After a 30-year career with U.S. consumer goods multinational Procter & Gamble, Gurcharan Das changed tack, writing two best-sellers: India Unbound, a narration of India’s history from gaining independence to its emergence as an information technology leader, and more recently, The Difficulty of Being Good: On the Subtle Art of Dharma, which examines contemporary moral issues using insight he gained studying the Mahabharata, the classic Indian epic. Das has also written a number of novels and plays, and is a columnist and contributing writer to a number of Indian and international newspapers.

In addition to discussing the insight that the Mahabharata provides, Das spoke with India Knowledge at Wharton about India’s economic growth, and how it can overcome its nagging governance issues and excel in its competition with China.

An edited transcript of the conversation follows.

India Knowledge at Wharton: Do you think the recent global financial crisis could have been avoided? Can we ensure something like this will never occur again?

Gurcharan Das: I don’t think we will be able to completely prevent such crises. Our hope is that enlightened regulation will help minimize them. The world is vishama — “uneven,” as the Mahabharata tells us — and this unevenness is the result of human flaws. Human flaws, as well as the “animal spirits” of human beings, create uncertainty and lead to such crises. Dharma, understood as “law,” can help reduce uncertainty. Ultimately, the best laws will not catch all the crooks. Hence, capitalist society depends on self-restraint, which is another meaning of dharma.

The financial sector was less regulated. Instruments like derivatives are dangerous and ordinary people should not play around with them. Many companies have suffered because they did not understand them. Even some people who sold them did not understand how dangerous they are.

India Knowledge at Wharton: You have become an expert on the Mahabharata. How long did it take you to write your book?

Das: It took six years. My journey, however, began when I was 18 years old and I took a Sanskrit course from a great scholar, Daniel Ingalls, at Harvard. Although it was a long time ago, it gave me the confidence to tackle the Mahabharata today. I have realized that the education we receive in the Indian middle class makes it possible to study the great classics of the West. We read Plato and Marx, but not the classics of our tradition. We may hear the stories of the Mahabharata from our grandmothers or by reading Amar Chitra Katha comics, but we don’t read the epic.

After writing India Unbound, I decided to read the Mahabharata. For two years, I was a student at the University of Chicago, where I sat alongside undergraduate and graduate students. As I studied the text, I learned to “interrogate” the Mahabharata. People ask, “Why did you have to go to Chicago, instead of say, Benares, to study Sanskrit or the Mahabharata?” The answer is that I did not want to escape into our past; I wanted the epic to speak to me today. I needed to engage in a process of critical inquiry.

India Knowledge at Wharton: You discuss human traits and values in your book. In one of the earliest chapters, you talk about envy. Can you discuss that in the context of the behavior in India’s current market?

Das: Let me give an example of how envy affects our business life. They did a survey at Harvard with the graduating class of 1987. The survey asked, “Would you rather earn US$100,000 or US$50,000?” Everyone wanted to earn the higher salary. But the survey said, “If you are earning US$100,000, your friends would be earning US$200,000, and if you earn US$50,000, your friends will be earning US$25,000.” Then, 83% switched their answer. It teaches you the role of envy. It also tells you that compensation is really relative.

When I worked for Procter & Gamble in Bombay, our factory was next to the Philips factory, which had been on strike for the whole year. We were worried. One day I heard the union leader of the Philips plant tell his workers: “I don’t care if we ever open this factory … as long as this Dutch factory manager goes down.” Then, I understood that if the sin of capitalism is greed, the sin of socialism is envy.

India Knowledge at Wharton: When you wrote India Unbound, you predicted the economic rise of India. Can you talk about that prognosis?

Das: Even I did not imagine that we would grow at almost 9% for five years. Of course, now we are entering into another golden age of growth. In the next decade-and-a-half, India will turn into a middle-class country as has happened in many East Asian countries, and its age-old economic problems are likely to be solved. Poverty will not be wiped out, but it will come down to a manageable level.

That’s the good news. The bad news is that prosperity is spreading in the midst of the most appalling governance. By governance, I don’t mean a politician caught with a bribe, as we saw in the run-up to the Commonwealth Games. The governance issues that concern me are the day-to-day transactions of the citizen with the state. Almost every transaction is morally flawed. Whether you want to get a birth certificate or a driver’s license, you have to give a bribe.

Each day, one out of four teachers in a government-run primary school does not show up to work, and those who do show up are not teaching. Today, a primary school teacher is one of the highest-paid people in a village.

India Knowledge at Wharton: But India continues to grow, despite the governance issues and corruption. Is it because of demographics?

Das: Many Indians believe their economy is growing despite the government. I like to say, “Our economy grows at night when the government is asleep.” Our economy is on autopilot. Of course, there are still many reforms to be done, but no politician can destroy our growth rate. The reason for optimism is the demographic dividend, certainly, but also Indian entrepreneurship. Because our success is from the bottom up, it is likely to be enduring.

People make the mistake in believing that the race between India and China is about which country will become rich first. I believe both countries will become prosperous. The race between the two, if there is one, is going to be decided by which country will fix its government first. India will win if it fixes its governance first, and China will win if it fixes its politics first. China has good governance but no liberty; India has liberty but poor governance. You need both, and that will decide the race….

India Knowledge at Wharton: There is a new breed of entrepreneur in India, which want to take risks and is optimistic about the future. Maybe the new generation will break the mold?

Das: I agree with you about the vibrancy of our entrepreneurship. But we still need the government, even more than economic reforms. It is more important to reform our institutions — the bureaucracy, the police, the judiciary. Prosperity will spread in India, but happiness will not until we fix our institutions, until we can get teachers back into school. To do that, we need to make our civil servants more accountable…. We have to adopt the idea that a civil service job is not for life. Besides the reform of our police and judiciary, we also need political reforms.

India Knowledge at Wharton: But is there a generational shift? Do you see certain practices eroding with new members of parliament, much like new entrepreneurs who do business differently?

Das: I often say that India has become the second-fastest economy with one hand tied behind its back. This refers to the failure of governance that an entrepreneur has to cope with. Imagine what could become of India if the second hand was untied. The Economist also cites the Indian entrepreneur as one of two reasons why India’s growth rate will overtake China’s in the next five years; the other reason is demographics. As for the political class, some young politicians are trying to break the mold, but alas, they are a tiny minority. Let us hope this will grow.

India Knowledge at Wharton: The government delivers services to its citizens, and now a number of public-private partnerships are emerging to share that role. What about the corporate sector doing more to help improve public governance?

Das: The government’s job is ultimately to govern. This means it has to ensure there is education, health, water [and other services]. It does not mean that the government has to produce these public services itself. It could do so by outsourcing to corporations and non-governmental organizations. A private company built the airport in Delhi, and it was one of the few items in the Commonwealth Games delivered on time and on budget. The same could happen with education and health. The government needs to redefine its role. Instead of trying to do everything through old bureaucracy, it could do it through public-private partnerships. There would be a lot more accountability if that happened.