Thursday, May 6, 2010


India has a middle class advantage

For the Indian middle class, every year the month of March and April comes with a classic dichotomy! March brings in the pressures of financial year closing and April is the time of dividends, which comes in the forms of salary revision and bonuses. And it is for all of us to observe that for the past a few years the salary levels for the Indian executive has grown manifold as compared to what it used to be pre-liberalisation. Though the growing pay packages has been a point of debate but then the economies of an augmented pay scale completely out weighs any argument that is being put forth against the same. And the biggest advantage of growing pay packages is the ever growing and empowered middle class which would enable India to an enviable position in times to come.

In fact, one of the biggest predicaments of growth is inequality that it brings about. World over, it has been observed that as an economy grows the income gap between the rich and the poor also grows. A classic case in point is probably the US which houses the highest earning CEOs as well as the richest transnational corporations, yet has a Gini coefficient which was as high as 40.8, which for India is around 36. In fact, the extent of inequality in the US could be gauged if one refers to the Forbes list of top 10 highest paid CEOs! Starting from Larry Ellison of Oracle who cornered a staggering $560 million in 2009 to Robert Lane of Deere & Co. who made US $61 million for the same year, all of them belong to the US. Not to forget that it is the same US where even today, some 32 million people languish in poverty!! In fact, not just the US, last year UNDP came out with a report stating income equality within nations – with Hong Kong topping the list as the most income unequal nation, followed by Singapore and then the US. The other countries which made it to the list were Israel, Portugal, New Zealand, Italy, Britain, Australia, Ireland and Greece. The report also stated that the Scandinavian economies, Japan and Czech Republic have least inequality. In fact, it is not just that the richest countries have such disparities, it is even high in cases of developing and under developed economies. As per other reports, every nation in Africa has very high levels of income disparity and even countries like China, Malaysia and Indonesia fare much worse than India as far as income inequalities are concerned.

The situation is even worse in case of poorer nations. In case of Sri Lanka, or a Bangladesh or a Nepal, the disparity is blatant and visible. I can say so out of my first hand experience of these countries. The inequality is so stark that, on one hand, one gets to see scores of beggars on the roads of Dhaka and Kathmandu, while, on the other hand, sprawling mansions with an envious garage full of top-end luxury cars! And this is what puts India into a relatively advantageous position. If these nations have only two socio-economic classes of super rich and super poor, with no trace of the middle class, India boasts of an ever growing and empowered middle class. For there cannot be any denial with this fact that it is the empowered middle class which acts as a change agent in reforming the political and economic scenario of a nation. Though it is also true that this Indian advantage is relative with respect to other nations, and a lot of work still needs to be done to pull out those 250 to 300 million people who are still poor. All in all, nation building just cannot happen without creating a formidable middle class! Lest we forget that once upon a time, it was the middle class that created today’s America!!


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