Manik V Suri - India’s massive power failure earlier last week was the largest in history, affecting more than 650 million Indians – nearly 10 per cent of humanity. Coming on the heels of a huge grid failure the previous day, the blackout brought large swaths of northern and eastern India grinding to a halt: trains stalled, subways shut down, shopkeepers shuttered businesses, and hospitals postponed surgeries. Power was restored in a matter of hours, but the blackout offered a sobering reminder that for a third of Indians who live each day without electricity, darkness is a part of life.
In dramatic fashion, India’s unprecedented blackout exposed the magnitude of its power problems for the world to see. The basic issue is inadequate supply. India is the world’s fourth-largest energy consumer, with capacity projected to increase nearly 50 per cent in the next five years. Yet the country’s Central Electricity Authority recently reported that peak power demand still outstrips supply by almost 10 per cent – a shortfall expected to continue into the foreseeable future. In larger states, the figure is as high as 12 per cent. Rolling blackouts are a fact of life in India’s urban centres. And over 300 million Indians, mostly in rural areas, lack any electricity at all.
The underlying causes are manifold. In an ongoing tug-of-war, “errant” states regularly overuse their allocations despite reprimands from the federal government. Meanwhile, rampant power theft and huge transmission losses eat up an astounding thirty-eight per cent of power generated-waste that India can ill-afford. The country has failed to implement efficiency-maximising technology that would allow control systems to rapidly change resistance in transmission lines. Yet unperturbed government officials blithely ignore the recommendations of expert panels convened after similar fiascoes in the past.
India’s flailing power sector is a drag on the economy. The Confederation of Indian Industry estimates that this week’s outages cost businesses several hundred million dollars. Chronic power shortages hurt India’s competitiveness, forcing production cuts, causing underemployment, and even threatening lives. The government’s respected Planning Commission estimates that they reduce India’s growth rate by 1.2 per cent. And insufficient power stifles entrepreneurship, too. Indians are ‘proud’ of their capacity for jugaad, but cost-savvy, homespun resourcefulness has it limits. After all, it’s hard to innovate away the need for electricity.
These problems with power reflect a broader challenge that India faces today: deeply inadequate infrastructure. Anyone who has visited the country for any length of time can bear witness to this fact. While experts have long recognised the need for better highways, more paved roads, modern airports, and decent ports, the Indian government continues to fall short on its investment targets. And pressure on existing facilities will only grow as thousands of new cars enter India’s roads daily, and millions of washing machines and refrigerators are installed for the first time.
Pinpointing the blame is difficult, if only because the list of culprits is long. Those who deserve a share of the blame certainly include the crony capitalists and petty bureaucrats, but one actor stands out: India’s feckless national government. Politically vulnerable, engaged in interminable infighting, and caught between deep-pocketed industrialists and protection-minded populists, the ruling coalition led by Prime Minister Manmohan Singh seems unable to inspire confidence at home or abroad.
Facing a tough election ahead, India’s political leaders are pandering to powerful domestic lobbies while sacrificing prudent policy. The rupee has tumbled in the wake of the government’s volte-face on the highly anticipated liberalisation of the retail sector and its ill-conceived attempt to impose retroactive taxes on foreign companies. Such short-sighted measures are driving away overseas investment that urgently needs to be channelled into sectors like infrastructure. Last week’s outage was merely the latest in a series of events to further undercut waning investor confidence amidst India’s economic growth slowing to 5.3 per cent, its lowest in nine years. Without real political leadership, a dangerous cycle that could stall the Indian growth engine appears on the horizon.
And yet, for India’s reformers, the blackout could be a boon. Elite decision-makers who run the country’s public and private institutions are heavily insulated from shortfalls in electricity and other public goods. Their homes, offices, hotels, and hospitals boast large backup power generators – some even have their own private corporate ‘island’ grids – so hardly any of them felt the direct effects of this week’s outage. It is the poor and middle class Indians whose water pumps, light bulbs, and TVs regularly refuse to turn on, sometimes for hours on end.
Crucially, however, India’s power failure laid bare the degree to which under investment in public goods still limits its potential. With reform efforts stalling in the face of populist pressure, Prime Minister Singh’s ruling coalition should use this opportunity to galvanise public support for needed measures. Rather than continuing to play a pointless centre-state blame game, India’s leaders must commit political capital to expanding investment in vital public goods like infrastructure, education, and health.
Democratic dysfunction is, of course, not just an Indian problem. In recognising New Delhi’s failings, we would do well to turn the mirror on ourselves as well. While its woes may seem unimaginably far away, India’s historic blackout could enlighten the West – for these days, myopic political leaders unwilling to make tough choices are just as common in Europe and the United States.
Manik V. Suri is a Visiting Fellow at the University of Pennsylvania’s Center for the Advanced Study of India and a Truman Security Fellow. He has held positions at global investment firm D. E. Shaw & Company and the White House National Economic Council.