In 1905, a German social scientist and politician wrote The Protestant Ethic and the Spirit of Capitalism. Max Weber argued that capitalism in his part of Europe bloomed when Protestant, particularly the Calvinist, ethic of thrift and hard work influenced many. They engaged in work in the secular world. They developed their own enterprises, went into trade and the accumulation of wealth for investment. This Protestant work ethic, he said, drove the unplanned and uncoordinated and thus influenced the development of capitalism.
As in Europe of the Middle Ages, religions have dominated life in India. The work ethic for capital accumulation and developing enterprise was confined to specified castes in communities. Thus the Bohris and Khojas among Muslims, Baniyas, Marwaris, Chettiars and others among Hindus, were known for their enterprise and success in business and commerce in India and in other countries. Some provinces like Sindh and Kutch also seemed to produce more enterprising people who took to business. The immigrant Parsis took to business and prospered.
Independence changed this. In the 1950s and 1960s, when industrial-licensing and development-finance institutions controlled by the government were the rule, the established communities and castes did well. But many others also entered business. Among them were Brahmins, as in the South Indian groups such as TVS, Amalgamations and so on. This happened in other metropolitan areas as well. Many started workshops for repairs and soon, for original manufacture. The engineering shops in Ludhiana and other parts of Punjab are prime examples. The Apollo tyres group, Mahindra and Mahindra, are examples. Further expansion of enterprise occurred as engineering and technical education took root. The easier availability of investment finance and the spread of the equity cult led to many new entrepreneurs. Preferences for Dalits and Muslims led to their founding manufacturing and trading businesses that grew big.
Business enterprise is fundamental to economic growth and development. Industrial licensing led to many government hurdles in starting new enterprises and their expansion. (The present difficulties in starting enterprises are a legacy.) But many new enterprises did start, based on connections and contacts. After 1991, and stimulants such as lower taxation, many new private enterprises came in. The role of the state-owned enterprises declined though they still dominated crucial areas minerals, infrastructure and heavy industry. With the technological revolution led by information technology, telecommunications, internet, computers and social media, new businesses came into being. Many were founded by professional managers and technicians. Their religion and caste were not relevant.
Enterprise needs peace, harmony and law and order. Government procedures and inspections must be minimized and clearances made speedy. These minimize corruption. Natural and other resources must be sold in free markets to avoid unsavoury deals. Enterprises must be free to expand production and employment, and to reduce them when times are difficult. What is worst for enterprise functioning and growth is communal disharmony, violence and hatred.
Narendra Modis victory was helped by the incompetence and blatant corruption in the United Progressive Alliance-II government, but the untiring efforts of thousands of volunteers of the Rashtriya Swayamsevak Sangh were essential. The Bharatiya Janata Party governments dilemma is to deliver development while keeping the RSS happy and cooperative.
The RSS is communal, pro-Hindu and anti-Muslim, with many antediluvian ideas, including preference for swadeshi to videshi and cultural influences. In an increasingly integrated world due to communication and free trade, these ideas are not viable. For faster and consistent growth, India needs investment from all sources and access to technology and markets. We must be open to goods, services, people and ideas.
The RSS and its associates have increased Hindu propaganda; witness Dina Nath Batras books extolling the Hindu discoveries in science hundreds of years ago, the pernicious propaganda that Muslims are entrapping Hindu girls and converting them to Islam (love jihad), inflammatory speeches by swamijis and others campaigning for the BJP in the state by-elections, anti-Muslim rhetoric, especially in Uttar Pradesh, and attempts to reinterpret Hindu philosophy that is said to incorporate all beliefs by propagating that other religions are also Hindu.
The government must distance itself from this rhetoric if its development agenda is not to be swamped. The absence of any counter by the Central government could have many negative consequences for economic development. It could revive the Western obloquy of Prime Minister Modi now disparaging India. After he became prime minister, the British and the Americans sent many top ministers to smoothen the relationship. A revived hate campaign against the prime minister in the media in these countries could affect investments into India.
The Modi government has already changed direction in foreign relations, with a strong tilt towards Asia, particularly Japan and China, both of whom have huge foreign exchange reserves and low interest rates. The creation of a development bank with $100 billion to start with is another sign of moving towards Asia. Japan and China were not bothered by the earlier accusations against Modi and, indeed, reached out to him.
In the domestic arena, the rabid Hindutva rhetoric will have the most negative impact. It could result in Hindu-Muslim tensions, even riots, as young Muslims and Hindus move from rhetoric to street actions. Communal violence, especially in our cities, will disrupt normal life, transport, manufacturing, especially the services sector, and the investment climate. It will hit trade. It will distract much top government attention from development issues to dealing with law and order. It will slow down consumption and hence living standards will not rise as desired. Exports will be adversely affected. Tourism will be hit. If oil prices again become volatile, that will add another serious hurdle. Almost certainly, the Pakistan border will become more active. Terrorism, internally, will rise. The development agenda will be adversely affected.
The Opposition parties will mount agitations against the BJP government. As the BJP did to the UPA-II, the minor Opposition parties can paralyze the Lok Sabha despite their small numbers. They will prevent legislative progress in the Upper House. They can prevent reforms of direct and indirect taxation, particularly the introduction of the goods and services tax.
Yet, a BJP government must keep the RSS in a good mood. It needs the RSS to provide it with the foot soldiers during elections. Also, many in the BJP, including the prime minister, grew up in the RSS and will have much sympathy for its ideology and rhetoric.
The challenge for Modi is to reconcile these two conflicting demands of development and the tilt towards aggressive Hinduism. What it will probably do is walk a tightrope and accept the tilt wherever it will not affect the development agenda and actions. For example, it might introduce Hindu prayers in a bigger way than what is there at present in schools and public functions. It could encourage Ayurveda and yoga and other popular Hindu remedies for better health. It could place restrictions on cow slaughter, which might hit exports but not significantly in overall terms. It might go slow on the special schemes for Muslims introduced in the UPA regime, on the argument that development will uplift all, and there is no need for helping specific groups. It could continue the targeting of Muslims whenever there is an incident of terrorism.
It will be sad if the government resorts to practices that do not accept and encourage the pluralism that is Indias special feature. A large majority in Parliament, control of most state legislatures and being feted by many foreign countries vying for a share of the Indian markets will allow the government to do so. But it will harm the desired economic development of India.
The author is former director-general, National Council of Applied Economic Research