When my parents returned to India in the early '80s after living
abroad for more than a decade, several friends and relatives thought
they were half-crazy. After all, India then was perceived by many
among its upper-middle class to be a socialistic, overly regulated
country with very few economic opportunities for the better-off.
How things have changed.
The economic transformation that India has experienced in the past
effects on a population of more than 1 billion--make the country an
important test case for the impact of globalization. In the past few
years, a number of my friends have gone back to India from the United
States, mostly to partake in the once-booming software industry. India
has shed its socialist pretensions, especially after free market restructuring
carried out under the tutelage of the International Monetary Fund
and the World Bank in 1991. All this has meant an upward swing in
the fortunes of India's upper classes.
India's poor are still waiting
for the results of globalization
to trickle down.
The size of this population--as defined by the number of people
who can afford modern consumer conveniences--is in dispute. The
most optimistic projections put this number at around 300 million,
still less than one-third of the country's total population. But
as many multinationals found out when they had to scale back their
sales targets, this number is an exaggeration. Palagummi Sainath,
the premier journalist covering poverty issues in India today, says
that some surveys classify anyone who owns a wristwatch as middle-class.
A visit to India's villages shows how thin the veneer of prosperity
is here. I went with my family to a lake close to my home in the
state of Uttar Pradesh. The lakeside village had a ramshackle building
with hardly any facilities serving as the only primary school. The
nearest high school and health care facility were miles away. The
vast majority of the houses were flimsy constructions of thatch
and straw. Kids walked around in a state that can, at best, be described
The village stood in stark contrast to the Crossroads shopping
mall in Bombay, which I visited during the final days of my journey.
The six-storied mall is full of clothing outlets, ritzy gift shops,
swank bookstores and even a McDonald's. Many of the items available
cost as much as several weeks' wages in the countryside. Places
like Crossroads, still rare, were absolutely nonexistent when I
was growing up in the '80s. India had a closed, protectionist economy
with scarcely any foreign goods, especially consumer items, available
(at least legally). My boarding school in western India even arranged
a trip to Nepal, hundreds of miles away, with the essential purpose
of enabling rich kids to purchase foreign goods such as Coca-Cola
and Levi's jeans.
Before the restructuring of the early '90s, restrictions on the
operation of multinationals and tight regulation of the indigenous
private sector meant that good jobs often were available only in
the public sector, which occupied the "commanding heights" of the
economy. During Prime Minister Indira Gandhi's heyday in the '60s
and '70s, income taxes were very high on the extremely affluent,
with the top marginal rate reaching as high as 97.5 percent (though
less than 2 percent of the population actually pays the tax). Politicians
rhetorically attacked the dominant economic classes, such as the
landlords and industrialists (while privately seeking access to
their funds and influence). Tariffs on imported goods were among
the highest in the world. Travel abroad effectively was curtailed
due to severe restrictions on foreign exchange. Television in almost
the whole country was restricted to a single state-run channel,
with a mix of propaganda for the ruling party, drab educational
programming and some entertainment.
The Indian upper-middle class perceived Indira Gandhi's economic
policies as a straitjacket. They couldn't care less about the steady
decline in the percentage of people below the poverty line under
her tenure and that of her son, Rajiv Gandhi, from 53 percent in
1973-1974 to 34 percent in 1989-1990. Many among this segment also
deemed insignificant that, in the '80s, India avoided hyperinflation
and a Latin America-style economic crisis due to tight foreign-exchange
controls and prudent economic management.
Only when Rajiv Gandhi changed course did India experience a foreign-exchange
crisis. India had started depleting its foreign exchange reserves
in the late '80s, mainly to hard currency payments for a flood of
imports and an increasing amount of foreign debt. Things came to
a head in 1991, when the country only had enough foreign exchange
left to pay for a few weeks of imports. The government went to the
World Bank and International Monetary Fund for help, and consequently
India opened up the economy and deregulated the private sector.
Under Prime Minister P.V. Narasimha Rao, who assumed office that
year, and his successors, restrictions on the multinationals and
the private sector have been greatly relaxed. The current governing
alliance, headed by the Bharatiya Janata Party's Atal Bihari Vajpayee,
has continued the same policies. The public sector is being steadily,
albeit slowly, dismantled.
On April 1, the current administration lifted--one year ahead of
schedule--quantitative restrictions on the import of a whole range
of items to comply with World Trade Organization rules. The only
major party that talks about class and redistribution anymore (although
in muted terms) is the Communists, whose influence is limited to
regional strongholds in Kerala and West Bengal. (There are parties
formed along caste-based lines that talk about justice for the lower
castes. But that's another story.)
Conspicuous consumption, once kept in check for fear of income-tax
raids, has become a status symbol. Income tax rates have been reduced
dramatically. It's a cinch to get foreign exchange to travel abroad.
Arcades and amusement parks have opened up in larger towns. And
then there's television, which now offers a wide mix of programming,
with Western shows (Friends, Baywatch), Indian versions of
Western channels (CNBC, MTV) and Indian versions of Western programs
(among the most popular shows in India today is the Hindi version
of Who Wants to be a Millionaire). Prevalent throughout is
a level of commercialism that makes American television seem staid
True, some problems affect the rich and the underprivileged alike,
from crime and a decrepit infrastructure to extensive corruption.
One stark illustration is the earthquake that struck India in late
January: A number of apartment buildings in better-off neighborhoods
of Ahmedabad, one of India's biggest commercial centers located
hundreds of miles from the epicenter, collapsed due to shoddy construction,
killing more than 700 people. Problems like these still compel many
people to emigrate. But it has never been a better time to be prosperous
It's a different story for the poor, however. The past decade has
been harsh for the roughly 300 million people living below the poverty
line. And the divide between the haves and the have-nots has widened.
This has occurred in spite of growth that averaged just below 6
percent during the '90s, an improvement over the less than 4 percent
average during the immediate post-independence decades. "The gap
between the upper-middle class and the poor since 1991 has never
been seen since independence," says Sainath, whose articles on India's
poor have been collected into the book Everybody Loves a Good
Drought: Stories from India's Poorest Districts. "India's participation
in globalization will result in deepening inequality."
Some analysts, such as Jean Dréze, professor at the Delhi
School of Economics and frequent collaborator with Nobel Prize winner
Amartya Sen, add that the '90s saw a deceleration in the improvement
of a number of social indicators, such as infant mortality and life
expectancy. According to a recent article in The Hindu newspaper
by Professor Gita Singh of the Indian Institute of Management, this
deceleration has come about due to policies carried out as part
of the neoliberal agenda--such as stagnant public health expenditures,
removal of price controls on essential drugs, and subsidizing private
hospitals at the expense of public ones.
The very fact that the current debate is about whether the restructuring
has helped the poor--and not by how much--highlights the meager
benefits the free market path has brought to the destitute. "Proponents
of globalization say wait for 10 years," says Dilip D'Souza, a columnist
for various publications. "But the poor can't wait. They have waited
for 53 years. We have to have urgent measures to help them."
The Indian elite views countries like Singapore and South Korea's
orientation toward globalization and the free market as the model
for success. Never mind that many of these countries placed primary
emphasis on providing universal literacy and health care to their
citizens, or that they often engaged in protectionist and interventionist
policies, such as radical land reform. Also overlooked is the fact
that the Indian state which has provided the most decent life for
its people--Kerala--has done so with extensive vigorous state action,
such as far-reaching land reforms, an extensive welfare-state apparatus
and pro-union interventions in the labor market.
Instead, many among the upper crust are calling for an Indian version
of Reaganomics. "If some people do well, they'll employ other people,
and the wealth will eventually trickle down, just as in the United
States," said one of my wife's cousins, who works at Hong Kong Bank.
"Government intervention has never made the poor rich anywhere in
The second, even more incredible thread that often runs through
the thoughts of the comfortable is the notion of "blaming the victim."
The poor are miserable because they have too many children, the
reasoning goes. Once they start family planning and control their
procreational urges, they'll be on their way to upward mobility.
"The better off have always had this attitude toward the poor,"
D'Souza says. "But now it is respectable to say this."
An official conceit, echoed by many among the prosperous, is that
the boom in India's software-export business over the past decade
is going to solve or drastically ameliorate India's problems, including
poverty. While the software industry has grown by 50 percent annually
in the past decade, this segment still contributes a paltry 2 percent
to India's GDP. And the term digital divide has a radically different
meaning in India: Only 22 people per 1,000 in the country have access
to a telephone, while less than five in 1,000 have a computer.
"The benefits of the information-technology industry to the poor
will depend on the extent it is absorbed by the rest of the economy,"
says Krishna Raj, editor of Economic and Political Weekly,
perhaps the publication providing the best in-depth coverage of
socioeconomic and political trends in India. "The sector is 95 percent
for export. It should be more oriented to the domestic economy."
With the poor increasingly left to the whims of the market, there
is little chance that things will improve significantly for them
in the near future. As for the affluent, they are cheering the changes
since Indira Gandhi's days. Unlike the poor, they don't have to
wait for the results to trickle down.
Amitabh Pal is the editor of the Progressive Media Project
in Madison, Wisconsin.