Since I’ve covered the Indian markets and the phenomenal growth that’s occurring here, it’s only fair that I present the other side of the story. And while I mentioned that the market is being fueled by India’s emerging middle class and driven by financial institutions and the upper crust of society, the vast majority of Indians are not benefiting from the growth here. Equally amazing to the near double-digit GDP growth, is the fact that 77% of Indians live on less than .50 USD per day. That’s nearly 850 million people, more than double the population of the US! And while the middle class is growing rapidly, only 4% of Indian’s live on more than 2.5 USD per day. Think about that; that means that the Indian upper and middle classes combine for less than 4% of the population, while three-quarters of the population live below the poverty line. Aside from the occasional editorial or op-ed pieces in the papers, the economic stories focus on the growth or trivial things like how third and fifth richest people in the world are Indian.

I opened up this post by saying that this is the other side of the story. And so why is this the other side of the story rather than just another gloomy article listing horrific poverty stats? The reason it’s the other side of the story is because the central government is, in many ways, prioritizing growth over welfare. Trickle-down theory of course indicates that the poorest will at some point receive some benefit from India’s growth, but its hard to agree with some of the central governments policies. It’s ironic that after riding the brand new, clean, multi-billion dollar Delhi Metro, we emerge from the station in the middle of people living and trying to survive on the streets. Not just provide food or shelter for themselves and their families, but literally survive. And its not like India built the Metro with its own capital. Japan financed the Delhi Metro and the building contracts went to Japanese countries. So India paid billions to Japanese companies and will be sending billions in interest payments to Japan for the coming decades. The same goes for the much-anticipated Delhi-Mumbai freight corridor and a number of other projects. Its even more ridiculous because India is financing projects in even poorer countries, like Nigeria. Why not help your own before helping abroad? Still don’t think the Indian government has misplaced priorities? The reason that the Delhi-Mumbai Freight Corridor project is being delayed is that the Indian government does not want to shell out the money to compensate farmers fair-market-value for the land that will be confiscated for the project and provide relocation assistance for the people the project displaces, a condition that the Japanese are insisting on. How can the Japanese be stronger advocates for rural Indian rights than the Indian government? A number of other projects including the proposed nuclear deal with the US, have the Indian government sending billions to other countries. If India is the next big economic power and has tons of money, why doesn’t it finance its own railroads, metros, and nukes. Why doesn’t it build up its own arms industry instead of buying all their jets and tanks from Europe and America? On another note, India has one of the largest grain stockpiles in the world, but millions of Indians go hungry every day. Why? Because over 50% of the grain is siphoned off (as previously mentioned) and India wants to sustain grain prices for Indian farmers. But this comes at the expense of many more Indians. Why doesn’t India just subsidize the farmers, rather than starve its population?

Two things are clear. One, the central government is prioritizing growth and modernization over welfare. Two, the bureaucracy and corruption within the lower levels of government and slowing growth and hurting the poor. A third, less obvious, but equally important point, is that the massive impoverishment could derail the Indian growth train. Even within the financial press, there’s a fear and much talk about how India’s poor could instigate massive civil unrest that could stop growth in its tracks. The Maoists have already turned Nepal upside down and are now agitating things out in the Indian countryside. Their influence and the number of “incidents” has been growing rapidly. There’s a large movement against western retailers and chains in India, while they’ve already shut down Indian chain-retailers in major states such as UP. The possibility of massive civil unrest is small (maybe even smaller if you look at the history of India and the absence of any major class violence). Yet, it still remains a possibility, perhaps increased with the growing influence of radical left-wing groups. Yet, regardless of the effects on growth, it seems like taking care of your people should trump investing in growth, to some extent.