Quotes of the Day

A former president of New Delhi's Foreign Correspondents' Club liked to startle newly arrived American and British journalists by telling them to begin work on their big India book at once. If they protested that they had just landed and would need at least a year to write a book, he insisted that they had got it exactly wrong. "The first day in India," he would say, "every foreigner is convinced he can write a book about it. After a year of living here, he realizes he can't write a meaningful sentence about it."

Fortunately, Edward Luce was not put off by this advice. The South Asia bureau chief for the Financial Times from 2001 to 2005, Luce is the author of In Spite of the Gods: The Strange Rise of Modern India, a recently published work that is the latest in a line of tomes seeking to explain how the erstwhile land of snake charmers and flying carpets has become the world's newest economic power. It is also, far and away, the best.

Like many foreign observers of India's economic emergence, Luce starts by laying out the basic problem: the "curiously lopsided" way in which India's economy has boomed. Why does a country that is home to advanced high-tech and manufacturing companies still have about 400 million illiterate people and high unemployment? In so many aspects of its economy, Luce notes, "India finds itself higher on the ladder than one would expect it to be," yet "most of its population are still standing at the bottom." Many articles and books on India end here, but Luce explains the reasons for India's interminable paradoxes, arguing they are the logical outcomes of illogical polices.

Since the country's independence in 1947, Luce notes, India's policy planners have invested limited resources both on universities and on primary schools. That's produced a class of English-speaking engineering graduates who can compete with anyone in the world. But the flip side of diverting a big chunk of the education budget to create and run sophisticated universities is that millions of Indians have been left without basic education. Another puzzle is why only 7 million Indians?as opposed to 100 million in China?are employed in the formal manufacturing sector. A major reason is that state laws make it very difficult for factories to lay off workers, Luce explains. As a result, Indian capitalists invest in advanced, efficient manufacturing facilities, which allow them to maximize production while minimizing employment. This is good for profit margins, but not for the millions of desperate job seekers.

Luce is strongest on economics, but he's also a savvy observer of the social and political environments that alternately nurture and throttle India's growth. With equal aplomb, he tackles topics such as the surging political power of India's lower castes, the rise and (apparent) decline of Hindu nationalism and the decline and (apparent) resurgence of the Gandhi-Nehru dynasty. Luce also takes a stab at explaining the big regional differences in economic development within India. For example, a senior bureaucrat in the southern state of Tamil Nadu candidly tells Luce that about 30% of public funds meant for promoting literacy, roads and electrification in his state are "diverted"?embezzled by bureaucrats?versus 70% in the north. The result: half of Tamil Nadu now lives in cities, where the standard of living tends to be higher, whereas 90% of the population of the northern Indian state of Bihar still lives in villages. And if you're wondering what life in an Indian village is like, Luce describes it vividly: "The tubercular hacking cough is as common a sound in the north Indian village as the lowing of the cattle or the ringing of the temple bell."

Luce offers some remedies for India's pervasive poverty and uneven development: fix labor laws, improve rural infrastructure and social services, and preserve and strengthen democratic institutions. India also must stop the spread of AIDS, he says, and protect its environment, which is decaying fast as the economy heats up. This is all perfectly sensible, but not all of Luce's arguments are rock solid. For example, he laments the stupidity of labeling all of India's diverse Muslim groups as fundamentalists, yet he brushes off the threat from Islamic fanaticism too casually. Its reach may still be miniscule within India, but it is spreading, and the terrorists who blow up trains in Bombay are at least as great a threat to India's economic future as any that Luce lists. For the most part, though, In Spite of the Gods: The Strange Rise of Modern India is an exceptional book, and that's because its author is unusual: he's a foreigner who gets India.

• Aravind Adiga
• A foreign journalist delves into the curious dichotomies of a country's economic miracle