It's also easy to forget that India's economic breakthrough was virtually an accident: In 1991, facing a foreign exchange crisis created by currency mismanagement, the government appointed an apolitical technocrat, Manmohan Singh, as finance minister, with the goal of giving India a more credible façade for international lenders. Singh grabbed the mandate and ran with it, devaluing the rupee, cutting confiscatory tax rates, opening the door to import competition, and reducing regulation of large enterprises to a level closer to, say, Europe, than to Cuba.
The economy responded with such alacrity to newly unleashed market forces that pragmatic politicians saw a future in defending the reforms. And with GDP doubling in the first decade under Singh, and more than doubling in the second, the idea took hold that the Indian economic juggernaut was unstoppable. But it was never that simple, as recent growth rates clearly show; contrary forces were building. To understand why, consider a little perspective.
The great majority of Indians are much better off today than they were four (or fourteen) years ago. Gross Domestic Product per capita income, measured in terms of today's purchasing power, has quadrupled between 1991 and 2011 to a respectable $3,600. What's more, the distribution of income did not change radically. India's GINI coefficient (a technical measure of inequality) hardly budged; neither did the percentage of India's income going to the bottom-fifth of the population. But rapid change did make great wealth more conspicuous -- especially in cities. According to Forbes, India has 55 billionaires (in U.S. dollars), most of whom do not hide their good fortune.
Moreover, income inequality between cities and the countryside has increased substantially. By no coincidence, one-third of all Indians (400 million people) who disproportionately reside in rural areas survive on less than $1.25 a day in terms of purchasing power.
What's more, Indians have little sense that the reformers are on the side of the poor. Big business was relieved of smothering regulation; yet for most of the population, daily life is still under the thumb of a corrupt, nitpicking bureaucracy that routinely sells services (education, welfare benefits, rule of law) that are supposed to be free.
Then there is the wretched state of India's infrastructure. Everybody suffers from congested transportation, unreliable electricity, and hit-or-miss communications. But the poor (and, for that matter, the new urban middle class) suffer far more than big business and the wealthy, who have backup generators, private aircrafts, and dedicated telecom lines.
SUBJECTS:
