India's poor wait in vain for trickle-down miracle: The economic boom has done little for the 400 million who live in poverty, writes Tim McGirk in New Delhi

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The Independent Online
ON 22 August, the day the Bombay stock market soared to a three-year high, propelled by foreigners investing in India's long- awaited economic miracle, Mashoor Ahmad began to count his barber's earnings. Mashoor, 18, tallied up 145 rupees, just over pounds 3. To earn that, he has had to shave nine men and gave 12 haircuts. 'Two of the haircuts I did for nothing. They were policemen. Otherwise they would harass me,' he explained.

From his pavement barber's chair in south Delhi, beside a cycle-rickshaw repairman and a fruit vendor, Mashoor sees the new riches brought about by the government's economic reforms. Mercedes and Toyotas whizz by; Benetton opened up a shop in nearby Greater Kailash market, and so has Wimpy. But Mashoor's customers are not the young, Ray-Banned college kids who stride by brash and loud in their new Levis. No, his clients are the sweepers, the Bihar labourers who earn pounds 1.10 a day carrying bricks for 12 hours on their heads. For them, a shave is a large investment.

Three years ago, when the prime minister, Narasimha Rao, discarded 40 years of centrally-directed socialism and opened up the country, the move was hailed by international economists, bankers and businessmen, who predicted that India would rise as the East's next economic powerhouse. Some of those forecasts have come true. Foreign investment jumped eightfold last year to dollars 4.7bn ( pounds 3bn), and India's exports rose by 20 per cent.

So far, though, few benefits of liberalisation have seeped down to the 400 million Indians who live in poverty. Economic reforms have added to their hardships. Swami Agnivesh, a social activist, said: 'India has forgotten about its rural poor, its downtrodden.'

The Finance Minister and chief architect of the economic reforms, a turbanned Sikh named Dr Man Mohan Singh, is banking on the new affluence of the middle class to work its way eventually down to the poor. But according to one prominent sociologist, Professor Ashish Nandy, 'This trickle- down business doesn't work. If the US can't reduce its poverty through free-market capitalism, then how can India manage with its 45 per cent poor?'

It is true that thousands of Indians are finding new jobs capping Coca-Cola bottles or designing computer software, but 70 per cent of all Indians toil on the land in a manner little changed over the past centuries. All they see of Dr Singh's reform is its brutish side; under pressure from the International Monetary Fund and the World Bank, the government has removed subsidies on kerosene and essential foodstuffs. The common man's daily fare, dal lentils and chappati bread, now costs between 15 per cent and 28 per cent more than last year.

The political opposition, both the right-wing Hindu Bharatiya Janata Party, and the scattered left-wing groups, are cranking up popular dissent against Dr Singh's wide-sweeping changes. The finance minister's many adversaries know that for now, India has no choice but to press on in the same direction. Even in West Bengal, one of the last Communist strongholds in the world, officials are scraping the Stalin logos off their filing cabinets and are trying to lure in once-reviled multinational executives.

Few want to turn back to the old socialist system where the bureaucracy was collapsing under its own corruption and ineptitude. It had stifled India's innate entrepreneurial verve. But Professor Nandy sounded a warning: 'Let the middle-class drink their fill of Chivas Regal. But when the crime rate rises in the cities because the poor have no other means of surviving, then they'll ask what went wrong.' Kidnappings are on the rise, with hundreds of cases reported in Delhi last year. Some policemen are blaming this on the widening gap between India's poor and its ostentatious rich.

Mr Rao hopes to help the poor by collecting more taxes to spend on education and development. Some economists estimate that only seven out of every 100 Indians pay taxes. The multinationals will prove easier targets for the tax agents, but their portion will not be enough to fund the uplift of India's downtrodden millions.

Some Delhi economists think that Mr Rao's Congress government could have only two years before a popular revolt takes hold against price rises. In the past, political parties have tapped into India's xenophobia and made foreign companies the convenient scapegoats. It may happen again.

(Photograph omitted)