In the wake of Thomas L Friedman's The World is Flat, and Shashi Tharoor's The Elephant, The Tiger, and The Cell Phone comes Rafiq Dossani's book India Arriving: How This Economic Powerhouse is Redefining Global Business.

Kolkata-born Dossani, senior research scholar and executive director of the South Asia Initiative at the Shorenstein Asia-Pacific Research Center at Stanford University, provides a unique, unflinching look at an often romanticized and often misunderstood country. He is brutally honest in showing the real India, and argues that the driver of India's transformation is a change in the nation's political structure rather than changes in economic policy or civil society.

Dossani, 53, whose earlier books include Prospects for Peace in South Asia (2005; Stanford University Press, co-edited with Henry Rowen), and Telecommunications Reform in India (2002; Greenwood Press), also teaches courses in South Asian development, identity and politics at Stanford.

He earlier worked with the Robert Fleming Investment Banking Group, has been the chairman and chief executive officer of a stockbroking firm in India, the deputy editor of Business India, and a professor of finance at Pennsylvania State University.

Dossani discusses his brave new book on India with Managing Editor (News) Aziz Haniffa.

What's new about India Arriving? Everyone from Tom Friedman to Shashi Tharoor has harped on this new emergence of India.

This is a book written for people on the outside wanting to know about India, although, maybe, there's some relevance for Indians living in India as well. It's certainly relevant, I believe, to Indians overseas as well as non-Indians.

India has thus far largely been defined in very simple terms in the media -- the mainstream media -- as a democracy, a country with a growing market economy, and having sophisticated services. That's it. In every other respect, it's not defined.

For example, let's take democracy. People think that the American and Indian democracies are the same except that there are more people in India. Nothing could be further from the truth. The way the Constitution divides power, for example, between regional and federal governments is completely the opposite in India.

The significant implication for investment for instance. . .  To give you one example, some years back Hewlett Packard went to Andhra Pradesh and thought [it] would set up a large rural infrastructure for communication technology in [then chief minister N Chandrababu] Naidu's home district Kuppam.

They thought a commitment to the state would be binding. They didn't realise the intricacies of Indian politics. The day Naidu was voted out, the new government pretty much shut down that project. So, the commitment to a state is not possible when you have the kind of constitutional structure that we have in India, which gives so much power to the federal government and little to the states.

In the US, it would be unthinkable that a large commitment to set up a rural infrastructure in any state would immediately be disavowed by the next elected person if he were from a different party.

You also write about the marked differences in American and Indian social democracies, how the rich and poor tend to participate more in India than in the US.

In the US, we say it's participatory because most of us belong to the middle class or higher and we vote. But we know that the poor don't vote. In India, the poor vote much more than the rich. This has significant implications on whether they determine the leaders of India. Hence, they should be determining the policies of India.

For various reasons, that didn't happen for many years; I discuss that in the book.

There is another example about nuance [in] democracy: If you ask about the sophistication of the services sector, you see it in the quality of the brilliant IIT [Indian Institute of Technology] engineers who come here, you see it in the quality of IT services exported from India.

What you don't see is the other side of the services sector -- that the vast majority of the percent of GDP [represented by] services [consists of] very low-end services. What services growth in India shows is India's weaknesses in manufacturing rather than a readiness for high-end services.

So, was the main premise of your book to explain the nuances rather than what is seen in the headlines and, some would say, the giddiness of recent books?

Yes. As I was researching this book, I made several trips to India, and especially to small towns -- Varanasi, Allahabad and Indore. I grew up in Kolkata, [and] I discovered this divide even within urban India; between big-town urban India and small-town urban India.

I discovered the great localisation of people's thinking. If a city like Delhi can have 500 Hindi language newspapers, nine Urdu language newspapers -- which is what people read, compared to the percentage who read the English language press, a small minority even in a sophisticated city like Delhi -- then there is something here that even your typical Indian doesn't know about; far less the West.

You are a specialist on the technology revolution driven by Indians in Silicon Valley, and one of the founders of TiE [The Indus Entrepreneurs]. But your book not only exposes the problems in India despite its progress, it also dispels some stereotypes. It must have taken considerable time for you to research and write this book?

In some ways, this book wrote itself, because I have been [doing so much research] on the technology sector. The only issue I wanted to explain was how is it that with relatively poor educational infrastructure you are seeing such world-class quality.

Today, if you look at a company like, say, Adobe, Google, Yahoo! or Cisco, India is their largest development center outside the United States. Even for SAP, a large German firm, India has 4,000 workers and is their single-largest center outside Germany.

Now, these are not just bodies doing low-end work. When Google, for example, makes an offer to a recruit in Bangalore, they tell that recruit that if you want to work in our Mountain View Silicon Valley offices or anywhere else in the world, you tell us and we'll transfer you there.

They don't make that offer anywhere else. India is the only country outside the US where they are able to recruit at that quality. How does this come out of the poor infrastructure that was inherited? This was a big puzzle, because, ultimately, the sustainability of IT depends on answering this question.

Does your book's title suggest India has still not arrived?

There are wonderful things happening and the well-spring of it is this regionalisation of politics, which everyone else tends to criticise from outside because they don't really understand it. But that has had many impacts -- the whole thrust towards private sector provision of education, which has improved educational access so substantially, the institutionalisation of the bureaucracy, and even the diversification of technology.

Centers like Hyderabad, a significant center for IT, would not exist without Chandrababu Naidu pushing it as a regional leader. So, it was important to answer that question.

But, in answering it, you discover India still has a long way to go. If you just look at the rural divide, today, six farmers commit suicide per day. This is a well-trotted out statistic by now, but it shows there is some deep discontent.

How is it that a population where the voting rate is 80 percent in the rural areas -- double that of urban areas -- and where they ought to be very happy, because by American standards, those who vote are very happy people and those who don't vote aren't.

In India, it's just the opposite. Those who don't vote are happy people because they don't see any need for it. Those who vote are desperately seeking happiness. But, it shows also their commitment to a system. They are not alienated. Those are the miracles of India.

How do you reconcile the likes of Indian Finance Minister P Chidambaram and others confidently predicting growth rates of 9 to 10 percent? Are such galloping growth rates sustainable, given the social problems, or is there a danger of India's economy overheating?

Chidambaram, being a member of the Cabinet, is certainly constrained to tell the truth. That doesn't mean there aren't significant problems. Certainly, his boss, the prime minister, is far more nuanced about the issues. I remember when Manmohan Singh first came in as finance minister. In my book, I quote the most beautiful statement he made when he was asked if the reforms he was introducing would lead to a prosperous India. He replied that his hope was that India would not enter the 21st century as one of the world's poorest nations.

From that modest hope, today India has come such a long way, [but] there are serious problems -- with education, with discrimination. It's a class issue, it's a caste issue, it's a gender issue, it's a religious issue.

The reality is that with regionalisation of politics, there are states that account for half of India's population and which vote based on regional parties. If they were happy with the national identity, with the way India was going, they would not vote for what are patently corrupt parties, because there are so many new ones, like the BSP [Bahujan Samaj Party]. Everyone knows the issues -- and not that the Congress party and the Bharatiya Janata Party are not corrupt, they have huge elements of corruption, which [news magazine] Tehelka has so wonderfully exposed in the last several years. The point is that people are making choices where they know the struggle will be harder. That's because they are not yet content.

Can high growth have different impacts -- positive and negative -- on different segments of the population? During your Carnegie talk, you spoke of how the availability and affordability of cell phones have empowered the indigent.

I believe in a poor country like India if we had better infrastructure, these growth rates are nothing. China showed that you could come in the 1980s on the back of many ideas about how to develop foreign investment and so on, and grow at 10 percent a year. Today, in 2007, with the technology that is available, India should be able to do double that rate of growth, just as China doubled the conventional wisdom of 5 percent growth; India should grow at 20 percent.

At its present growth rates, China [will] become a developed country by 2016 -- if you take the OECD [Organisation for Economic Cooperation and Development] definition of $20,000 per capita -- India only reaches it in 2028. High growth rates are a very good thing, [but] it ought to be much more, it ought to be deeper.

I'll give you one example. In the 1960s, in America, when telephone lines were very costly, many houses shared a single line. It rang in many houses and you picked it up. That idea is a very simple but powerful one.

Why should it not be implemented in the poorest households [in India]? When I made this proposal to the government, they wouldn't listen. The local government of Andhra Pradesh found it a very good idea, but found the laws wouldn't allow it. They went ahead anyway and did it as an experiment; they found that in a village where they implemented it, it changed the lives of the villagers.

It cut the time the typical landless laborer spent -- up to four hours a day -- queuing up to phone all the landlords in the area [to see] if he could work for them that day. Now the landlord could call him at his house on a shared line, [saving the laborer] four hours a day. Rs 25 [less than 50 cents] a month is what they were paying for the line. They covered that in less than a day of labor. Just imagine the extra productivity it resulted in.

There's always this talk about India-China rivalry, with the argument that, unlike in authoritarian China, a democracy like India finds it difficult to expedite reform. Is it far too simplistic a concept?

There are more similarities between India and China than we recognise. The problem of rural poverty is one. The second is that the power being given to local bureaucrats in China and local elected officials in India is really what has driven growth.

What changed in China was -- certainly this opened up foreign investment, but making sure that investment was accessed on the ground -- that a labor force was available, that plant and machinery was in place; the work of local officials, bureaucrats, all appointed by the party. So, maybe, it was not in an elected process, but that same localisation, which drove growth in China as a grassroots phenomenon, is what India is seeing now.

Are you saying India and China will soon be on par?

Where China differs is that in 1979 when China began its reforms, it already had high levels of literacy -- over 75 percent -- and near universal healthcare even in rural areas. India is very far from that. Today literacy [in India] is 60 percent, universal healthcare access remains a dream -- it's not even 30 percent.

China was then able to offer the world a decently educated, healthy workforce, which could enter the manufacturing sector. India doesn't have that. It's still a [long way] from being a manufacturing-ready country. That's where the difference is.

India is trying to make up by doing it in services. It's got this creamy layer of highly educated people, but that is a problem -- it can't go too far.

Where India scores over China in a big way -- and some would argue it's a long-term sustainable advantage -- is the role of entrepreneurship. Where China bottled it up till 1979 and then released the genie. The genie behaved very badly to start with, and even today you can argue Chinese entrepreneurship doesn't really understand risk, long-term thinking, planning.

India has legions of entrepreneurs who understand it very well. And not just the big ones like the Tatas. Even small entrepreneurs, cotton traders, who've been doing it for generations, people like that.

Unlike many who slam the Indian bureaucracy, you lauded it at Carnegie, saying it is one of India's greatest assets.

I really believe that. What India has achieved in the last 20 years is the institutionalisation of the bureaucracy -- which was destroyed in the [Jawaharlal] Nehru/Mrs [Indira] Gandhi/Rajiv [Gandhi] eras when they centralised all power in a few politicians and gave the bureaucrats no capabilities, and actually punished those with capabilities.

That environment has now changed and good bureaucrats are finally being rewarded and doing their work properly. They are bringing in their capabilities to help out in a big way.

The telecommunications reform was very much bureaucrat-driven. The SEBI [Securities and Exchange Board of India], the National Stock Exchange -- I was involved with them -- were very much a bureaucratic-driven process.

You have an entire chapter on the Diaspora and the role of non-resident Indians. How important are the NRIs in the US? Isn't their role over-hyped? Isn't it true that NRIs in the Gulf, including those doing menial labor, send more money to India, as Vayalar Ravi, Indian minister for overseas affairs, keeps reminding guys here when they advise the Indian government on policy?

It's a very complex and good question. If you ask how did the Indian IT services industry develop and what was the role of the NRIs in it, the answer is: Not much. In firms like TCS [Get Quote] [Tata Consultancy Services], Infosys [Get Quote], Wipro [Get Quote], NRIs played no role either in setting it up or in helping it grow. If you look for examples, in the top 10 firms in IT, even today, none was founded by someone who did his first degree in IIT. The IITs sent their best people abroad. That was the trouble.

When it comes to the last five years, I would argue that the role of the NRI has become more important.

What India had on its own was a services industry culture in IT. What the NRI is doing is carrying the product company culture from the US to India. It is a very difficult thing because you have to know, for example, when you release a product, what is acceptable in terms of defects.

Services are much easier. You do things on contract. You write code. There is no limitation in that sense, whereas product limitation is an entirely different game and India has failed at it. Over the last five years, NRIs employed by firms like Yahoo!, Intel, and so on have been the carriers of a product company culture, [resulting] in starting product start-up companies in India. I expect some very successful product companies to come out of India. So, the role of the NRIs, in terms of the intellectual capital, is increasing.

But you are right, in terms of financial capital, it doesn't come anywhere near what NRIs in the Gulf send. But, the hope is that they [the NRIs in the US] can leverage large pools of institutional capital -- not their own, but American pension funds and all of those who will have confidence in them. And that is happening.

So, this NRI commitment to India is a recent phenomenon. And I guess the Indian American CEOs' Forum is one such manifestation, which can divert large pools of capital towards India.

Exactly. It's also important to recognise not all NRIs have that same degree of commitment to India. I would say the bulk of them who came in the 1960s, 1970s and 1980s, came to escape India. . .  

Because you couldn't get jobs in India as an engineer and so you came here and did your PhDs. Now, at Stanford and other top universities, we are seeing a decline in the enrollment of Indians because they no longer want to escape. They have enough work in India.

So, there is a certain layer of NRIs committed [to] providing the intellectual capital. They are the ones who came in, say, in the 1990s onwards, and who have experienced a bit of the good on both sides. They came here because they felt they could do better work. Today, many of them have a bi-national lifestyle. They don't think in terms of either India or America. They would like to live as long as they can in both worlds. For them, the intellectual contribution can be significant.

You made a lot of references to the vernacular media and to the almost sheer insignificance of the English media in India. Does this vernacular media have the clout and influence to shape policy?

They certainly influence the common man. An overwhelming majority of Indians rely on the vernacular media rather than the English language media. The English language media is the one that speaks to New Delhi.

But now, with the regionalisation of politics, the vernacular media counts more and more and is the voice of the people. It is actually one of the intermediaries between the common man and the politicians -- in a good way, and this is what India [needs].

So you believe the English language media is simply catering to the elite in big cities.

Not only that, there are significant weaknesses in the English language media. One is a strong tendency to be pro-establishment, just like we see in the American big media, a very strong tendency to be pro-big business. This is not surprising because they are owned by them.

There also seems to be a complete lack of interest in investigative reporting. I was shocked when the first Tehelka episode, the one that broke in 2002 or 2003 [Editor's note: 2001, actually], when [then Indian defense minister] George Fernandes was exposed. After he was exposed, none of the mainstream media were willing to carry any stories about it or do any follow-up.

When Tehelka was relentlessly pursued by the government then in power and forced to close down, they [the mainstream media] just gave up on the story. They were earlier reporting only on reports of what Tehelka was saying, and subsequently not doing any follow-up. It was shocking to me [that even] when they had a ready market they were unwilling to be journalistically honest.

But how can you expect the media to always be the agents of change? 

In all fairness, yes, the media can't do everything. It can't for example, file a suit every time. What is really missing in India is civil society. When we say civil society, we mean obviously things like NGOs [non-governmental organisations], or that space between people and elected officials or bureaucracy, but which is legitimate, which is recognised by the government as a legitimate actor.

For example, the Women's Rights Society. There is a history behind it. Nehru distrusted anything that was not his creation. The moment someone said, 'I want to start a women's rights or trade union,' he tried to infiltrate it. That's how the political parties got into the act. So civil society as an independent player could not develop, and still remains pitifully weak. This is the real problem.

Today, you may have a Right to Information Act, and you may have the media following a certain trend. In the US, civil society is so strong. Today, say, if [then President Richard] Nixon [who was impeached over the Watergate bugging scandal], were alive and wanted to stand for office, civil society would ensure -- no matter what the media said -- and be relentless [in ensuring] that this cannot happen.

In India, we know that politicians get elected from jail and then get freed because once they get elected they can get bail. They come to celebrate their victory party straight from jail. There [should be] a civil society that inquires into the background of these legislators -- no one wants to elect a jailbird. It's not as if the public is saying, 'We want jailbirds.' So, yes, we shouldn't overburden the press. The press itself will respond to what civil society does. That will take decades [in India].

You held forth on the maturity of the Communist parties in India and their progressive role in Kerala, West Bengal, etc. But take, for example, their opposition to the US-India civilian nuclear deal. Was it mature of the Communist parties?

I believe the Communist parties' first objection was that they were not being recognised as a legitimate actor in this whole deal -- its interests were being ignored and the government headed by Manmohan Singh was ignoring it based on its assessment that, in foreign policy, local parties don't matter. That's always been the conventional wisdom.

They [the Communist parties] were upset that their view was not [considered]. At first, they didn't say whether they were against it or for it. When the government continued to ignore them, they started articulating a point of view.

The question is whether should they have a point of view that is different from the government. Why not? Is there any harm in their saying that they are against the nuclear deal?

My own view is that India should have access to nuclear fuel. Not for the reasons that the US is giving -- that it's a grand gift. India deserves it on the grounds of equity. It's a responsible player in the world. Why should it not have nuclear fuel for nuclear energy? But there is nothing wrong with having an opposing point of view and having a discussion.

If the Communist parties are supporting the party in power, I don't see anything wrong with what the Communists have done. If you look at their history, they have been very legitimate players in the Indian system. You can pretty much see in Kerala that every time the Congress party came into power, Kerala went backwards; every time the Communists came into power, education was stressed. The first 100 percent literacy drive happened under Communist rule. That is one of the most significant achievements in Indian history, post-Independence.

They were the leaders in the 1975-1977 Emergency resistance, along with several others. So, how can we fault them? The reforms in 1991-1996, which started all of this, happened with Communist support. Manmohan Singh, on his own, could not have done it. [Former Indian prime minister] Narasimha Rao could not have done this without their support. These were domestic policies they were concerned about.

They are legitimate players, they have to be listened to. If they have irrational grievances, let's address them. But, there's no evidence that [their opposition to the nuclear deal] is irrational.