India’s economic boom is lopsided

June 26, 2009

It is fashionable among India’s new business elites to talk about the boom in the economy, but a lot of it has been awfully lopsided.

About 600 million people, or 60 percent of India’s population, live off the land, according to CNN. Majority of farmers depend on rainwater for crops — irrigation, electricity are a luxury.

Yet presumably in a bid to attract investors, Indian business and investment analysts have trumpeted India’s economic boom. Their comments often reflect a divide in urban/rural perceptions, a lack of knowledge about what goes on outside the cities.

Rather than provide a counter-balance to such skewed perceptions, the Indian media has by-and-large gone along with the urban point of view.

The same business classes are also planning to get the private sector into education, healthcare, and insurance, little realizing that private services are not a substitute for government. If government services are bad, fix it…….let’s not talk about privatization as a panacea.

The few instances of privatization in these sectors in India have shown that the costs of the new privatized services are way beyond India’s poor who are not only in its villages but also in towns.

The boom in India, which has been largely confined to its cities, and particularly in its outsourcing, retail, and telecom industries has created a new class that demands the best in schooling for its kids, the best in food, the best in healthcare, quite regardless of the price.

But these schools, hospitals, and other services are beyond the reach of the poor both in the cities and the towns, further accentuating the huge economic divide in the cities. School fees in some of the better private schools would add up to over US$3000 a year. That is a cost that is way beyond a woman working as a maid in the city who would earn less than US$500 a year, at the peak of her career.

The moves to have private services in education and healthcare and other areas are therefore designed to serve the new elites, and cannot compensate for government action.

While there is no objection to the elites pampering themselves like their counterparts in the U.S., there is a case for the government to set up more of its services. In these sectors there is case for more government.

The poor also have their aspirations for a better quality of life, and if that is not satisfied by government, it will find other avenues, in some cases in increased loss of faith in the system and criminality.

If the political class, corrupt and suspect, have already contributed to an erosion of faith in the system, self-serving prescriptions from parvenu Indian elites can only increase the alienation.

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