[Viewpoint] India’s Tea Party

Few people in their right mind would find any good in a $31 billion loss. In India’s case, it may just be the best thing that has happened in a very long time.

Let’s flash forward 20 years to what school kids will learn about recent events. Sure, they may hear about Anna Hazare, the anticorruption activist whose hunger strike shamed a government. More than anything, they may learn than Hazare was a symbol of the national sense of disgust over an opaque phone-license deal that squandered $31 billion.

While that’s a big figure anywhere, it’s appalling in a nation in which 76 percent of its 1.2 billion people live on less than $2 a day. As public anger soars, history will probably record this loss as the proverbial last straw. Walking the streets of India’s cities, I can’t help but feel the biggest democracy is seeing its own Tea Party movement. Only unlike America’s, which is fiscally conservative and libertarian in nature, India’s is about the government doing more - ending the stifling bureaucracy and offering better services. This could just be the Indian turning point for which investors have waited.

“I think a genie has been let out in India that won’t get back into the bottle,” said Jesse Lentchner, Hong Kong-based Asia Pacific chief executive officer for BTIG LLC, a broker dealer. “It all started in 1991, and what we’re seeing now suggests reform is accelerating.”

Now is also an apt time to look back two decades. It was then that Manmohan Singh brought free-market reforms to India as finance minister. He scrapped red tape and removed the state-enforced restraints on various industries, paving the way for today’s 7.7 percent growth.

Yet as prime minister since 2004, he and his government have dragged their feet on attacking the rampant corruption that leads to too many Indians being mired in poverty. There is a sense that his failure to use the rapid growth of the mid-2000s to upgrade the economy was a huge missed opportunity.

Last year’s humiliating Commonwealth Games in New Delhi should have ended the complacency. The international media were aghast at shoddy construction, work delays, claims of tainted swimming-pool water that some athletes say caused “Delhi belly,” a dengue-fever outbreak and 100-roll packs of toilet paper going for $80.

The phone-permit sale predates the Commonwealth Games, though a steady diet of disclosures emerged in recent months. In November, the telecommunications minister, Andimuthu Raja, resigned amid allegations that a 2008 auction of phone licenses was rigged and cost the state tens of billions of dollars. The audacity of the alleged fraud, the dollar amount and the government’s tepid response outraged the nation. With each passing month of inaction by Singh and the president of his Indian National Congress party, Sonia Gandhi, public ire grew.

The whole reason for the public anger is that India’s democracy is failing the masses. The parallels between the Indian and U.S. Tea Parties reflect public anger at elites, rather than the substance of their grievances. Most Indians don’t want the government out of their lives - they want it to do better by them. Indians are less antagonistic toward public spending than their American counterparts and instead demand that it benefit the broader economy.

As in the United States, India’s version of the Tea Party seemed to come out of nowhere to alter the political landscape in sudden and unpredictable ways. For too many years, politicians pooh-poohed the need to clean up India. In 2010, the nation ranked 87 out of 178 countries in Transparency International’s Corruption Perceptions Index, tied with Albania and Liberia.

India needs change, and the grass-roots fury coursing through New Delhi and Mumbai shouldn’t be downplayed. It’s real, it’s raw and it’s set to explode anew if politicians renege on their pledge to tackle graft. On Aug. 27, as both houses of Parliament passed a resolution to do just that, one could sense the electricity in the air.

“We’re seeing history in the making here,” Adi Godrej, the billionaire chairman of Godrej Consumer Products Ltd., told me in Mumbai. “Whatever happens from here, our economy will be better off for it.”

Observers are free to quibble with the details. Some worry about creating a massive new bureaucracy that merely centralizes corruption. There’s also concern that once the crowds disperse, nothing will change in Asia’s third-biggest economy.

They are missing the point. Indians are fed up with how prosperity is eluding so many of them. They are disheartened to see China racing ahead while they walk past shantytowns and child beggars every day. And now India’s brand of Tea Party movement has had a taste of success. If you think this genie is going back in the bottle, you’re dreaming.

*The writer is a Bloomberg View columnist.

By William Pesek