India Is Shining For 250 Million People Only

Updated: Mar 14 2004, 05:30am hrs
A Birds eye view brings one kind of picture. Every city or town from an aircraft looks beautiful. The warts and the moles are submerged in a sea of light. The progress made by the nation uplifts ones spirits.

A worms eye view brings a totally different kind of picture. Dharavi is Mumbai and Mumbai is Dharavi. Slums, cesspools, and children defecating on streets overwhelm ones senses. Has the nation made any progress at all, we wonder

Neither picture is true. The true picture will emerge only if we look at the status of individuals, households and communities. The National Council of Applied Economic Research (Ncaer) does a market survey from time to time. It is called MISH (Market Information Survey of Households). MISH asks the head of the household to estimate the household income over the previous fiscal year. The results of the latest survey illuminate the path that India has walked since 1991.

Household Incomes
In 1989-90 there were 142 million households and 58.8 per cent of it had an annual income of less than Rs 45,000 at 2001-02 prices. (Hence the actual income in 1989-90 for this group would have been lower but equal to the purchasing power of Rs 45,000 in 2001-02). About 14.2 per cent had an income of Rs 90,000 or more. The remaining fell in the group called lower middle with a household income of Rs 45,000-Rs 90,000. How has this changed in the 10 years of economic reforms

By 2001-02, the number of households had increased to 188 million. That is an increase of nearly one-third. Despite the sizeable increase in the number of households, of the higher number, only 34.6 per cent had a household income of less than Rs 45,000. At the other end, those with an income of more than Rs 90,000 had increased from 14 per cent to 28 per cent. Naturally, the lower middle had also grown from 27 per cent to 37.4 per cent.

What will the bird say That Indians are becoming more prosperous. Households are moving from low income to lower middle income and from lower middle income to middle income. That if each household has an average of 5 persons, even in the low category, the monthly income is upto Rs 3,500. Many of them can, therefore, afford to have enough food and a roof over their heads and send their children to school. The success story is in the middle category. As many as 28 per cent of households fall in this group that means 52 million households or 250 million people. These households have a monthly income of Rs 7,500 or more. The Indian middle class has arrived and it is a reality. No one can any longer say that we had over-estimated the size of the middle class.

More pages can be written to celebrate the success story of the rising middle class. They consume more and aspire for more. Years ago, I had put forward a simple statement on what drives an economy. I said: Aspiration drives consumption. Consumption drives production. Production drives investment. I believe that statement remains valid. A 250 million-strong middle class can lift a nation to great heights. This class is educated, is enterprising, is willing to take risks; and if its minds are ignited and its animal energies released, there is nothing that it cannot achieve. It is representatives of this class who have become engineers, managers, bankers, chartered accountants and so on and are leading even stodgy companies to conquer world markets.

The Worms View
Now, lets turn to the worms view. At the ground level, we see 65 million households with a household monthly income of Rs 3,750 or less. Since Rs 3,750 is only the average, many of these households have less income. 65 million households mean 325 million people.

That is the population of a continent. We have, therefore, a continent of discontent that is struggling to make both ends meet. Divided as urban and rural, there are 7.5 million urban households (37.5 million people) and 57.5 million rural households (277.5 million people). The very poor among them do not get even two square meals a day. They live in kutcha dwellings (often no more than a hut or a hovel). Their children do not go to school, and even if they do it is only for a few years. They have no more than manual labour skills. When adversity gets the better of them (prolonged drought, mounting debt etc.) hundreds of them are driven to commit suicide, as in Andhra Pradesh.

India is shinning for 250 million people. India is depressing for 325 million people. The story of the first ten years of reforms is a sweet and sour story. To celebrate the shine that it has brought to the lives of 250 million and to throw a blanket over the struggles of 325 million people is a cruel joke. Over the next 8 years leading to 2009-10, the story of India will play out according to the same script. The middle class will grow to 107 million households (535 million people). The low-income group will still be at 35 million households (175 million people).

More and faster paced economic reforms will open more doors of opportunity for the middle class. If governments are reluctant to force the pace of change, such governments will be thrown out. The middle class knows its power and it does not rely only on the vote. Its control over institutions and the media will give it enough power to influence the political parties and the governments.

Helping Hand
It is the very poor who need a helping hand. Without help; they will not be motivated to send their children to school. Without help, they cannot acquire new skills. Without help, they will not be able to find jobs or work.

Besides the very poor, there are other disadvantaged sections like the tribals, the handicapped, the sick and the very old. Their number runs into millions. The state is usually seen as hard and heartless, and that perception is for the most part true. New and innovative systems have to be designed to deal with the problems and the needs of the disadvantaged sections.

When we see a silver lining, we ought not to ignore the dark cloud. India is both shining and depressing. The forthcoming elections will show which political party (or combination of parties) has been able to capture the true picture of India.

The author is former a Union finance minister