29 April 2008: It is well known that the world’s economic fault lines are rapidly shifting eastward. Strong economies are emerging throughout the world, yet it has been the Asian giants, China and India, that have occupied our attention by taking global markets by storm and creating an excitement about new economic possibilities. Not only has their rapid growth created possibilities for global markets, it has created possibilities for the tangible development of these regions, which to this point in modern history have been among the world’s poorest.

These possibilities are quickly turning into real development in China. This is not to say that China is no longer a poor country, but there have been signs of relative improvement in all strata of Chinese society. Data has shown strong wage growth throughout the country, the emergence and growth of a middle class with dispensable incomes and an improvement in economic and social indicators. Keeping its population size in mind, China has more people with access to the internet than any other county in the world. They also lead the world in the number of people who have cell phones. Though these indicators may seem inconsequential, but even with consideration to its 1.3 billion people, they suggest the emergence of China into an age of communication and information technology and can be used as a barometer of things to come.   

Despite its relatively comparable economic success, the wealth generated by India’s growing economy has been slow to impact the dire situation of its country’s poor and has in fact broadened it’s already gaping inequality. This situation is, of course, compounded by its massive population. Of its 1.1 billion people, 700 million Indians strive to live on $2 a day or less and few have access to indoor lavatories or sanitary water. Of those, 220-230 million live below the country’s poverty threshold of $0.40 per day. The obstacles facing the country’s leadership concerning its rampant poverty are immense and numerous. Yet, the plight of the people has been at the crux of the Indian experiment since its independence—at least in rhetoric if not in practice—which many claim has been the problem. Its decades of socialist-type aspirations did little to change the economic landscape of India. Market protection led to little growth and years of stagnation.

The economic liberalization that took place in the early 1990’s reversed this trend and jump started the success that we are witnessing today. India now has one of the fastest growing economies in the world and is expected to be among the top three by as early as 2025.

As democratic allies, this is very conducive for a future of strong and prosperous Indian-U.S. relations. As two of the world’s largest democracies and in hopes to foster global prosperity in this newfound era of economic expansion, it is also important to promote all democratic principles, including the empowerment of the marginalized to affect change in their own society. This process has been slowed in India due to a complex bureaucratic apparatus, which has in the past been plagued by corruption, its fractious party system, and the idea that economic growth alone is enough to eliminate poverty.

Though ending poverty has been on the lips of Indian leadership for decades, many promises and policy expectations have not come to fruition and in some cases have hindered further development. But there are many reasons why India’s success is not felt throughout society. One being that 2/3 of India’s population depends on agriculture for its livelihood. Yet its agricultural sector is growing at a rate of 1.5-2% a year and contributes only 28% to its GDP compared to, for instance, its manufacturing, service, and information technology industries which are expanding at upwards of 10% a year. The poverty of those millions reliant on agriculture is perpetuated by their low productivity and the fact that many of them have no education and no other vocational skills. This leads them to be forced to make the decision of whether to continue their fruitless labor in the fields or move to a city where they will, no doubt, work as low skilled laborers making little to nothing. Either choice seems to guarantee poverty.  

It is plain to see that the economic growth has not been inclusive. The wealth being made at the top is not being reinvested in India. India is ripe for investment, both foreign and domestic. However, the prospects are made unattractive by the overall state of public services, lack of basic infrastructure, and by discouraging government policies like regulatory and foreign investment controls and restrictive labor laws.

Because of these impediments, many Indians prefer to invest in, and acquire firms abroad in order to gain access to wider channels of distribution and to take advantage of technology and infrastructure. If India’s economy is to continue to grow at a rate of 8% plus per year there must be massive investment in infrastructure and other vital retail ventures. There have been grand schemes proposed to introduce railways to connect metropolitan cities, build power plants, and construct modern highways. These goals, though long-term, are essential to creating a more attractive impetus for investment and improve the overall efficiency of the country.

Comprising around 15% of the global population, India is also home to a disproportionate, 22% of the world’s poor and surprisingly ranks 126th out of 177 countries listed in the World Human Development Index. Its growing population can easily be seen as a cause of India’s perpetual poverty, yet it has been found that in many cases, poverty, and more specifically, the lack of access to basic education, leads to population surges in underdeveloped regions.

Most would agree that investment must not be confined to the corporate and the structural in India but must also be allocated for education, healthcare and sanitation. The acceleration of economic growth is of utmost importance in the overall progress of India as an emerging global entity, but without a concerted effort on the part of India’s leaders to attack the issue of poverty at all levels including the most basic, the process of development will be much more arduous and to many millions, unrecognizable.