The Two Indias: Astounding Poverty in the Backyard of Amazing Growth

With the world's largest democracy in the embrace of a freer-than-free market capitalism, India may prove a bellwether for liberal societies everywhere.

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"Incredible India" is the brand this country's Ministry of Tourism has been pushing in a global marketing campaign launched in 2002, and it couldn't be more fitting. Over the last decade, India has witnessed a stunning acceleration of rapid changes, both good and bad, that it began in the 1990s.

The most widely noticed metamorphosis is economic. Over the last ten years, India's GDP has grown between 7-9% per year, second only to China's sustained growth rates. In 2011, Forbes counted 57 Indian billionaires, up from only four a decade before. The same period saw Indian corporations vaulting onto the international stage. Tata Motors shocked the automobile industry with an acquisition of the British Jaguar Land Rover business in 2008. India's famed business-process outsourcing industry has expanded beyond call centers and software development to medicine, law, tax preparation, animation, and even music-video production. And, several IT giants have turned the tables on offshoring: No longer are jobs only "Bangalored." Today, Indian companies employ thousands of Americans on U.S. soil.

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All of this is striking for an economy that languished for decades. From 1947, when India won its independence, through the 1980s, annual per-capita income grew at 1.3% per year, a snail's pace oft-derided by the Indian elite as the "Hindu rate of growth." Today, though, any social theorists walking the bustling streets of Mumbai might be tempted to revise Max Weber's classic treatise: The Hindu Ethic and the Spirit of Capitalism.

Economic change has been accompanied by a less noted, but no less significant, political inflection point. Alongside the enthralling Arab Spring and China's stillborn Jasmine Revolution, something that might be called the "Turmeric Revolution" has been bubbling over in India.

Though theoretically a democracy, India's governance has resembled something of a feudal system in practice. Politicians and bureaucrats often act like dukes and barons with term limits. They routinely apply a corrupt layer of graft for their personal benefit.

A self-confident educated class, however, has risen up to say "No more!" Last year, hundreds of thousands of protesters rallied around a series of hunger strikes by social activist Anna Hazare. The movement shined a spotlight on the terms of an anti-corruption bill that many criticize as being too weak. In West Bengal, May elections saw an end to the 34-year reign of the communist Left Front alliance. It lost to the Trinamool Congress party, which made corruption-free governance the pillar of its campaign.

Meanwhile, the bar for being above the law appears to be rising, as high-profile culprits in corruption cases are brought to account. Karnataka Chief Minister B. S. Yeddyurappa was arrested over accusations of illicit land and iron mining deals that benefited his family. And, the headline-dominating "2G scam" was partially resolved this month with a Supreme Court decision to nullify all 122 2G wireless spectrum licenses issued under the tenure of former Telecommunications Minister A. Raja. Raja, who is believed to have personally pocketed $600 million at a cost to the government treasury of $39 billion, has been arrested and charged, along with several others implicated in the scandal.


These successes are far from being universally shared, however. Though rates of poverty are declining, in 2005 the World Bank estimated that 42% of India's population still lived at under $1.25 a day (PPP), and nearly twice as many under $2. Thus, 800-900 million Indians live in conditions that most developed-world citizens would consider destitution.

The challenges for this vast, voiceless majority are multidimensional and stark. Discrimination by caste, religion, and gender remains pervasive. Low literacy blocks meaningful social mobility. India's rate of child malnutrition is greater than in any other country in the world. In many communities, the sick and the elderly are left to die for lack of means to support them, and bonded slavery is not unheard of.

What's worse, there is some evidence that conditions for the least privileged are deteriorating. A paper by public policy researchers Anirudh Krishna and Devendra Bajpai points out that rural incomes are declining in absolute terms, likely due to systemic stresses to agriculture and differential access to markets and education. It is common to speak of "two Indias," and the widening canyon between them is the greatest threat to the nation's well-being.

What does the future hold? Much depends on how energetically the fruits of the country's success are applied towards greater equality of opportunity. The government's rural employment guarantee act is a start, despite its flaws. Healthcare, agriculture extension, and other government services that accrue to poorer communities deserve far greater resources and attention. Outdated constraints on industries that employ low-skill labor must be relaxed. The country's vibrant civil society should continue to give voice to the marginalized. Most importantly, public education could use a budgetary boost and a management miracle.

The next ten years may hold a lesson for developed countries, as well. With the world's largest democracy in the embrace of a freer-than-free market capitalism, India may prove a bellwether for liberal societies everywhere.