India's Economy Is Booming, But Not For Everybody : Planet Money India is a nation of a handful of billionaires — and 400 million people without electricity.

India's Economy Is Booming, But Not For Everybody

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UNIDENTIFIED PERSON #1: Namaste. (Non-English language spoken) National Public Radio call PLANET MONEY program.

DAVID KESTENBAUM, HOST:

Thank you very much.

UNIDENTIFIED PERSON #1: OK. (Non-English language spoken).

(SOUNDBITE OF SONG, "HUN THA MEH NACHNA")

STEREO NATION: (Singing in non-English language).

ADAM DAVIDSON, HOST:

Hello, and welcome to NPR's PLANET MONEY. I'm Adam Davidson.

KESTENBAUM: And I'm David Kestenbaum. Today is Friday, June 4. That was a man selling socks on the street in Delhi, India, you heard at the top, introducing the show.

DAVIDSON: And we're going to go back to India in a minute. That's the topic of today's podcast. But first, Jacob Goldstein, our blogger, has emerged from the blog cave. You have the indicator in your hands, I see.

JACOB GOLDSTEIN, BYLINE: I do. I have it right here.

(SOUNDBITE OF PAPER RUSTLING)

GOLDSTEIN: By special request, I'm making it make noise. Listener James N. wrote in to tell us he missed the rustling indicator. So today's indicator is 431,000. As in - the economy added 431,000 new jobs in May.

DAVIDSON: Now, Jacob, whenever you come in here and give us the indicator, you have a habit of giving us what sounds like good news, and then telling us it's actually bad news. But today I don't see it. Four hundred thirty-one thousand new jobs - that sounds really, really good.

GOLDSTEIN: Adam, this one time I actually don't take any pleasure in telling you that you're basically wrong. This number sounds good, but actually, it really is pretty bad. Almost all of those new jobs, more than 400,000 of those new jobs, actually, were temp jobs created by the census. And census employment peaked in May, which means the census is going to start cutting more jobs than it adds in the next few months.

KESTENBAUM: We should do the census again.

GOLDSTEIN: Right. That would be especially useful because it looks like private companies may not be able to pick up much of the slack.

DAVIDSON: So this week I was reading a few people saying, hey, maybe it is a robust recovery, much more robust than anyone thought, but this would be evidence that that's not true, I'm guessing because a robust recovery, in my mind, implies lots and lots of non-census jobs being created.

GOLDSTEIN: That's right. It's definitely a bad sign. I mean, if we're going to get to a sustained economic recovery, private companies just have to hire more people.

DAVIDSON: All right, Jacob, back to the blog cave with you. Find some more bad news for us.

GOLDSTEIN: Thanks, guys.

DAVIDSON: Thank you.

So, of course, regular listeners know that one of our big themes this year has been the question of why are poor countries poor? And today we have a puzzle from India. Now, David, you were in India very recently, and I believe you brought back with you two bonus PLANET MONEY indicators from India.

KESTENBAUM: Yeah. So the first one is the number nine. I have here the Forbes list of the top 100 richest people in the world, and nine of them are from India, which is, to me, kind of surprising. All nine are multibillionaires.

DAVIDSON: Now, you were kind enough to give me the second extra bonus indicator. That is a much larger number. It's 400 million. And I was shocked by this number. That's the number of people in India who do not have electricity. And basically, those two numbers, nine multibillionaires in a country where 400 million people don't have electricity, that is our puzzle today. India's economy is doing incredibly well. It is growing at something like 8% a year, which is incredible growth. And that growth is clearly creating some very, very rich people. But then you have tons and tons of people who are just not benefiting from that growth.

KESTENBAUM: So today we wanted to try and figure out why is this happening? Is it just the way things are in a fast-growing economy, or is there something wrong?

(SOUNDBITE OF CONSTRUCTION MACHINERY WHIRRING)

KESTENBAUM: So let's start on this street where I went. It's in a neighborhood called Shanti Niketan of India's capital, Delhi. And that sound you're hearing is the sound of a huge mansion being built. I actually got to walk through it. There are three floors. There's Italian marble being put in for the bathrooms. There's going to be a swimming pool in the basement. And this mansion is being built by very poor people, who have come into Delhi from the villages.

Now, in the U.S., or really anywhere in the world, you know, I think it's pretty obvious that the people who are building mansions are going to be poorer than the people who are owning mansions. That's not a surprise. But in India, which is very different from the U.S., the mansion builders are not just poorer than the owners, they're really living in a different world. The mansion builders, the work people, are basically living in a preindustrial universe. They barely have enough resources to survive. So, for instance, in this case, they don't have homes in the city in Delhi where they're working. A lot of the workers just sleep in the house. It looked like ten of them were sleeping in what in the future was going to be some rich kid's playroom. So you find contrast like this all over the place in India.

Around the corner, I met this short, old man. He was bald. He had a tanned head. He was wearing a white dhoti cloth wrapped around his waist, and he was furiously polishing shoes.

(SOUNDBITE OF SHOES BEING POLISHED)

KESTENBAUM: His name is Umrao Singh.

How old are you?

UMRAO SINGH: (Through interpreter) Seventy and five - 75.

KESTENBAUM: So I sat with Umrao Singh for a while, and a customer came and dropped off some shoes to be polished. Another guy came by with a bag that had a busted zipper. And I talked to Umrao about money. And this is one thing I find sometimes in poor countries, you know, poor people are actually quite happy to talk about money 'cause it's something they think about all the time, and it can be kind of weirdly intimate. I mean, he told me how much money he has in his bank account. It's about $8. He sends most of his money back to his family in the village. He told me that he makes something like $2 a day.

So, Adam, you were just in Haiti. What does $2 a day look like in Haiti?

DAVIDSON: So in Haiti, I actually met some people who live on pretty much exactly $2 a day. That gets you a handmade shack that might have some concrete walls but probably has a dirt floor - not a concrete floor. You definitely don't have electricity. There's no running water, certainly no car or even a bicycle, no access to health care, very little schooling. And, I mean, really, I think the big thing is very little hope that you or probably anyone you know, anyone in your family, is ever going to get out of poverty any time soon. So $2 a day means spending your entire life trying to just be one step ahead of hunger and disease.

KESTENBAUM: Yeah, so that's basically what it looks like in India. Umrao told me that when he's sick, he says he eats the leaves from the special tree that's growing out of the sidewalk over there. And Umrao's house, he's got - well, it's not really a house. He's got two walls. They're just sort of piles of bricks, and there's a metal roof over top that doesn't really keep out the rain.

DAVIDSON: OK. So to set the picture, you've got this big mansion being built and around the corner, a guy whose dream is to one day own a piece of plastic sheeting that might keep the rain out.

KESTENBAUM: I asked Umrao if he ever thought about, you know, what would it be like to be rich? And he shrugged. And he says, you know, this is my life. This is karma.

SINGH: (Through interpreter) There is nothing I can do about it because it's all written. It has to do with karma. And so there are people right here, five minutes away from where I am sitting, who earn around 200,000 rupees a month and some of us hardly make that much money. I think what is written is written, and you can't change it.

KESTENBAUM: So India's economy is growing really fast, but clearly that growth is not reaching people like Umrao. And this was such a big question. I decided I had to sort of climb the mountain and ask the wise people. And by wise people, I mean, economists. So I talked to 10 economists, and I asked them all, why is India's economy growing so fast but the poor people aren't being helped? Is that just what happens? Because people talk about how in the Industrial Revolution, it took a while to help the poor people. Is this just the way economies work? Is it a stage economies go through, or is there really something wrong?

ROHINI SOMANATHAN: I think there is something wrong about that.

KESTENBAUM: So this is Rohini Somanathan. She's at the Delhi School of Economics. It's kind of an old, excellent building. The doors have this Indian-style lock on it where you slide a bolt, and then you have to put a padlock through it.

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: How many people are in poverty in this country?

SOMANATHAN: It's very controversial. So a quarter would be pretty safe - at least a quarter.

KESTENBAUM: So a quarter of a billion people.

SOMANATHAN: That's right.

KESTENBAUM: It's almost like the entire United States in total poverty.

SOMANATHAN: Right.

KESTENBAUM: And, Adam, these are people who are much poorer than Umrao the cobbler. One Indian man told me this story that really stuck with me about going to one of these remote villages. It's, like, hours and hours from anywhere on a bad road. And he says they were sitting around in someone's home, and they realized that the person who had been guiding them around had left. And they said, where did she go? And it turns out she'd gone to all the homes in the village to try to find an egg to share. That was considered special, you know, if they had an egg that they could bring and eat together. And she came back because she couldn't find an egg. There wasn't one in the village.

DAVIDSON: And this - to me, this is the key issue we are trying to figure out this year. Why are so many people in the world completely untouched by the truly remarkable economic growth of the last century? If you see a graph, this past century has been unprecedented in human history - the number of people who have gone from poverty to wealth, who have gone from medium wealth to a lot of wealth, but then there's all these people left behind. And it's a puzzle because one of the great selling points of capitalism is that economic growth is supposed to benefit everyone. Sure, there will always be people who get more benefit than others do, but everyone's supposed to benefit.

And I think in the U.S., that is largely true. Even very poor people today in America are a lot better off than middle-class people were a century ago. You - there's really nowhere in America you can go and find people who have the real life-and-death struggle that was pretty typical in much of America a hundred years ago. So economic growth has raised all U.S. living standards, even if it raised some more than others. But in India - and this is true not just for India. It's probably true for at least half the people alive today, I would guess - there are these huge pockets who get virtually no benefit from all this economic growth.

KESTENBAUM: And this disparity is not just something that economists sit and talk about in their offices. If you look at the government's five-year economic plan, which I have here, it's basically entirely about this issue - about how they need to build roads and schools and electricity and health care and water to try and help the poor, to try and promote what they call - inclusive growth is the word they have on the cover here. Though when I was talking to Rohini Somanathan, I couldn't actually remember what that catchphrase was.

Well, I read the five-year plan or - what is the word? Something - equitable growth or - what is the term they use?

SOMANATHAN: Something like that. But, David, that's what they've been talking about for 60 years. That's what the first - that was in the first plan and the second plan and the 11th plan. And the question is really when it's more than lip service. But I think that the rhetoric is really important, actually.

KESTENBAUM: OK. But - so the words are there. Why has it been so hard to actually do it?

SOMANATHAN: I didn't realize you were going to ask me these very hard questions.

KESTENBAUM: Adam, so that's another thing people always talk about in India - why the government seems to be so ineffective at providing basic services. But if you just look at the economy and why there aren't better jobs for people like Umrao, all the growth recently has been in the services sector, like, IT stuff, the very things we think about when we think about India - call centers, back office stuff, billing. And Umrao Singh, the cobbler, he doesn't speak English. I'm sure he can't type. There's no way he's getting a job in a call center. So I talked to Partha Sen. He is the director of the Delhi School of Economics. And he says those kinds of jobs - they are not going to do it. They have to be much simpler jobs, like making clothing - manufacturing jobs.

PARTHA SEN: You know, I'm not romanticizing manufacturing jobs, but so far as I know, the only way out of poverty for a hugely overpopulated economy is through manufacturing services, which India seems to be relying on. Computer services and other BPO services is just, you know, scratching the surface, nothing more.

KESTENBAUM: I mean, it seems like you sort of have two - like, so what normally happens is you get people who are agrarian, living out in the farmland, right? They move in, they take these manufacturing jobs which maybe pay twice as much or something, or more, and then their kids can go to school and then they make the next step. And eventually, after a generation or two or three, they're in the middle class or something. But you're sort of missing that rung on the ladder, or the rung is very small or something.

SEN: Yes. So what's happened is that, you know, if you look at India today, 60% of this huge country, its workforce is in agriculture. And they produce less than a - well, just about 20% of the gross domestic product. So there are a lot of people just hanging around out there who aren't really, you know, doing a worthwhile job. So if you want to get them out of poverty, you have to find them meaningful jobs. And the meaningful jobs for an economy which is full of a large number of illiterate, poor people can only be in manufacturing. Look at a Casio watch. It's quite interesting that the Casio watch used to be made in Japan. Then it started becoming made in Korea, then made in Taiwan, now made in China, and hopefully someday, India.

DAVIDSON: You know, David, ever since you've been talking about India and why isn't India's growth impacting poor people, I've been thinking about this very question about manufacturing 'cause as far as I know, from reading economic history, either you find oil and enough oil that you can make everyone in your country rich - a lot of countries have oil, and it only makes things worse. But at least some have gotten rich through oil. But if you don't have oil, you're basically stuck with manufacturing. If you think of the U.K., England, when the Industrial Revolution started, the U.S., Japan - as he said, Japan, Korea, Latin America - I think every country that has gone from poor to rich that didn't have oil did it through manufacturing.

And it's - you know, these are not great jobs. These are tedious, boring, low-paying, you know, tough jobs, but they are more productive than agriculture. They create a space for you to have a little extra time, maybe get a little extra schooling, get some savings so maybe you or your kids can build the skills that allow you to climb up to another level and eventually become middle class. And for countries like India, like many countries where most people are still farmers, you know, I remember this guy saying no one has ever agricultured (ph) their way out of poverty. No one has ever farmed their way out of poverty. That's just has not yet been a path.

KESTENBAUM: So you need something like manufacturing jobs. And India has a strange lack of manufacturing jobs. I asked Partha Sen about that and a businessman in the clothing industry saying, why is that the case? And they both pointed out that there were laws that discourage big companies from coming in and setting up shop here. If you have over a certain number of employees, you have to pay higher taxes. Also there are exchange rates right now that make China more favorable for doing this kind of thing than India. But there are a lot of rules that discourage companies from coming in and setting up big operations for manufacturing.

DAVIDSON: And this is such a tricky issue that you see all over the world. I'm seeing it in Haiti right now. You know, it's never popular in a poor country, or any country, for politicians to cut taxes for rich factory owners or make it easier to fire workers or lower the worker protection. But, of course, if there aren't the incentives to do more low-end manufacturing, then it's hard to see any path for really, really poor people to eventually become less poor, although I can't imagine a political slogan like, hey, vote for me. I will help rich people pay you very little for some crappy job so your grandkids could become middle class.

KESTENBAUM: Adam Davidson for president.

DAVIDSON: Yay. Right. It's not a great idea. And I think that probably explains why China, where the leadership does not have to worry about voters so much, why they've been so much more successful at this.

KESTENBAUM: I did manage to talk to an economist with the government about this puzzle also. Actually, he's the government's chief economic adviser. His name is Kaushik Basu. Until recently, he was a professor at Cornell University over here in the United States. Then he got this call. Do you want to come advise the Indian government and help us sort through our problems? The prime minister had him come over for a visit, and Kaushik decided he couldn't really say no. So I went over there. I met him in his office. We sat down and had tea. And he said, one thing to keep in mind is that India's sudden economic growth has been relatively recent. So you sort of have to give it some time. The economy is exploding at 8% now, but for many years it was growing, but much slower, at just 3.5%.

KAUSHIK BASU: That used to be described the Hindu rate of growth.

KESTENBAUM: The Hindu rate of growth?

BASU: Yeah. That was coined by actually one of my senior colleagues, which really caught on. He said it jokingly that no matter what we do, why do we remain stuck at 3.5%? Maybe it is there in the Scriptures that India will never grow. That's the Hindu rate of growth, that it - you never escape that. Then suddenly, in the mid-'80s there was movement. And from 1994, quite unexpectedly, really, India just seemed to - the growth picked up. There's still masses of poverty, but the growth rate - the entire country's GDP picked up. And from 2003, it's really unbelievable. It's virtually at 9% that that country is growing.

DAVIDSON: So, David, I want to just pause for a minute and just emphasize that number he just said - 9% growth. I mean, that is insane for a country the size of India to grow. I would guess that if a few decades ago, you had done a survey of economists, they would have said it is impossible for a country of a billion people to sustain growth that high for a decade. And then China is even more insane. They're - they've been growing at double digits - 10% - for two decades. I mean that - at 10%. That means every seven years, your economy doubles in size. Growth that it takes generations for us to see, Chinese people can see year after year after year.

KESTENBAUM: So, of course, India's dream right now is to break into that rarefied realm of double growth. And that's a lot of what their economic planning is for. But Kaushik Basu says even if they do that, that alone - that is not necessarily, on its own, going to help people like our cobbler, Umrao Singh.

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. My own view on this is that the market forces are very good for prompting growth, and in India, the market is being increasingly left free. In China, that has happened, and that is promoting growth. But market forces don't have a natural mechanism for promoting equity. That's where you do need deliberate government policy.

DAVIDSON: So this brings up another key economic question, which is, you know, on the one hand, there's a lot of economists who say no one should care so much about inequality. So what if rich people are getting richer so long as poor people are also getting richer? Maybe the rich are getting richer faster, but that's fine because there's enough economic growth that poor people's lives are getting better and better. There's a surplus in the country, so you can start providing basic services like sanitation and medical care and education and roads. And, you know, that - the U.S. would be a perfect example of that. Why do I care that Bill Gates is a billionaire? I'm much richer than my great-grandparents. By the way, my great-grandparents did work in low-end, low-paying manufacturing - at least some of them did - in clothing manufacturing in New England.

Now, other economists will say, no, no, no. Inequality creates frictions in an economic system. It creates political pressures that are anti-growth. And so even if you don't care about equality for some moral reason, if all you care about is economics, then you do want more equality than what an unfettered market would provide.

KESTENBAUM: And if you think of Umrao Singh - right? - he's just repairing shoes right now. And, you know, the sooner you can get someone like him into a more productive job, the better that is for the economy overall. So I went back to hang out with Umrao Singh at night. He was cooking outside. He was making roti. That's the flat Indian bread - basically flour and water. He was cooking it in a pan over a fire of sticks on top of a manhole cover out in the street. There was the yellow light from one of the streetlights overhead. It was actually kind of a fun scene. And this really friendly street dog comes up. His tail is wagging. Here's my translator.

UNIDENTIFIED PERSON #2: (Non-English language spoken)

UNIDENTIFIED PERSON #3: You know what they've named the dog? Very dangerous.

KESTENBAUM: Because she isn't.

UNIDENTIFIED PERSON #3: Because he isn't, yes.

SINGH: (Non-English language spoken).

UNIDENTIFIED PERSON #3: They've - you know what they've called it? Gunda. Gunda is actually thug. And so when you call it - you know, thug or goon. So when you say gunda, it comes to you. You call it - seriously call it thug.

SINGH: (Non-English language spoken).

KESTENBAUM: So Umrao seemed to actually be having a good time. And I talked to him about his future. I said, you know, is there something missing from your life? What is missing? And he said, nothing's missing. I said, come on, wouldn't you like a car or something? And he said, I wouldn't know what to do with a car. This is what's written for me, he said again. I'm content. And then his friend who had been listening in piped up. This is a guy who runs a taxi stand next to him. He says, Umrao, come on. Remember when you told me in your next life you wanted to be born into one of those fancy apartments across the street? And then they both laughed. So maybe this is what the gods had written for him. But next time, you know, it'd be OK if they wrote something nicer for him. With that, Umrao sat down to eat, and then he was going to go to sleep on the street.

We actually have pictures of Umrao on our blog, as well as a photo study of poor people around the world. It's really actually quite fascinating - challenges what poor looks like, what poverty looks like. That's all on our blog, npr.org/money. And before we go, I do want to give a huge thank you, a huge shoutout to our listeners. You sent us so much feedback this week. You gave us great feedback, great notes on our experimental Deep Read podcast and amazing designs on our T-shirts. We're going to be getting back to you soon about that. You guys are amazing. Thank you so much. As always, you can send us email at planetmoney@npr.org. I'm David Kestenbaum.

DAVIDSON: And I'm Adam Davidson. Thank you for listening.

(SOUNDBITE OF SONG, "HUN THA MEH NACHNA")

STEREO NATION: (Singing in non-English language).

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