Global Policy Forum

By Thomas Schmitt

Economists predict a rosy future for the Indian economy, with the stock market rising from one record to the next. In boomtown Bangalore, the nouveau riche proudly flaunt their wealth. Unfortunately, this dazzling display often obscures the losers of the country's economic miracle.

Ramakrishna Murthy doesn't have much good to say about the leaders in the Vidhana Soudha, Bangalore's government palace. A short while ago, he was put out on the street by his employer, Hindustan Lever. He had worked for 10 years as a food chemist for the company, which is part of the Anglo-Dutch multinational Unilever. But Murthy doesn't hold the industrialist responsible for his getting fired -- instead he points his finger at Bangalore's top political decision-makers.

He sees himself as one of the victims of the "Indian economic wonder" and, as such, one of the "losers of globalization" --those who have lost their jobs as a result of India's economic liberalization. The company told Murthy that, at 52 years of age, he was "too old, too inflexible and too expensive." With a huge and inexhaustible source of young and well-qualified workers, there's little room left for people like Murthy. "I had to leave my apartment the same month they laid me off," he says. Now he and his family are living without any kind of appreciable social safety net in an abandoned house that is falling apart on the edge of Bangalore. They struggle to make ends meet with his wife's pay.

Until recently, many in the up-and-coming high tech metropolis were united in their belief that there is no alternative to economic reforms. But there's a growing chorus of Indians who fear that further economic liberalization could upset the social balance in the world's second most populous country after China. Columnists in the country's biggest circulation publications including Outlook, India Today and The Week have begun to question the highly praised reform course of the Indian government in New Delhi.

If you glance at the vital data from economists, India's economic reforms have all the characteristics of a resounding success. Indeed, the world's biggest democracy has succeeded in becoming the world's leading exporter of IT services. After the government cut red tape that had been hampering business expansion, average annual economic growth accelerated from 3.7 percent in the 1950s and 1960s to a remarkable 7 percent in 2005.

Economic institutes never tire of saying that India's economy hasn't even reached its peak yet. If you go by the forecast of Deutsche Bank Research, India's gross domestic product will double in the next 12 years. That would make India the world's third-largest economy by 2020 -- trailing only the United States and China. The confidence of foreign investors is so great that the most important Indian stock index, the Sensex, recently passed the 10,000 point mark for the first time.

Inflation, pollution and illiteracy

But Murthy couldn't care less about these rosy statistics. "India is far, far away from becoming an industrialized nation," he says. "Only every second person can read and write and the situation with the environment is getting worse and worse." "Wages are stagnating as the cost of living increases," his friend Dhruva L. Robby says in agreement. Dhruva himself recently had to job hunt. But unlike Murthy, he's young and has no real attachments. Now he's working six days a week in a Dell Computer call center for a small wage. He helps people solve their computer problems by phone for Dell on the graveyard shift.

But the constant news of stock market successes overshadows the social problems in India's economic wonderland. Salaries for those working in modern service jobs may have risen palpably in recent years, but wages in other sectors have grown at a much slower pace and have, in some areas, even stagnated. That's an unfortunate reality for the vast majority of workers in India, who are faced with an annual inflation rate of more than 4 percent and have to contend with a decline in purchasing power each year as a result.

That's a situation that won't change quickly either. Workers in the industrial sector seldom earn more than 7,000 rupies (€130) per month, and a daily laborer is lucky to even earn 1,500 rupies in the same period. That's not enough to put a reasonable roof over one's head or to even buy decent groceries. As in the past, child labor is still commonplace and the poorest segments of the population don't have adequate access to healthcare.

The unpleasant side effects of India's push for growth are especially apparent in its booming metropolises. According to the World Bank, they are the fastest growing cities in the world. Despite a plenitude of parks and broad boulevards, the cities are increasingly choking on air- and noise pollution. A few rounds in Bangalore's city center on a motorized rickshaw leaves one's shirt darkened with soot and one's eyes stinging from exhaust fumes. The evening rush hour routinely spirals into complete gridlock with countless thousands of mopeds, jitney buses and cars congesting the road. The German firm Siemens recently halted its plan to expand in Bangalore and the head of its Indian operations, Jürgen Schubert, says the company is instead looking to expand in Puna, Chennai (Madras) or Calcutta. Meanwhile, poor people from the countryside continue to flood into the city of 6 million looking for work. But all too often, they wind up in the slums.

Little wonder then, that globalization critics like Shok Mitra have no trouble finding new people sympathetic to their views. A further opening of the market, the economist and former finance minister of the state of West Bengal argues, would result in multinational concerns "acquiring" the Indian subcontinent. Mitra fears this will only further harm the country's poorest citizens and lead to growing social and political instability. Mitra regularly fills newspaper columns with his critical treatises on globalization. He also categorically rejects demands by the World Bank and the International Monetary Fund for greater cuts to state economic aid.

The cult of mobile phones

But proponents of globalization disagree on all points. For too long, they argue, India clung to the line that it should promote heavy industry and the public sector. N. Srinivasan, the general director of the Confederation of Indian Industry, has called for "open door" policies in order to continue attracting foreign investment. With strong foreign partners, the Indian economy can "only win," he says.

Next to foreign multinational firms and Indian companies like Infosys and Wipro, the upper and middle classes in conurbations in southern India are also globalization's winners. The IT and software boom that has gripped cities like Bangalore, Hyderabad and Chennai has enabled the well-educated to dramatically improve their own financial situation. With monthly wages far above the national average, they have adopted the consumer culture and lifestyle of the Western world.

Dhruva Robby's new co-workers love nothing more than going to the modern cafes on Mahatma Gandhi Road in the early evening to kill time or to go for walks carrying their flashy new mobile phones. Later in the evening, they often wind up at one of the city's many nightclubs. "No one wastes any thoughts there on poverty," the critical Dell employee complains. So far, no serious initiatives have been taken to mitigate the dislocation and upheaval that has been caused by India's economic liberalization policies. And the gap between the agriculture-dominated north and the newly rich south, with its sprawling cities like Mumbai (Bombay) and Bangalore continues to grow. More than half of India's poor live in the northern union territories, including Orissa, Bihar, Rajasthan and Madhya Pradesh.

And even in the more prosperous south, grass roots initiatives and associations are organizing to protest the economic policies. In Karnataka, where hundreds of farmers commit suicide each year because of high debts, the Karnataka Raythat Sangha farmers association frequently mounts protests. The changing sentiment helped the Hindu nationalist Bharatiya Janata Party get voted into the government recently for the first time ever in a southern Indian union territory.

Mailing lists can already be found on the Internet calling for boycotts of foreign products. Ironically, the appeals aren't directed at the socially weak -- like impoverished farmers and other losers of globalization -- they can't afford expensive import products anyway. Instead they are directed at the nouveau riche -- the group that has profited most from the opening of India's markets.

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