Upwardly mobile could bring India down
Wednesday 19 October 1994
The economic reforms ushered in three years ago by the Prime Minister, Narasimha Rao, overturned 40 years of protected state socialism. India opened up. Nearly pounds 5bn in foreign investment poured in and the irrepressible Indian businessman was able finally to wriggle free from stifling bureaucracy. India's economy is now growing at more than 6.5 per cent, nearly twice that of Europe. The country has more than 220 million people who, many for the first time, are able to buy a motor- scooter, fridge or small car.
The size of the middle- class is much disputed but has been estimated at 50 million- 300 million (from a large European country to the whole European Union). On average, they earn far less (about pounds 1,600 a year) than Western counterparts, but living costs are far smaller.
Kito de Boer, from McKinsey financial consultants, said the number of gadget-starved Indians may be grossly over-inflated as a ploy to lure in multi-nationals. 'There are probably between 30 million and 80 million Indians who earn more than dollars 10,000 ( pounds 6,300) a year. That's still a large market, but it's nowhere near the 300 million figure that some marketing people are claiming.'
One side-effect of this economic boom has been a swift upheaval in social values, one with potentially dangerous consequences in a nation where 45 per cent of its 900 million population are, and probably always will be, poor. Nikhil Chakravartty, a prominent newspaper columnist, argues that the pace and the direction of India's new free-market economy may be askew. 'The middle-class may be 10-12 per cent of the population. But what happens to the rest, the other Indians? We are instigating a revolution of expectations without the resources to match them,' he warned.
Tensions are rising between have-nots and the increasingly visible haves. As Prem Shankar Jha, an economist, said: 'This is first generation money.
There's enormous consumerism and ostentation that comes with it.' This consumerist message is blasting at India through Rupert Murdoch's satellite Star TV, and the foreign companies' advertising blitz.
Today's new member of the the affluent society is likely to be someone like Shahnaz Hussain, who sells her Indian herbal beauty products to the UK and owns several Delhi salons. It could also be a software programmer, a big rice farmer, or a property dealer in New Delhi where land prices over the past 10 years have soared by more than 300 per cent.
Throughout the country, only 7 million Indians pay taxes yearly, and now the middle class at last have goodies on which to spend their black money. Many Indians have also begun playing the bustling Bombay stock exchange, and even women's magazines have regular columns offering share tips.
Some nouveaux riches build Moghul-style mansions; one businessman has a flotilla of cut-crystal boats bobbing about in an artifical stream running through his living room.
Priti Devi Thapar, the Hyatt Regency hotel's marketing manager, drew attention to another excess: 'Some people threw a birthday bash at a disco for their seven-year old. They didn't do it for the kids, but to show off to the other adults. It is all rather ugly.'
Ostentation may be universal, but this is the dream to which many Indians on the rungs of the lower middle- class now aspire. For those barely surviving on a few rupees a day, forgotten by a government that is promoting economic reforms at the expense of social services, this disparity is a source of increasing grievance. The recent plague epidemic arose out of a breakdown in government health care. Education is in worse shape: only 1 per cent of this year's budget was earmarked, even though 250 million remain illiterate.
One solicitor, troubled after negotiating a whopping pounds 3,500-a-month rent on a villa that six months ago was worth only pounds 1,000, said: 'I'm afraid that one day, this could all get messy and violent. India may be forging ahead, economically. But millions are being left behind.'
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