Sept.

10, 1999
A central riddle of Indian politics was about to be answered here as the cyber-savvy Chief
Minister of one of India's largest states, the country's most dynamic economic reformer, rose
to address a huge, raucous political rally in this hardscrabble farm town.

The riddle is this: How does a politician -- in this case, a darling of the World Bank who
slashed popular food subsidies early in his term -- sell his long-term vision for economic
growth to a mostly rural, illiterate electorate that is struggling just to survive day to day?

The short answer: He didn't try.

As the Chief Minister, N. Chandrababu Naidu, faced the whistling, cheering throng, this self-
proclaimed C.E.O. of Andhra Pradesh, a man whose Web-site pictures him sitting at his
laptop, made no mention of his successful courtship of Bill Gates and other corporate
executives or his efforts to restore fiscal balance to the southern state's budget.

Rather he spoke the traditional language of social programs: marriage halls for Muslims,
irrigation canals for farmers, free hand tools for artisans, matching grants to poor women
who save money.

''This government is for the poor,'' thundered Mr. Naidu, 49, the son of a modest farmer. ''I
lay down my life for them.''

Politicians across India are watching to see whether Mr. Naidu's aggressive blend of old-style
politicking and new-wave economics gives his party a victory when the votes for
parliamentary elections are counted on Oct. 6. Polls indicate he will win his seat and stay
Chief Minister.

As India's states become increasingly important in the drive for the economic growth that is
needed to pull hundreds of millions of Indians out of poverty, state leaders like Mr. Naidu are
at the vanguard of efforts to modernize local economies and integrate them into the global
marketplace.

Only a decade ago, the national Government controlled where industries could locate and
sharply limited foreign investment. But as political power shifted to the right in the early
1990's, the Government's tight grip on investment relaxed. Ever since, the states -- some, like
Andhra and its 80 million people, big enough to be among the largest nations -- have played
an ever more important role in setting the pace.

But the steps that India and the states have taken to liberalize the economy are only
beginning to penetrate the public consciousness.
Three out of four voters questioned in a 1998 survey by the Center for the Study of
Developing Societies were simply unaware that such momentous economic changes had
taken place. In Andhra Pradesh, whose literacy rate of 44 percent is below the national
average, 5 out of 6 had never heard about such changes.

So perhaps it is not surprising that despite the slow but momentous transformation to a
market-driven economy, such issues are little talked about in the monthlong state and
national elections.

So far the economic changes have no proven record of mobilizing voters. They are complex to
explain and will take years to pay off. And they involve doing business with rich foreigners,
not necessarily a popular strategy in a country that still smarts from colonial rule and has a
deep suspicion of the profit motive.

And besides, the two main national parties, the Congress Party and Bharatiya Janata Party,
generally agree that liberalization should continue.

The largest parties here in Andhra Pradesh, Congress and Mr. Naidu's regional Telugu Desam
Party, have competed for votes with subsidy plans.

The more extravagant state leaders of the Congress Party have promised free electricity to
farmers, a promise that national representatives of Congress have called irresponsible. More
modestly, Mr. Naidu said he would provide subsidized cooking-gas cylinders to a million rural
women, a plan the Election Commission vetoed as a gambit to win votes.

If politics is the art of winning and keeping power, Mr. Naidu is certainly no innocent. Four
years ago he came to power after leading a rebellion against the Chief Minister at the time
(and head of his party), N. T. Rama Rao -- who also happened to be a popular former screen
idol and Mr. Naidu's father-in-law.

''He's ruthless,'' said Jairam Ramesh, economic adviser to the Congress Party, which Mr.
Naidu belonged to until he switched to his father-in-law's group, the Telugu Desam Party, in
1983. ''He stabbed Congress in the back. He stabbed his father-in-law in the back. I admire his
vision; he's a doer. But he's certainly not a man of principle.''

After his own election in 1994, Mr. Rama Rao fulfilled two promises that plunged the state
further into fiscal crisis: He sharply increased the rice subsidy and he banned alcohol,
depriving the state of the quarter of its revenues that had been earned through liquor taxes.

According to a World Bank study, a higher proportion of Andhra Pradesh's spending was
going to welfare programs and subsidies than in any other state, crowding out things like
education, health, roads and irrigation. Not surprisingly, the state's growth rate was low.
So perhaps it is not surprising that despite the slow but momentous transformation to a
market-driven economy, such issues are little talked about in the monthlong state and
national elections.

So far the economic changes have no proven record of mobilizing voters. They are complex to
explain and will take years to pay off. And they involve doing business with rich foreigners,
not necessarily a popular strategy in a country that still smarts from colonial rule and has a
deep suspicion of the profit motive.

And besides, the two main national parties, the Congress Party and Bharatiya Janata Party,
generally agree that liberalization should continue.

The largest parties here in Andhra Pradesh, Congress and Mr. Naidu's regional Telugu Desam
Party, have competed for votes with subsidy plans.

The more extravagant state leaders of the Congress Party have promised free electricity to
farmers, a promise that national representatives of Congress have called irresponsible. More
modestly, Mr. Naidu said he would provide subsidized cooking-gas cylinders to a million rural
women, a plan the Election Commission vetoed as a gambit to win votes.

If politics is the art of winning and keeping power, Mr. Naidu is certainly no innocent. Four
years ago he came to power after leading a rebellion against the Chief Minister at the time
(and head of his party), N. T. Rama Rao -- who also happened to be a popular former screen
idol and Mr. Naidu's father-in-law.

''He's ruthless,'' said Jairam Ramesh, economic adviser to the Congress Party, which Mr.
Naidu belonged to until he switched to his father-in-law's group, the Telugu Desam Party, in
1983. ''He stabbed Congress in the back. He stabbed his father-in-law in the back. I admire his
vision; he's a doer. But he's certainly not a man of principle.''

After his own election in 1994, Mr. Rama Rao fulfilled two promises that plunged the state
further into fiscal crisis: He sharply increased the rice subsidy and he banned alcohol,
depriving the state of the quarter of its revenues that had been earned through liquor taxes.

According to a World Bank study, a higher proportion of Andhra Pradesh's spending was
going to welfare programs and subsidies than in any other state, crowding out things like
education, health, roads and irrigation. Not surprisingly, the state's growth rate was low.