Robinson Hambro
Robinson Hambro: Board Search and Chairman Advisory

Karina's Column

An insider’s view on the City of London and beyond

The twin fragilities of India & Turkey


A look behind the facades

India is as fashionable now for investors as Turkey once was. A stable, business-friendly government, projected 7.4% growth this year and a fast-expanding middle class look like a rising soufflé.

That optimism is visible in the Indian stock market’s 33% gain in 2017, with another 15%-18% forecast by brokers for 2018. In the India versus China comparisons, a staple in the investing world, the former currently has the upper hand as China’s growth slows down, while President Xi establishes a dictatorial control that contrasts with India’s apparently vibrant democracy.

Yet beware the easy narrative.

Instead, India shares similarities with troubled Turkey. They are countries that mirror the developed world’s problems of rising inequality and polarised societies; where jobs that have not yet been created are already disappearing under the axe of automation and digital processes; where (imperfect) democratic traditions that allowed for a relatively peaceful expression of anger are undermined and where, ultimately, the graffiti of political upheaval could spoil the pretty picture of economic growth.


When I interviewed Turkish Prime Minister Recep Tayyip Erdogan in 2007 he denied that he planned to turn secular Turkey into an Islamic state. Eleven years later the hijab is much more prevalent and having a hijab-wearing wife is the surest way to receive a lucrative government contract or a job in the government, notes Soner Cagaptay, Director of the Turkish Research Program at the Washington Institute for Near East Policy.

Many parents face little choice but to send their children to the proliferating religious schools, while mosque-building rivals all other infrastructure work. The military, who were the guardians of secular Turkey and, oddly enough, its democracy, are emasculated. A 2016 law to restructure the country’s high courts has made the judiciary dependent on government. Meanwhile, the independent media is silenced via court orders, prison and murders. A weakened, divided opposition has failed to make inroads into the dissatisfaction felt by 50% of the electorate who do not vote for the ruling AKP.

“The AKP is on steroids. There is no accountability, “says Cagaptay.


In India the IMF gives a thumbs-up to reforms such as flexible inflation targeting and the implementation of a goods and services tax. The Washington-headquartered organisation affirmed growth forecasts of 7.4% this year and 7.18% in 2018, making India the world’s fastest growing economy.

But other statistics highlight different truths. Non-performing loans in the banking sector are over 10% of total assets and are due to rise to 12% later this year, according to India’s central bank – a jaw-dropping figure which could yet be an underestimate, according to some private sector bankers.

Meanwhile, over 30% of the country’s population between the ages of 15 and 29 are NEETs (Not in education, employment or training). Women’s participation in the labour force at around 25% is the lowest among emerging markets.

The BJP’s electoral promise when it came to power in 2014 was the creation of 10m jobs a year. Twelve million Indians reach employable age each year. Prime Minister Narendra Modi insinuated in a tv interview that offering pakodas (snacks) on the street could count as a job. The lack of security and the lack of enough income to survive – the case for many of the sellers – lead to a firm rebuttal by P. Chidambaram, leader of the ailing Congress opposition party, who scoffed, “By that logic, even begging is a job.”

On the political front, the BJP appears to be heading back to its roots as an anti-Muslim, Hindu nationalist group. It is worth remembering that the violence against Muslims in Gujarat in 2002 happened under the rule of Narendra Modi, who was Chief Minister of the state. He is now Prime Minister.

The ruling party has been encouraging violent groups like Gau Rakshaks, whose reported duty is to protect the cows sacred to Hinduism, say commentators. Additionally, they have been undermining the Supreme Court and other constitutional safeguards.

“This state will confront, not accommodate, its neighbours; this state will not tolerate cultural heterogeneity but seek to replace it with a single homogenised culture that Modi mistakenly believes to be Hindutva. Muslims, and other minorities, will be tolerated in this entity so long as they know their place,” wrote respected author Prem Shankar Jha.


There is little doubt about who stands to win the 2019 Parliamentary and Presidential elections in Turkey – fraud and ballot stuffing guarantee the result – while Prime Minister Modi’s oratorical skills and the sorry state of the opposition are likely to lead to triumph for his party in the same year.

But by personalising power, undermining democratic institutions and turning religion into a bulwark of the state, both rulers have deepened the polarisation in their countries: about half of their electorate will never be won over. There is a brittle fragility to the new Turkey and the new India.

President Erdogan could continue in power until 2034. In fact, he cannot afford to be out of power. He and his family would be prosecuted for well-documented corruption, among other charges. While reinforcing his authoritarian nationalism, Erdogan’s pursuit of an anti-Western foreign policy has made him no friends and added to the number of Turkey’s enemies. “Coupled with these external threats, the country’s crisis could catapult Turkey into a dangerous civil war,” warns Cagaptay.

India and Turkey are moving too quickly along unsustainable paths. Investors watch out.

With thanks to Turkish expert Soner Cagaptay, whose masterful book The New Sultan is a must-read for those seeking to understand today’s Turkey.

With thanks to Mukulika Banerjee, Director of the South Asia Centre at the London School of Economics


catherine phelps