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India's Growing Pains

A World Bank report recently stated that 53% of all Indians defecate in the open, a statistic that can cause some serious cognitive dissonance if you’re used to hearing about India’s growth miracle. For more along these lines, Pankaj Mishra recent sobering examination of the economic liberalization that took place in the 1990s under Indian Prime Minister Manmohan Singh (who was then the Minister of Finance), is worth a read. A taste:

“The bulk of India’s aggregate growth,” the Cornell economist Kaushik Basu warns, “is occurring through a disproportionate rise in the incomes at the upper end of the income ladder.”17 By 2010 India’s one hundred wealthiest people had increased their combined worth to $300 billion, a quarter of the country’s GDP. Recent corruption scandals involving the sale of billions of dollars’ worth of national resources such as mines, forests, land, water, and telecom spectrums reveal that crony capitalism and rent-seeking, rather than entrepreneurial dynamism and innovation in a free market, are the real engines of India’s economic growth.

Will these inequalities and corruption scandals help unseat Congress Party in the upcoming elections? It’s hard to tell. But it is important to remember that Chinese variant of state-controlled capitalism seems to not be faring much better, exhibiting similar levels of high inequality, especially between rural and urban regions. How China and India cope with the demands of the increasingly politically aware have-nots is ultimately one of the more interesting stories to watch in the coming years.

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