India’s Path Was Paved by Soviet Fall

India’s Path Was Paved by Soviet Fall

Letter from India, The International Herald Tribune


With all the attention being paid this month to the fall of the Berlin Wall, I’ve found myself thinking of how much India has changed over the last 20 years. Most of the media coverage has, quite understandably, focused on Europe. But the tremors from Communism’s collapse were felt far beyond the immediate battlegrounds of the Cold War.

The breakup of the Soviet Union had a profound impact on India. In many ways, it paved the way for a reinvention of the country: from a stultified, socialist economy to a more dynamic, capitalist one; from a foreign policy defined by suspicion of America to one defined by shared interests and even mutual affection; and from public attitudes that frowned on individualism, consumerism and ambition to a nation that today exalts those same qualities.

A founding member of the global non-aligned movement, India was never a Communist country. But it was far closer to the Soviet Union than to the United States throughout the Cold War, buying weapons on concessional terms, doing barter trade with the Eastern Bloc and receiving financial and technical aid for industrial and infrastructure projects.

I remember, from my childhood, the Soviet engineers and scientists who filled the bars in Pondicherry, seeking respite from the rigors of the power plant they were building up the road. I remember the dusty bookstores that stocked cheap Russian classics and the bottles of sparkling Russian wine my father used to buy from visiting sailors.

There were many reasons for the closeness between India and the Soviet Union, not least of which was a U.S. foreign policy that tilted decisively toward Pakistan. But the closeness was born, too, of genuine ideological affinity.

In 1926, Jawaharlal Nehru, who was to become India’s first prime minister, visited the Soviet Union and came away deeply impressed. An ardent believer in democracy, he was skeptical of Communism’s emerging political shape, but he was inspired by the Soviet economic model, which he felt had much to offer his own country.

At Indian independence, Nehru helped shape an economy that was substantially modeled after the Soviet template: five-year plans, central planning and a dominant public sector that would assume — as Nehru, borrowing Lenin’s phrase, put it — the “commanding heights” of the economy.

By the late 1980s, that economy was creaking — sagging under the weight of excessive government control, stifling in the same stew of inefficiency and bureaucratic mismanagement that was bringing down the Soviet empire.

In the summer of 1991, a few months before leaders of the Soviet Union would meet in a dacha outside Moscow to formally dissolve their nation, India confronted a severe balance of payments crisis. Left with foreign currency reserves worth just weeks of imports, the government was forced to begin dismantling the import barriers and state controls that were restricting the economy.

The country would never be the same. For better or for worse — for better and for worse — India was embarking on a path that has today made it one of the world’s most unabashedly capitalist places. Its economy, its foreign policy, its cultural and social attitudes have undergone a dramatic process of opening up over the last two decades. A country that was once inward-looking and insecure about its place in the world is now a confident, emerging power.

Economic liberalization has led, also, to a shift in the balance of power within India. As states have been freed to compete for investment and capital, formerly backward regions have risen in prominence. The south, in particular, has gained ascendance, largely because of its ability to attract foreign technology and automotive and other companies.

It’s possible that all of this would have happened anyway, with or without the dissolution of the Soviet Union. But although the proximate cause of that fateful crisis in 1991 had little to do with the Cold War — it was prompted by a spike in oil prices during the Gulf War — the demise of Communism certainly provided an impetus. Indeed, the chronic shortage of foreign exchange was exacerbated by the end of barter trade and subsidized weaponry.

Most important, the death of Communism had a psychological and intellectual impact that paved the way for India’s transformation. As the economist T.N. Srinivasan (among others) has argued, it provided an opening for would-be reformers, who had already recognized the need for some form of liberalization but who had run up against ideological resistance.

The collapse of the Soviet Union wasn’t just the collapse of a political and military behemoth. It was the collapse of an idea, too, and with the discrediting of Communist ideology, Indian socialism, long the guiding philosophy of statecraft and economic policy making, confronted a crisis of confidence. Ideas that had until then been anathema to the nation’s governing class — ideas about markets, about profits, about entrepreneurship — suddenly seemed, amidst the detritus of Communism, to be incontestable.

It’s hard to remember now, after the spectacular market failures of the last few years, but policy makers in 1991 were operating at “the end of history.” Capitalism wasn’t just a superior model; it was the only viable one.

Almost two decades later, debate continues about the nation’s economic reforms. Critics point to what they see as a legacy of dispossession and inequality, and defenders point to world-class companies, enviable growth rates and a general tide of optimism that has changed the way the world looks at India and India looks at itself.

Over one thing, though, there is little debate: India today is fundamentally different from the India that existed before the collapse of the Soviet Union. And that transformation, although attributable to many causes, is testament to the power of ideas — to the way they rise and fall in credibility and valence, to the way they travel across continents and cultures, and to the way they shape the destinies of nations and the people who live within them.

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