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Tuesday, June 21, 2011

Poverty highlights gaps in India's economy


CHENNAI, India — In many ways, India can be highly deceptive and contradictory. There are millions of mobile phones floating around. Dozens of swank hotels. Just about every major car manufacturer has set up shop in the country. Several designers are showcasing and selling clothes that are seen on the fashion streets of Paris, Milan and New York.

So visible are these that a foreign visitor might just about be blinded by them, the reflection from the sheen of a state-of-the art car or from a full-glass façade eclipsing the grime, dirt and degrading poverty that make up three-fourths of India. But it is this quarter of shimmer that the nation's political bosses and bureaucrats have never failed to brag about at home and abroad.

What they hide, though not always successfully, is the fact that the poor live in terrifying conditions, and that their numbers are huge. Hundreds of slums dot the surface, while skyscrapers tower over them, and from a distance it looks like a land of enormous prosperity. By entering a five- or seven-star hotel in New Delhi or Mumbai, one would feel like having stepped into a different world with its English-speaking staff, plush interiors, polished silverware and what have you.

Strangely, India is renowned for its stark contrasts, and often its big neighbor to the north becomes a referral point for comparisons. Especially for India's economic progress. Experts argue that despite all that is made out of India's success — popularly and sometimes jocularly termed "India Shinning" — its growth has been slower than that of China's. Its national income per head surged past India's 20 years ago, and the gap has been widening since then.

Yet, the International Monetary Fund said last year that India' economy grew by 10.4 percent, which was higher than China's. New Delhi measures this growth differently and places the figure at a more modest 8.6 percent. But even this is impressive and it is being affirmed that in some years from now, India can "supplant" China as the world's fastest growing economy.

So, one would have expected foreign businesses to rush into India with their grand plans to make a quick buck, and in the bargain boost the country's economy and employment. No such luck though. Foreign direct investment fell by a third last year.

And Indian entrepreneurs have been scathing in their criticism. They point out how difficult it is to do business in the nation of teeming millions that can translate into a hugely lucrative market. The major impediment between the seller and the buyer is red tape. This is true, to say the least, and not as the government would explain away as the ravings and rantings of a few disgruntled, failed businessmen.

The World Bank has an index known as Ease of Doing Business in which India holds the unenviable 134th position out of 183 countries. The index is divided under different heads: India, for instance, trails Angola as far as starting a business venture is concerned. India's number is 165th here!

An entrepreneur wanting to start an enterprise faces many obstacles. Each Indian state has its set of rules, one more cumbersome than the other. It can take up to 200 days to clear 37 impediments to secure a "sanction" to build a warehouse in Mumbai, India's financial hub. In Kolkata, one needs an additional 58 days, though with fewer licenses at 27.

When the businessman gets all his approvals (after greasing tens of palms), he has to cope with terribly inferior infrastructure. Roads are dreadful in many parts of India, railways overbooked, seaports jammed and airports struggling to cope with thousands of fliers. Electricity generation is inadequate in large areas, and water supply is scarce.

A survey by Legatum Institute found that only 11 percent of Indians thought that their government was doing fine. In China, 30 percent felt that their administration was helpful. Yet, the survey showed that 83 percent of Indian businessmen think that India is good for an entrepreneur to succeed. And 50 percent said that India would be the top global economic power in 20 years. Who knows, this may after all happen, given the country's favorable demographic profile and the investment taking place from rich Indians returning home.

In the final argument, it is imperative that New Delhi seek to solve two problems.

One problem is that businesses are finding it difficult to retain employees that have been trained at the cost of the companies concerned. It is not easy for the hospitality industry to get English-speaking employees. Some IT firms rue the fact that their graduate staffers have to be taught what they ought to have learned in school. Manufacturing units cannot find workers with basic literacy skills. Everybody, it seems, wants to make more and more money in the shortest possible time without qualifying for it.

The other problem is corruption. It is endemic, but is beginning to cause real rage among Indians. Everybody appears to benefit from scams, from the parking attendant to the journalist to the executive to the bureaucrat to the minister. Those who fall outside this charmed circle tacitly encourage corruption by doling out favors and bribes to get their work done. Nobody can say where all this will end.

Gautaman Bhaskaran is a journalist based in Chennai, India.


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