Why Prof. Ashoka Mody Believes India is Broken
Ashoka Mody is an economic historian at Princeton, but writes, his “heart is in India.” It’s through this lens that Mody, formerly of the World Bank and the International Monetary Fund, channels his finance- and policy-driven analysis of the world’s second most-populous country. Weaving history, statistics, economics and political science, Mody’s “India is Broken: A People Betrayed, Independence to Today” is a clear-eyed look at the obstacles the country faces on its path to becoming a global superpower. Mody recently sat down with Princeton International to discuss his findings.
The basic premise of the book is that India is broken. How so?
Indian elites who live first-world lives and their international counterparts tell a very upbeat story about India, relying on whacky techno-optimism and using superficial indicators.
I have long felt that that upbeat story is completely divorced from the lived reality of the vast majority of Indians. I wanted to write a book about that lived reality, about jobs, education, healthcare, the cities Indians live in, the justice system they encounter, the air they breathe, the water they drink. And when you look at India through that lens of that reality, the progress is halting at best and far removed from the aspirations of people and what might have been. India is broken in the sense that for hundreds of millions of Indians, jobs are hard to get, and education and health care are poor. The justice system is coercive and brutal. The air quality remains extraordinarily poor. The rivers are dying. And it's not clear that things are going to get better. Underlying that brokenness, social norms and public accountability have eroded to a point where India seems to be in a catch-22: Unaccountable politicians do not impose accountability on themselves; therefore, no one has an incentive to impose accountability for policy priorities that might benefit large numbers of people. The elite are happy in their gated first-world communities. They shrug their shoulders and say, “What exactly is the problem?”
A line in your book reminded me of an anecdote: My sister dated a man from an India who was born into an elite family — his dad was a government minister of some sort. This boyfriend said he had cheated on every single test he ever took from elementary school through college, just because he could.
That is a heartbreaking story, but I am not surprised to hear it. That is the breakdown of the norms — there is a sense of entitlement that I can cheat my way through the entire educational process — and who is going to catch me? I call this a bad equilibrium. If enough people cheat as he did, then what is my incentive to be honest? Unless I cheat, I'm going to get really left behind. Such societies coalesce around the dictum, “Do unto others before they do unto you” — and once the norms are broken, they are very hard, if not impossible, to repair.
Let’s talk about the jobs issue.
There were not enough jobs in 1950, when Jawaharlal Nehru was prime minister, and the jobs crisis, if anything, has become steadily more acute. There were fewer people employed in 2021, than in 2011; this was so at a time when 7 million to 9 million new job aspirants entered the market every year. If my calculations are right, India needs 200 million jobs over the next 10 years to employ its working-age population, and we’re starting from a decade that has experienced net zero or even net negative job growth. I say repeatedly in the book: If you want to understand India, you must keep an unflinching gaze on jobs. Because jobs are not just about economics, they are about dignity and respect.
What do you make of the announcement that Apple is going to bring manufacturing jobs to India?
The Apple investment is one part of the upbeat Indian story I referred to at the start. To digress for a minute, another part is the relative GDP growth rate. The growth rate story is utterly misleading because Indian GDP fell sharply during the COVID period. And if you fall sharply, there is always a bounce back, so GDP is growing. Even otherwise sensible economists are extrapolating that bounce back into the next century. I anticipate Indian GDP growth will moderate quite rapidly after this unusual year.
To return to your question, yes, there is some chatter that Apple is planning to expand — that this is the leading edge of an expansion of manufacturing in India. The underlying premise is that because sourcing from China had become a problem due to its lockdowns, a lot of companies were beginning to leave. At the very least, it is way too premature for India to cheer.
The problems are manifold. First, it's very hard to leave China because it doesn’t just make iPhones, it supports an entire supply chain of components. So, firms are still sticking around there. Second, U.S. firms are relocating to Mexico, and Asian firms are relocating to Vietnam and even Cambodia. Finally, recent reports warn that the iPhone production in India has run into severe quality problems. It's possible that Apple will expand into India. But in the larger scheme of things, considering all types of labor-intensive manufactured exports, the conclusion for now is that this train has left.
We in India still have a dismal education system. Go to a school in Delhi, a fifth grader cannot do second-grade reading and writing. By ninth grade, something like 30 percent drops out. And those who go on are poorly educated — many go to rubbish colleges, several of which are money spinners set up by local politicians and notables. People are clamoring for a degree certificate that they can peddle to get a job. This idea that Apple is somehow going to solve these deeply rooted problems is laughable, although as somebody who has his heart in India, it makes me cry.
Something I noticed in your book is that you're very deliberate about pairing the joblessness situation with the ongoing climate catastrophe.
Astonishingly, environmental damage does not figure in the Indian discourse on economic policy. It's not convenient. For example, there’s been a lot of news about a man named Gautam Adani, who was briefly the second richest person in the world. Adani is reputedly a very close friend of the Prime Minister. And everything Adani does leaves a deeply grievous wound in the environment — as just one instance, he may well be one of the world's biggest coal miners. Adani’s staff and the government officials work together to evict people from these mining areas. Technically, you need the permission of those evicted to clear the forests under which the coal typically lies. But Adani can afford to pay people off, leaving them some immediate funds but with unclear prospects. In the meantime, his projects are destroying pristine forests. The attitude of the Indian elite is “Yeah, but this is how development occurs.” What is this development if you are robbing your kids’ inheritance by mowing down pristine forests and polluting the air and water? Mine, I think, is the first book from a macroeconomic perspective that puts environmental damage and preservation on center stage.
Making matters worse, as Indian authorities will only too quickly remind you, India has some of the best environmental laws in the world. This is where the norms come in. Who cares about the laws and regulations? They are routinely flouted. It is common knowledge that environment-impact assessments are just pieces of paper, where people check boxes while lying through their teeth.
While the breakdown of norms and accountability is reflected in poor job creation and public-goods provision, it is most acutely reflected in the destruction of the environment. And this is so everywhere in the country. Economic growth in India relies so heavily on natural resources and construction, both of which are tied up with the mafia. The construction push, for example, has spawned illegal sand mining.
Here is the problem: in every corner of the country, sand — as an important ingredient in concrete — is in huge demand for construction projects. And illegal sand mining causes vast environmental damage and breeds criminal activity, which creates a steady supply of criminal politicians. Miners dredge sand from riverbanks and river beds, thus shifting and reducing the flow of water. Bear in mind, the rivers are already polluted; if you slow down the river flow, the rivers cannot cleanse themselves. Also, sand is a like a sponge. After a rainfall, the sand absorbs the water, allowing it time to percolate down and replenish the groundwater. If you remove the sand, the water runs away without filtering back into the ground. Sand mining also kills biodiversity and the natural habitat of fish. I don’t know what causes greater harm: the environmental damage or the supply of criminal politicians.
On a brighter note, you have a couple of prescriptive measures.
The priorities are clear: We need better education, better health care, reform of the judicial system, working cities, and greater respect for the environment. The solution must lie in repairing social norms and accountability. The only way to rebuild norms and accountability is to bring the governing class and the governed into closer proximity. This requires more decentralized, community-based governance. Things will change only when politicians are forced to deliver on their promises rather than showing up at election times, making promises, and disappearing until the next election. In the 1830s, Alexis de Tocqueville wrote glowingly about civic consciousness in American communities. We see glimpses of that in Kerala.
Kerala is a southwestern Indian state that has long been the country’s most socially advanced; it has been long governed by a communist party, which is, truly speaking, a social democratic party. For the last 75 years, maybe 100 years, Kerala has had the best education and the best healthcare in the country. And although even Kerala’s air, water, and land have suffered damage, communities in the state are sensitive to and often successful in fending off environmental damage. Many Indians often dismiss Kerala’s example as unique and impossible to replicate. In which case, I say, we have no hope. Because if other parts of the country cannot aspire to Kerala’s achievements, then what right do we have to hope for anything better?
Despite my grim prognosis, I am an idealist. Idealism requires us to create realistic institutional structures that will lead people to behave in ways where they feel obligated to be honest and responsive. A sense of community and civic consciousness in a decentralized institutional framework with adequate resources is, as I see it, our best hope.