MUMBAI – Every day, a small Japanese jet brings another 60 businessmen from Tokyo to sniff out new commercial opportunities in Mumbai and the heart of the Indian economy.

Naturally, there may be a touch of geopolitical calculation about this. As Japan grows increasingly nervous about China’s rise, the case for increasing investment in the other Asian giant strengthens.

But there is more about this than politics. Japanese businessmen may be a little puzzled by the creative chaos of India; the argumentative culture can seem alien to them.

They know, however, a chance for making good profits in a rapidly expanding market when they see one. 

And they see one in India’s glorious Technicolor – the Bollywood version of Adam Smith. When the Japanese company Daiichi Sankyo paid $4.6 billion for majority control of the Ranbury pharmaceutical group in 2008, they were placing a bet on continuing corporate success. Given India’s growth rates, who would seriously question their decision?

So the lobby of Mumbai’s Taj hotel, just across the road from the gateway built to welcome Britain’s King George V and Queen Mary on their visit to India in 1911, is once again thronged with visitors, many of whom have arrived to see if India is living up to its image as the next great power.

The grand old Taj deserves all the business it is getting, after being the target of a terrorist attack in 2008. The bravery of the staff in trying to protect the hotel’s clients deserves the applause of every world traveler.

The business leaders you meet in Mumbai, Delhi, Bangalore, Pune, and the other buzzing commercial centers of India demonstrate the challenge of building national and global brands and businesses.

No wonder they have started to crowd into the premier league table of the world’s rich. There is also an uninhibited self-confidence about them. They take double-digit growth in their own companies for granted. The task is to push sustainable growth much higher.

Of course, they know much better than any visitor the many problems India still must tackle – social, environmental and economic, with many accompanying issues in the security domain.

If you want a novelist’s view of this world in Mumbai, read Vikram Chandra’s Sacred Games, one of the best and most exciting novels written anywhere in the last few years.

What is interesting is that Indian businesspeople no longer dwell on what India’s government needs to do. They do not expect much from the state and are not surprised when it fails to deliver. A government initiative is something that they seem to regard as an oxymoron.

This does not mean that they criticize the macro-management of the Indian economy very much. They support the almost two decades of reform that have stripped away much of the "license raj.”

They recognize that India has the most economically literate leadership in the world. They expect reforms to continue, albeit at a rather gentler pace. 

They note the infrastructure improvements – airports, for example – while sighing over what remains to be done and drawing invidious comparisons with China. But there is no impatience for a bigger government role.

It is not that they have given up on government; they are just realistic about what it can achieve. Indian society seems to have become more globalized than its government.

There is a marked difference in tone here from debates in much of the Western world. In many rich OECD countries, the financial crisis and recession have made government intervention popular again.

Governments bail out banks, rush to the aid of manufacturers, and claim primacy in averting national catastrophe and personal hardship.

Although increasingly strapped for cash, governments offer the solace of public subsidy. Gone for the moment are jokes about government being the problem, not the solution. Tax collectors used to be Public Enemy Number One; now bankers have usurped that role.

In India, by contrast, even when you might think that government should be expected to deliver more, expectations are not high.

India needs better and much more education, as its young population grows. But, with terrible figures for teacher truancy in state-run schools – as high as 25%, according to the World Bank – families increasingly turn to the private sector to educate their children.

Many successful businessmen are putting some of their wealth into foundations that run schools and colleges.
Two big issues remain for government, in addition to keeping reform moving forward.

First, as India’s middle class expands, more must be done to ensure that economic growth is inclusive. This is bound to involve greater redistribution if the hundreds of millions of Indians who remain extremely poor are not to become alienated from their country’s success story and pulled toward populist extremism.

The second challenge is today’s violent manifestation of this alienation: the Naxalite insurrection in rural central and eastern India.

Interior Minister Palaniappan Chidambaram, a tough reformer, has this problem in his sights, but it cannot be solved by better policing alone.

Ending the insurrection will also require better government, whatever the low expectations of business leaders. And, to be fair, Nitish Kumar, the chief minister of Bihar, a poor state that previously was a byword for corruption and incompetence, has shown what can be done by beginning a serious transformation of his state in just five years.

If India’s other states – and the central government – can follow this example, then the polish of India will not lose its shine.

Chris Patten, the last British Governor of Hong Kong and a former EU Commissioner for External Affairs, is Chancellor of the University of Oxford.

Copyright: Project Syndicate, 2010.