Social Inequality Threatening India's Economic Stability

Can a country where a third of the population is illiterate be an Information Technology superpower? Can a country where 78 million rural homes have never seen electricity be an economic superpower? Can anyone feel safe living in islands of prosperity in a sea of poverty? While India’s educated elite are reveling in their new found status on the global stage, inequitable distribution of wealth and opportunities are shaking the very foundation of India’s new economy. Will the Indian government’s apathy towards the rural poor bring India’s party to an abrupt end?

In the last 12 years, India's economy has grown at an average annual rate of about 7 percent, reducing poverty by 10 percent. However, 40 percent of the world's poor still live in India, and 28 percent of the country's population continues to live below the poverty line. More than one third live on less than a dollar a day, and 80 percent live on less than two dollars a day. India's recent economic growth has been attributed to the service industry, but 60 percent of the workforce remains in agriculture.

The rate of increasing disparity between the ‘haves’ and the ‘have-nots’, is hard to miss in tech centers like Bangalore, Chennai and Delhi. Technology professionals are returning, having made their millions in the US. They are driving expensive cars and living in luxury apartments. Cities are growing in all directions. Farmlands are being acquired to build luxury townships, golf courses, five star hotels, spas and clubs. Poor farmers get paid off, and are forced to move further away from the city. And while global leaders and businessmen wax eloquent about India’s growing status as an IT superpower, everyone turns a blind eye to the majority of the population untouched by the economic growth.

And the scenario is not too different in smaller cities. Nagpur is a bustling metropolis in the heart of India, in a region known as Vidarbha. There are signs of economic boom everywhere in the city – shopping arcades, multiplexes, pubs, and luxury clubs. Yet, right outside the city, farmers are committing suicide due to their inability to repay debts as small as $100. In the last five years, almost two thousand farmers in the region have killed themselves.

Hyderabad is the capital city of the state of Andhra Pradesh. In the last decade, Hyderabad has established itself as a worthy successor to Bangalore. Companies like Microsoft, Wipro, Infosys, GE, HSBC have all made their presence felt in the city. Bill Gates, Bill Clinton, Jack Welch and a host of other global biggies have visited the city and proclaimed their confidence in its play in the global world. Yet, a continuing drought and a lack of government support has led to 4500 farmer suicides in the last 7 years in the state of Andhra Pradesh.

A socio-economic structure as lopsided as this is bound to collapse sooner or later. And some horrific incidents in the recent past signal the appearance of cracks in the Indian structure.

Last month, Adobe India CEO Naresh Gupta’s two-year old son was kidnapped from Noida in suburban New Delhi. The child was released on the payment of a ransom of $100,000, but the kidnappers were eventually caught by the police and the ransom amount recovered.

More recently, Adhip Lahiri, a young man working for i2 technologies in Bangalore, was brutally murdered as he was returning home from work at 10.30 pm. His wristwatch, ring, wallet, laptop, cell phone and car were missing, and robbery seems to be the motive behind the crime.

In the last six months, five cases of carjacking have been reported from Bangalore alone.

It is quite obvious that India’s recent economic growth has not trickled down to the bottom. The majority of the population has been sitting by the sidelines watching the buildings grow taller and the roads get wider. What’s concerning is that there doesn’t seem to be any concerted government effort to rectify the situation. For the poor, a severe lack of basic health, education and training opportunities mean that not only are they in a miserable condition today, there isn’t much hope for the future either. It is only a matter of time when they barter their spades for knives, in a desperate attempt to liberate themselves from the throes of poverty.

A country with such an unequal distribution of opportunities and wealth can never promise long-term security and stability. Any individual or establishment that symbolizes this economic and social disparity will be under threat. India wishes to become an economic superpower. But, if India wants what it wishes, these glaring social and economic problems must be addressed directly and earnestly. And until, these problems are addressed, no company setting up base in India can feel truly secure.

While, the government must own primary responsibility for social upliftment, the answer to India’s woes probably lies in a public-private partnership towards addressing India’s deprived poor. It’s happening in pockets. Companies like the Tata Group have ingrained social responsibility in their DNA. Azim Premji Foundation, promoted by the Wipro Chairman, is working with state governments to improve grassroots level education in rural India. What’s probably now needed is for all private enterprises and government bodies to collaborate, to create a larger, more meaningful, nationwide impact.

Corporations should not view it purely from a philanthropic perspective. A bigger pool of educated and employable population will mean availability of better quality human resources. And a stable society creates a far more secure environment to do business in. Cleansing the environment where you are running your operations definitely makes better long term business sense. And the sooner corporations realize this, the better it is for everyone.

Anupam Mukerji • Mumbai, India • anupam@mmi-india.com

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7 Comments

  • Prashanth

    You say
    "More recently, Adhip Lahiri, a young man working for i2 technologies in Bangalore, was brutally murdered as he was returning home from work at 10.30 pm. His wristwatch, ring, wallet, laptop, cell phone and car were missing, and robbery seems to be the motive behind the crime."

    - So, does no other Country have robbery / Murder, etc?

    You say
    "More than one third live on less than a dollar a day, and 80 percent live on less than two dollars a day."

    - Lets see what you can buy with 1 Dollar in US for example. I will say nothing but shit. In India, for 1 Dollar, you can get 2 - 5 Meals depending upon the kind of Restuarant you visit. Please read about PPP (Power Purchase Parity) before trying to compare.

    All it takes for a Nation to go forward is for just one strong kick and for India its the IT sector which is giving the kick. The income resulting from that percolates to every other industry to you name.

    In respect of Un-equal development, I cant find a more glaring example than the US itself. Inspite of the country being on the top for many decades now, if you take statistics of Blacks, Hipsanics, native Indians vs Whites, its more damming than whatever you can ever hope to produce against any other country.

  • Bhasker Jaiswal

    the article echoes the great divide, the story of two Indias, one which we all advertise and feel proud of, and another which have no access to this internet technology or even literacy. For every system , the law of 80:20 is still valid , the question in my mind is that has the divide gone to 95:5 levels , ie 95% of Indias wealth in 5% of the people ??

  • Barbara Green

    I agree with everything you said.

    This disparity is also occurring in the United States of America, but is not yet at the high percentages of poverty in India. The social inequality in the U.S. is primarily due to the executives at the top of corporations rewarding themselves with millions of dollars in bonuses and outrageous salaries while not giving any salary increases to employees even though productivity is soaring. In addition, they are not satisfied with their salaries and bonuses, they also indulge themselves by backdating stock options, producing erronous financial statements to make even more money for themselves. This is due to two things: Corporate Greed and a global labor market.

    Our government has also sold out to the Corporate
    Lobbyists and have given corporations what they lobby for namely:

    Immigration Laws are not enforced and therefore, wages are pushed downward in the non-skilled labor markets.

    H1-B Visas are increased every year depressing wages in the I.T. and other professional services labor markets.

    New bankruptcy laws were passed in 2005 which essentially allows the Credit Card companies to take whatever is left from the people to whom they sent unsolicited credit cards i.e. mainly people without the income to pay back the credit card companies. So the Federal Government passes the new bankruptcy law without any regulation prohibiting predatory marketing. One more win for Corporate Greed.

    There has not been an increase in the Federal minimum wage in 10 years, so the workers at the lowest wage in the labor market are even worse off and ultimately will end up on welfare or homeless and unable to pay for health care. Of course, somebody has to pay to help these people and that is all of us taxpayers.

    In the end, the corporations are just transferring social costs (includes health care) to us. So the CEO's just keep getting richer while the rest of us just keep getting poorer no matter how productive and educated we are.

    As you pointed out, this can't go on for long without social instability and a disruption of security. People will eventually take whatever they need instead of trying to earn enough money to provide for themselves.

    This year's elections threw out the Republicans who are responsible for not doing much of anything about the above events. The people in the U.S. are mad as hell and they are not going to take it anymore.

    Nancy Pelosi says "her number one priority" is eliminating the link between new legislation and Lobbyists.

    So just remember Democrats, we are all watching

  • nobody

    I don't see how crime rates that are lower than those in the US are going to scare off multinationals.