socialist parties sprung up that started tapping on the general socialist/communist mindset of the world back then. However, these parties were competing against each other and effectively split the votes. Nehru steamrolled the other parties and formed the government.
An interesting thing about the first three elections is that they had multiple seats for some of the constituencies. One constituency in West Bengal even had three seats.
1967 Elections
Nehru had easily won the 1957 and 1962 elections. However, plenty of things happened between 1962-1967. Nehru died in 1964, followed by Shastri who died in 1966. In a span of two years, India had three Prime Ministers. As we saw in Chapter 9, there was a big internal power struggle. Indira Gandhi was able to finally prevail over and bring the increasingly left-turning party members back to the fold.
1977 Elections
For the first 30 years, the Congress party had a relatively smooth sailing. Some external commentators even wondered if India is a real democracy as a single party was totally dominating the center. However, as we saw in Chapter 9, Indira Gandhi declared emergency in 1975 and brought a range of repressive measures. It was time to see if India was a real democracy or not.
And we did see. An anti-Indira alliance led by Morarji Desai swept through almost all of north India, winning 345 of the 542 seats. Indira Gandhi and her son Sanjay Gandhi could not even get elected in their own, safe seats. It was Indian democracy working with a vengeance.
For the first time in decades, India would see a new party dominate the national politics. Unfortunately, this euphoria didn't last enough. The coalition fell apart under its own weight, letting Indira come back in 1980. Since then, Janata Dal was constantly creating new parties.
1989 Elections
Indira’s death in 1984 led to a huge sympathy wave that brought Rajiv Gandhi with an unprecedented majority that even his mother and grandfather could not achieve. However, in just five years Rajiv would throw it all away.
Bofors gun scandal, botching up of Indian Peace Keeping Force (IPKF), and the rising religious tensions following the Shah Bano case and rising frenzy around the Babri Masjid issue all took care to submerge Rajiv's government.
The 1989 elections had many elements of the 1977 elections. Yet again, the socialists and the nationalists came together to form a coalition. Yet again, the coalition would collapse in two years. Interestingly, when such a coalition was formed in 1996, it again collapsed in two years. If you are forming a socialist coalition, two years is an unlucky interval.
1999 Elections
The decade following 1989 was a test of coalitions and political horse trading. Uttar Pradesh leader Mayawati boldly predicted that the Vajpayee government that took power in 1998 would not last more than 13 months, referring to his previous government in 1996 that could just last 13 days. Mayawati was right and she was helped in the assertion by some erratic decision making by the Tamil leader, Jayalalitha.
By September 1999 things however changed. In the previous year, Prime Minister Atal Bihari Vajpayee boldly took India as a nuclear power by testing nuclear weapons in the desert sands of Pokhran in Western India. He also could claim victory over Pakistan in the mountains of Kargil in Jammu & Kashmir.
Indian people were relatively impressed with Vajpayee's achievements and were in any case tired of constant coalition tamasha. Vajpayee led the National Democratic Alliance (NDA) to 270 seats among 542 seat Parliament. Congress was given the worst drubbing in India's democratic history. Although Vajpayee lost some votes overall, he got 16 more seats than he won in 1998. Still one short of the required count and was saved by Telugu Desam party.
With a much better showing, Vajpayee was able to run a government for the entire term of five years. The coalition partners were more stable this time and they also sensed that they cannot afford to keep spending money on elections every few months.
2004 Elections
After a long time, a government was able to complete the entire term and also end on a relatively high note. The economy was growing and there was a real improvement in the ground. However, BJP got too carried away by such a strength.
They went on a political campaign termed "India Shining" that portrayed India's growing economy. Unlike the more depressing slogans centered on poverty, scandals, corruption and violence, the elections made a significant shift focusing predominantly on optimism. The party was practically confident of winning again gaining confidence by all the poll surveys.
However, the celebration was too soon - both for the economy and for the party. The economic growth had still not reached 90% of the populace and for many Indians the campaign looked like a slap in the face. The overconfidence also cost the party significantly.
Out of nowhere Sonia Gandhi took Congress to victory. There was a minor controversy about whether the Italian born person should become the Prime Minister of India. Finally, she brought her deputy Manmohan Singh as the Prime Minister.
2014 Elections
After 10 years of rule, anti-incumbancy was bound to attack. Congress party that had won quite comfortably in 2009 had gotten itself mired in a range of scandals ranging from the auction of telecom spectrum to coal mines. The leadership was also weakened with Manmohan Singh stepping down and his replacement Rahul Gandhi appeared undercooked to lead either the nation or the party.
BJP's candidate Narendra Modi sensed this opportunity and brought an invincible campaign that brought the full power of technology and social media to the core. His opponents were left clutching outdated microphones and outdated campaign manifestos.
3. Key Trends in Indian elections
Right from the first elections in 1951-52, there was the first sign of a strong socialism - with the 3 top socialist/communist parties winning nearly 20% of the total votes. The same trend continued for the next two elections - 1957 & 1962. Congress won about 45% in each elections and communist groups won 20%.
The revolution of 1967:
Until 1967, Congress had a near total control over in both state and national politics. While the Praja Socialist party took power in Kerala in 1954, Congress still dominated most of India. However, the death of Nehru and Shastri would loosen the grip of Congress. It would happen from many causes.
One reason is that Indira Gandhi called early elections fo
r the Lok Sabha and thus separated the electoral synchronization between the centre and state. Until then, the elections both at the nation and at the regional level were conducted at the same time. This gave more room for national issues. However, by removing this relationship, it allowed much more parochial and caste wise issues to affect the regional level. We are still seeing some of the effects now.
In 1965, the Indian Constitution's protection for English was to end. The Constitution framers negotiated for 15 years of parallel usage of English & Hindi and that 15 years from the enactment of the constitution was to end (1950-65). Prime Minister Lal Bahadur Shastri initially hesitated to continue the protection and that engulfed South India.
Out of nowhere, the Dravida Munnetra Kazhagam under CN Annadurai took power in 1967, fully leveraging the anti-Hindi agitations. Since then, Congress and national parties of India were never able to win in Tamil Nadu.
In the same year, Congress also lost grip on West Bengal. The lack of speed in land reforms brought out a big communist unrest (Naxalbari revolution) and also broke up Congress in the state to form the Bangla Congress which formed a government with the Communists. With a decade after that, Congress would be completely bundled away from the state.
In 1967, Punjab had Akali Dal taking power. In Uttar Pradesh, Charan Singh led Bharatiya Kranti Dal took power. As a result of all the regional parties arising in various parts of India, Indira Gandhi barely managed a majority in 1967 winning only 283 seats.
From Tryst to Tendulkar: The History of Independent India Page 19
