The dust had barely settled on last year’s stunning terrorist attacks on trains across Mumbai, India’s financial capital, when the news of a new series of bombings aimed at Hyderabad came across the wires. The southern Indian city, not to be confused with a city of the same name in Pakistan, boasts a rapidly growing software industry and has often been described as India’s most livable city.

As with the non-starter of an investigation into last year’s bomb attacks on hapless Mumbai commuters, the Indian government quickly blamed a “foreign hand” for the bombings last week. Once again, a familiar pattern of blaming outsiders for an outrage in the heart of India will likely produce no credible results, and eventually lead to the fizzling out of efforts to locate and penalize the offenders. And certainly, there will be no efforts to address the key problems being faced by the country’s poor, which remains the main breeding ground of terrorist attacks.

While much of the media attention in India focuses on the threats posed by Islamic terrorists, less attention is paid to the terrorists who have caused greater damage to both life and property. These are the Maoist guerrillas who kill landowners and police with alarming regularity in an agricultural belt running from the middle of southern India to the borders of Nepal. The economic underpinnings of the terrorist movement in India can be best appreciated by examining the Maoists.

Backwardness begets …

I wrote in a recent article [1] about how India has failed to improve the lot of its poor fast enough. Even as the proportion of the population living below the poverty line has steadily declined over the past 10 years, as defined by the World Bank and the Asia Development Bank in recent reports, [2, 3] the sheer number gives pause for thought. There are at least 200 million poor people in India, a figure that must decline sharply before any meaningful impact on the stresses and strains of modern living can be sorted.

By stresses and strains of course I am referring to the urbanization that must be accelerated by India if these poor will have a meaningful chance of escaping poverty in coming years. To do that requires an overhaul of the infrastructure that is provided to urban areas, as well as the removal of antiquated restrictions on land usage as well as floor space available for development.

All that, however, must wait on the first part of the story, which is the removal of restrictions on industry. Jobs are created by the private sector, not mandated in government budgets. The opening up of strenuous restrictions on business would be the primary source of generating employment as well as creating a viable group of second-tier cities that can absorb the rural masses seeking better futures.

As things stand, the options for poor people are quite limited – moving to one of the country’s top 10 cities would inevitably create undue pressures on pricing. This week the media reported, for example, that a Mumbai office block garnered the highest rent in the region extending from the Middle East to Southeast Asia, an area that includes well-developed cities such as Singapore and Dubai. However, such pricing is indicative of severe supply lags relative to demand, as against being something to be proud of. Indeed, it is clear that many Indian cities are unable to attract new businesses because of spiraling costs, which obviously also limits potential employment growth.

Every one of these issues plays straight into the hands of Maoist recruiters, who find it easy to hire foot soldiers from among the desperately poor with limited upward mobility. Quite unlike India’s urban poor, who have more extensive opportunities (as borne out by many a rags-to-riches story), the poor in rural India have only the one option, namely to leave their villages and take the risk of working in a big city.

In its report cited above, the World Bank made the following observation on Indian agriculture that more or less conveys the desperate situation in rural India:

Slow agricultural growth is a concern for policymakers, as some two-thirds of India’s people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable, and India’s yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers’ access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation.

Muslim issues

At this point, it is perhaps pertinent to examine the charges that India frequently makes of Pakistani involvement in terror acts. While it has been generally proved that Pakistan’s Inter-Services Intelligence has provided significant training and arms assistance to Muslim terrorists across South Asia, the charges do not explain India’s own failing in improving the lot of its Muslim population that could help deny new recruits to terrorist causes.

Being the most visible minority in India, it is perhaps true that Muslims get a lot of political attention. Even so, claims that the community is backward or that there is any evidence of systemic discrimination are, in the main, bogus. Many of the top 100 of India’s richest men are Muslim, as are prominent politicians, sportsmen and film stars. This record would simply be impossible in any country with structural constraints.

Despite all that, it is also true that the country’s criminal underworld is almost entirely Muslim, and that Muslim children are much more likely to turn to a life of crime than children of other communities in India. It is also true, as per the Indian government [4] and other multilateral agencies, that Muslims lag in key human-development indicators such as education.

All too often, comparisons are made to the United States’ black community, wherein another visible minority does have its successes in the entertainment business but failures in most other indicators, including the number of criminals within the population. However, those comparisons are simply wrong-headed, because India’s Muslims show broad-brush success across many economic sectors.

The more likely facet to understanding Muslim backwardness in India is to examine the distribution of the population, which for historical reasons is more urban than the general Indian population. While some two-thirds of Indians live in the villages, the proportion is thought to be inverted for Indian Muslims, with most living in urban and suburban areas.

That observation also brings into context the poor infrastructure, rising costs and declining growth in many Indian cities as they suffer from the weight of rising populations. In Mumbai, the conflict between the old and the new has often led to significant corruption on development projects, which in turn has led politicians to consort with unsavory characters in the underworld. In keeping with the South Asian penchant for keeping things in the family, including businesses and political parties, most Indian underworld outfits operate as family groups. It is therefore the accident of birth rather than one’s religion that appears to affect the choice of career in urban India.

Poor infrastructure in cities also means low-quality education in many areas, in turn driving poor Muslims to religious schools. Graduates of such schools, whose curriculum lags the national curriculum by many decades, find it well nigh impossible to compete with other graduates for jobs in fast-growing sectors such as software development. The same observation on employment opportunities is true for many graduates from rural Indian schools.

While it may indeed be true that much of the Indian underworld is Muslim, it is a lot less likely that these criminals aren’t working for political bigwigs. Thus the nexus of politicians, big business and criminals provides a seamless delivery of hit-men and small-time crooks that help to grease the wheels of India’s parallel economy.

As with all bad economic ideas, the ultimate cost is borne by growth, and this is true of the parallel economy in India that has pushed inflation significantly upward in urban areas. That has in turn pressured the living standards of poor people while poor infrastructure limits employment growth. Finding themselves in this lose-lose situation, it is highly likely that many young Indian Muslims simply adopt a life of crime that eventually sets them on the path to more heinous acts.

The only way to break this vicious cycle is to take the task of economic development in urban areas much more seriously. Higher economic growth with attendant employment generation will do more to erase the scourge of terrorism in India than any alternative strategy, and will do so in less time and with greater chance of success as well.

1. South Asia’s schizophrenic twins, Asia Times Online, August 18, 2007.
2. Key Indicators 2007: Inequality in Asia, Asia Development Bank.
3. India Country Overview 2006, World Bank.
4. Census of India 2001, government of India.