Economic Extremes Seen Side By Side In India

India's economy is one of the world's fastest growing. So why do its poor remain so very, very poor?

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And I'm Michele Norris.

If a rising tide lifts all boats, the news hasn't reached India. Its economy is growing more than twice as fast as ours - over 8 percent a year - and it's producing billionaires. But it still has hundreds of millions of poor people who don't even have electric power to switch on a light bulb.

David Kestenbaum, with our Planet Money team has this story from India's capital, Delhi.

DAVID KESTENBAUM: It's not hard to find both economic extremes of India right next to each other. Take this street in the Shantiniketan neighborhood. You walk by a mansion that's being built: three floors, giant bathrooms with Italian marble. There's a swimming pool being built in the basement. Then you turn the corner and you meet a short, old man furiously polishing shoes. His name is Umral Singh(ph).

(Soundbite of shoe polishing)

KESTENBAUM: How old are you?

Mr. UMRAL SINGH: (Through translator) Seventy-five.

KESTENBAUM: Singh's store - if you can call it that - is the space between two stacks of bricks that function as walls.

A customer drops off shoes to be shined, and another guy brings in a bag with a busted zipper. Singh figures he makes maybe $2 a day. Where do you sleep? I ask. Right here, he says proudly, on the ground. What if you get sick? I eat the leaves from this tree, he explains. This is what God has chosen for me.

Mr. SINGH: (Through translator) There's nothing I can do about it because it's all written. It has to do with Gautama. I think what is written is written, and you can't change it.

KESTENBAUM: There is karma, God, scriptures - and there is also economics. In India, the gap between rich and poor is getting wider. And you have to wonder: Is that just what happens in fast-growing economies, or is there something wrong here?

Professor ROHINI SOMANATHAN (Economist, Delhi School of Economics): I think there is something wrong about that.

KESTENBAUM: Rahini Samanotan is an economist at the Delhi School of Economics.

Prof. SOMANATHAN: What's wrong is not that you have people in different income classes who have different lives, but I think what's wrong is just how far apart those levels are.

KESTENBAUM: The usual route for poor people to stop being poor is that as the economy grows, new, higher-paying jobs open up. And typically, for the very poorest, the first rung on that ladder is a manufacturing job - making something, T-shirts or furniture.

Partha Sen is director of the Delhi School of Economics.

Mr. PARTHA SEN (Director, Delhi School of Economics): So far as I know, the only way out of poverty for a hugely overpopulated economy is through manufacturing.

KESTENBAUM: But for a variety of reasons, he says, the manufacturing rung of the ladder in India, it's kind of missing or it's small. And the parts of the economy that are growing, like the IT sector, they're not creating the kinds of jobs that people from the villages can do. Umral Singh, the cobbler, he's never going to work in a call center.

If you read the government's five-year economic plan, it lays out a grand vision for helping India's poor: better education, roads, health care, infrastructure. I mentioned that to Rohini Somanathan, and she jumped in.

Prof. SOMANATHAN: But that's what they've been talking about for 60 years. That was in the first plan, in the second plan - and the 11th plan.

KESTENBAUM: I met with India's chief economic adviser, Kaushik Basu. Until recently, he was a professor at Cornell University. But he came over to help diagnose and treat India's problems. Basu says one thing to keep in mind is that India's sudden economic growth has been relatively recent. The economy is exploding, growing at 8 percent now. But for many years, growth was less than half that - 3 and a half percent.

Mr. KAUSHIK BASU (Chief Economic Adviser, India): That used to be described the Hindu rate of growth.

KESTENBAUM: The Hindu rate of growth?

Mr. BASU: Yeah. That was coined by, actually, one of my senior colleagues. He said it jokingly, that no matter what we do, why do we remain stuck at 3.5 percent? Maybe it is there in the Scriptures. That's the Hindu rate of growth. But from 2003, it's really unbelievable. It's virtually at 9 percent that that country is growing.

KESTENBAUM: The economy is growing, he says, in part because India opened up to the global economy. But that's helped business owners more than the shoe shiners.

Mr. BASU: We do know that when a country takes off, there's a bit of a natural propensity for inequality to worsen. It's happened in China in a very big way. It's happening in India.

KESTENBAUM: And in India, it's worse.

Mr. SINGH: (Speaking foreign language)

KESTENBAUM: I went back that night to hang out with the cobbler, Umral Singh. He was cooking some Indian flatbread on top of a stove made of bricks he had set up over a manhole cover.

Mr. SINGH: (Speaking foreign language)

KESTENBAUM: Singh told me he's content with what he has. But then his neighbor piped in. Remember how you told me, he says, that in the next life you wanted to be born into one of those nice apartments across the street? And they both laughed.

David Kestenbaum, NPR News.

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