India, a country in South Asia with a population of more than 1.2 billion people, is the world’s largest democracy. Over the past two decades, with an influx of new money and new opportunities – led by service and I.T. industries – India has become a rising global powerhouse. Even so, grinding poverty and corruption still persist.

Over the last year, India’s economy has slowed down: its currency, the rupee, is falling; investment is down; inflation is rising; and deficits are eating away at government coffers. On the plus side, analysts say India’s long-term strengths remain significant. It has one of the world’s youngest populations, and polls consistently show they are overwhelmingly optimistic about their future. Meanwhile, India’s businesses are competing more aggressively on the global stage.

One serious threat hampering economic growth is the country’s inadequate power grid. For two days at the end of July, an unprecedented blackout crippled the nation, when the northern and eastern electricity grids failed. About 670 million people – or roughly 10 percent of the world’s population – were affected. The outage stopped hundreds of trains and stranded passengers, darkened traffic lights, trapped coal miners, caused huge traffic jams in the capital and left nearly everyone – the police, water utilities, private businesses and citizens – without electricity. Power was restored on Aug. 1, as the nation’s power minister sought to tamp down a growing argument between state and federal ministers over who was to blame.

While short-term growth has slowed but not ground to a halt, India’s problems have dampened hopes that it, along with China and other non-Western economies, might help revive the global economy, as happened after the 2008 financial crisis. Instead, India is now facing a political reckoning, as the country’s elected leaders must address difficult, politically unpopular decisions.

At the core of the political uncertainties is the weakened status of the Indian National Congress Party, which leads the coalition government, known as the United Progressive Alliance. Since 2004, the government has operated under an unorthodox partnership between Sonia Gandhi, president of the Congress Party and the governing coalition, and Manmohan Singh, her handpicked prime minister.

The slowdown has punctured the once bubbly mood in the business and political classes and brought sharp criticism of the government. Indian business leaders, foreign investors and analysts say India’s strengths are being undermined by growing political dysfunction: the populist tendencies of Indian politicians, a lack of action by top leaders and allegations of corruption that have undermined the authority of policy makers.

India is desperate for investment in mining, roads, ports, urban housing and other areas, but Indian businesses and foreign investors are starting to shy away. Indian corporations, unable to obtain governmental licenses or permissions for projects, are investing overseas instead. Foreigners are also pulling back; their investment in Indian stocks and bonds totaled only $16 billion in the last fiscal year, compared with $30 billion the year before. The trend accelerated in recent months after the Finance Ministry, trying to stem a rising budget deficit, proposed a raft of new taxes on foreign institutions doing business in India.

Analysts say it will be harder for Indian policy makers to respond to a slowing economy now than in the financial crisis more than three years ago. At that time, the government’s finances were relatively healthier and it was able to spend money to stimulate the economy. Now, however, New Delhi is desperately trying to cut its fiscal deficit from 5.9 percent of its gross domestic product to 5.1 percent. Also, the Reserve Bank of India has less room to cut short-term interest rates to stimulate lending because inflation remains high, at about 7 percent.

Indians have long thrived amid adversity, often by creatively – at times, illegally – subverting onerous regulations with a workaround ethos that has spurred economic activity. Even today, industries like pharmaceuticals, information technology and consumer goods, which do not need many licenses and official approvals, are prospering. But those sectors tied to the government, including mining, construction and manufacturing, are struggling.

A Panicked Exodus to India’s Northeast

In mid-August 2012, India witnessed a panicked exodus by tens of thousands of northeastern migrants working in major cities such as Bangalore, Chennai and Pune – a mass departure linked to a vicious communal fight between Muslims and the indigenous Bodo tribe in the northeastern state of Assam. The violence in Assam, rooted in a complex local dispute over land, immigration and political power, has claimed at least 78 lives as more than 14,000 homes have been burned. At least 300,000 people have fled to refugee camps in the state.

The conflict in Assam, which started in July and worsened in early August, had initially remained contained to the state until tensions rippled outward. A protest by Muslims in Mumbai, the country’s financial center on the western coast, turned violent. Beatings of northeastern residents in the city of Pune spread alarm among other northeastern migrants.

Then, on Aug. 15, authorities say, misleading cellphone text messages and other social media began circulating with warnings that Muslims would attack students and migrants from the northeast. Tens of thousands of people hurriedly boarded overcrowded trains to return to their home region as Indian leaders pleaded for calm.

By Sunday, Aug. 19, the sense of panic had eased. In Pune, Indian news media reported that the number of northeastern students and migrants rushing to train stations to leave the city had declined. In Bangalore, the country’s technology capital, an estimated 30,000 northeastern migrants and students fled the week before, but local authorizes said the situation had now stabilized.

V. S. D’Souza, deputy commissioner of the Bangalore police, said police had arrested 22 people on charges ranging from assault or intimidation against northeastern natives, as well as the spreading of inflammatory messages. Aug. 20 is the Muslim holy day of Id al-Fitr, and some of the threatening text messages sent the week before had warned that northeastern migrants would face reprisals if they had not left by the holiday.

On Aug. 19, India’s top domestic security official called on the Pakistani government to investigate Indian claims that “elements based in Pakistan” had orchestrated a fear-mongering misinformation campaign using text messages and social media that helped set off the nationwide panic among northeastern migrants.

The Indian news agency, IANS, quoted an anonymous Pakistani official denying any involvement. Describing India’s claims as “cooked up,” the official told IANS that “instead of indulging in mudslinging and the blame game, it’s time for India to address its internal issues.”

The hysteria in several of the country’s most advanced urban centers underscored the deep roots of ethnic tensions in India, where communal conflicts are usually simplified as Hindu versus Muslim yet are often far more complex. For decades, Indian leaders have mostly managed to isolate and triangulate regional ethnic conflicts, if not always resolve them, but the recent public panic was a testament to how the old strategies may be less effective in an information age.

Assam’s History of Ethnic Strife

Assam, which has about 31 million people, has a long history of ethnic strife. The current violence has been focused on the westernmost region of the state, which is claimed by the Bodos as their homeland. For years, Bodo insurgent groups fought for political autonomy, with some seeking statehood and others seeking to create an independent Bodo nation.

In 2003, India’s central government, then led by the Bharatiya Janata Party, brokered a deal in which Bodo insurgents agreed to cease their rebellions in exchange for the creation of a special autonomous region, now known as the Bodoland Territorial Autonomous Districts. It was a formula long used by Indian leaders to subdue regional rebellions: persuade rebels to trade the power of the gun for the power of the ballot box.

The Bodos currently dominate the government overseeing the autonomous districts, even though they are not a majority, accounting for about 29 percent of a population otherwise splintered among Muslims, other indigenous tribal groups, Hindus and other native Assamese. Competition over landownership is a source of rivalry and resentment: the land rights of Muslims are tightly restricted inside the special districts, even though they constitute the region’s second-largest group, after the Bodos.

The Bodos say illegal Muslim immigrants from Bangladesh have streamed into the autonomous districts and taken over vacant land, Muslims contend such claims are a smokescreen intended to disguise a Bodo campaign to drive out rightful Muslim residents in a campaign similar to ethnic cleansing.

Opening a Door to Private Education

It has long been the case in India that people who earn little money could only send their children to government-run schools. As a rule, these public schools suffer from teacher absences, poor infrastructure and a lack of facilities.
But through a law upheld by the Indian Supreme Court in spring 2012, some families of little means are able to send their children to private school. The legislation – called the Right of Children to Free and Compulsory Education Act, or the Right to Education Act – requires Indian private schools to admit 25 percent of their student body from ages 6 to 14 from families making less than 100,000 rupees, or $1,800, a year.

There is still a long way to go and the number of children to benefit from new access to private schooling will be relatively small. Screening is forbidden in the admissions process, but that does not open it to everyone: Those put forward have to have a parent or sponsor with the tenacity to process the application.

Critics of the law have accused the government of shirking responsibility toward the 80 percent of schools that are publicly financed. Of the 188 million children enrolled in elementary school in India, 70 percent study in public schools. In villages, 84 percent of children attend government schools, according to the District Information System for Education, a government database.

The problems at public schools, beyond teacher absenteeism and poor infrastructure, include gender discrimination, with many schools lacking toilet facilities for girls. An article published in June 2012 in The Economic and Political Weekly pointed to a number of studies that found that even after five years of government schooling, some students do not have basic reading, writing and math skills.

(From New York Times)