India has a lot going for it. Unlike Britain, where our intellectuals mostly deserve our anti-intellectualism, its population is divided between those who are highly educated and those who are not but devoutly hope their children will be. It is the world's largest democracy, speaks the international lingua franca of business and is blessed with the Common Law system. The latter is well suited to economies in rapid development, as it makes for more flexibility in crafting novel contracts and means the courts can adapt the law to changing circumstances far faster than any legislature could.
Yet there are problems in India too. Mainly corruption, but also protectionism. Other emerging economies have joined the rich world by opening their minds as well as their borders. Russians can't trust their judges so they have allowed international lawyers to "offshore" the process of dispute resolution by the use of foreign arbitration. Purely Russian businesses often structure their contracts through offshore companies simply to have them governed by English Law and any disputes resolved in London. India's legal and political elites are so far having none of that. Their reforms to date allow foreign investment only in tightly-controlled circumstances under rules that make investors nervous both about repatriating profit and the eventual exit of their capital.Though its own companies are welcomed elsewhere with open arms, India is not truly open to foreign investors.
The local legal profession has recently also raised fundamental doubts about India's justice system as I blogged here. I accused the lawyers concerned of cowardice, but an Indian friend tells me they are more likely to be responding to political direction of some kind; that the Indian government probably doesn't want the accused men to be defended by anyone competent. That adds further gloom to an already dark picture. There is a well-established correlation between the rule of law, which requires an independent judiciary and legal profession to function, and economic development. Despised though lawyers often are in Britain, its attraction to international investors is largely based upon the fact that our contracts mean what they say (as interpreted by independent judges with the assistance of independent lawyers) and not what the government of the day wants them to say.
When English judges refuse to deport Berezovsky, the Russian government fulminates, but Russian business-men (and others in the growth markets of the world) are impressed by their independence. India's lawyers are not helping either to impress us with the quality of their courts and their profession or the ability of either to resist government influence.
Finally, there is the rather regal attitude of India's public servants. A neighbour visiting Bangalore emailed me today about the inscription over the pictured building, the local state legislature. It reads, incredibly,
Government work is God's work
Knowing my opinions of state power in general, he thought of me immediately!
Until such attitudes change, India cannot realise her great potential. It would be inconsistent of me to predict otherwise given that the increasingly godlike arrogance of the British state largely fuels my fears for our own future prosperity.