India Shouldn't Balkanize
The center is not holding in India. Ethnic, caste, regional, and religious forces are pulling it apart. The defeat of the corrupt Congress Party in May and the diffusion of power to the Bharatiya Janata Party of the north and many smaller parties of the south mark a distinct end to India's post-colonial era. The future will bring either decentralized government and further economic growth or anarchy, hatred, and bloodshed. We expect the good sense and pragmatism of Indians to prevail. We hope that the military, one of India's most integrated and national institutions, ensures stability.
The most immediate issue is who will run the national government in New Delhi. The BJP emerged as the single largest party, but it is having trouble forming a coalition government and is expected to lose a vote of confidence on May 31. A three-way battle is taking place between the BJP, a group of southern communist and socialist regional parties called the United Front, and the discredited Congress Party. Whoever wins will preside over a weaker central government.
There is nothing wrong, per se, with a weak center and stronger state governments. States already differ dramatically in economic policies. Some have liberalized their economic policies, some have not. Some compete for foreign investment, others do not. Yet, for both Indian and foreign companies, a decentralized India poses problems. If rules governing business vary from state to state, investment becomes that much more difficult. India's huge mass market, one of its most important attractions to corporations, may get chopped up into smaller, less inviting parts. Economies of scale can suffer, along with profits, investments, and jobs.
India is poised for a great place at the table of nations in the 21st century. Its economy is growing fast. Exports are booming, and foreign investment is arriving. India can fulfill the promise of peace and prosperity for its nearly 1 billion people in the years ahead. But only if a peaceful and orderly society prevails.