Can India close the wealth gap?

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By Karishma Vaswani, BBC

Many of India’s poor are being left behind by the speed of change
Sixty years after India was freed from British colonial rule, the country’s economy is booming. But will the wealth be shared more equally in the future?

On the eve of independence India’s newly elected Prime Minister Jawarlahal Nehru made an impassioned and oft-quoted speech saying India had made a tryst with destiny.

At the time he was talking about India’s struggle to gain the right to govern itself and to make its own decisions about its future, be they political or economic.

It was an austere, simple time when idealism was at its height and the distribution of wealth was a priority.

Today, it would seem that India has taken a slightly different route towards its destiny.

‘Not enough’

In Mumbai, India’s financial capital, symbols of India’s economic success are all around – from flashy billboards advertising the latest perfumes to trendy young women dressed in the latest Tommy jeans.

The India of today is vibrant, confident and ambitious – and not afraid to show it.

Take Rishi Rajani for example. The 30-something garment tycoon based in Mumbai and Denmark is a self-confessed workaholic who also loves the good life.

His latest acquisition is a black Porsche sports car, which he drives through the streets of Mumbai.

In the money capital of India, flaunting your wealth is now fashionable.

Mr Rajani has always dreamed of owning the mean machine, and now his dream is a reality thanks to the success of the economy and his business.

“I work hard, you know, for my money”, he says. “And I need a reward. This is my reward.

“But it’s not enough. My next goal? A yacht. That’s when I’ll know I’ve really made it. I’m already working towards it.”

Fast city

This is the stuff dreams are made of.

Fast life, fast city – money in Mumbai cannot be spent or made quickly enough.

And it is this dream that leads millions of migrants to the city every single day.

They come here in packs, having heard legendary tales of Mumbai’s streets being paved with gold.

Travelling thousands of miles by train, they leave behind their families, their friends and their desperate lives.

Many end up in the one of the city’s numerous slums and struggling to survive by doing odd jobs on the street.

The city they came to conquer, ends up engulfing them.

Demolition job

Saunji Kesarwadi is a potter by profession who lives in a 10×10 foot flat in Dharavi, Asia’s biggest slum.

Dharavi in Mumbai
Many of India’s poor live within sight of the wealthier people

In this box, he works and supports a family of six who live in the attic.

Barely eking out an existence, he fears being thrown out of his home to make way for development.

“We hear the builders are coming,” Mr Kesarwadi says as his two little girls look on.

“But no one has told us anything. They say they’ll give us a flat if we sell them this land – but how can all of us leave? This is where my work, my life is. It may not be much but it’s all I have.”

But while life in the big city often falls short of expectations, thanks to the growth in the country’s economy there are new opportunities in some villages.

Rural choice

Some 300 kilometres away from India’s technology capital, Bangalore, lies Bellary – an industrial town born out of a sleepy village.

When you first arrive, all you can see is dusty farmland for miles around. But behind the quiet exterior, there is a dramatic change afoot.

Bellary is home to one of India’s first rural outsourcing centres, run by Indian steel maker JSW Steel Limited.

The organisation has started two small operations on its Bellary campus, hiring young women from nearby villages to work in their rural processing centres.

Here the girls spend their shifts punching in details of American patients’ dental records, typing in a language many of them have only recently learned, using a machine many had never seen or heard of before.

Twenty-year-old Savithri Amma has a basic high school diploma. She earns about $80 (£40) a month doing this work – the same as one of her peers might earn working as a house-help in Mumbai.

For that money she has to turn up to work every week day by 7am – picked up from her village by a JSW bus at 5am and taken home when her shift ends at 3pm.

“At first, when I started this job, my parents were sceptical,” she says shyly.

“Girls here used to never go out – but now we can because our position in life has improved financially and socially thanks to our work here. My father makes a little more than I do every month.

“I’m proud to contribute to the family finances.”

Growth promise

In Ms Amma’s village, she is looked upon as a role model for many of her peers.

The daily evening prayers at the village temple are a time for her to reflect on her day’s work, and give thanks to the ancient Hindu gods for her good fortune.

She has much to be thankful for. Ms Amma is one of the lucky ones, she is someone who did not have to leave home to battle the millions in urban India to survive.

Growth in India’s economy has to make its way off the streets of Mumbai and Delhi and into all of India’s villages.

Only when it does will it truly be here to stay – and the promise of independence will be met.

Why Do They Hate Us?

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By Fareed Zakaria

Watching the gruesome ISIS execution videos, I felt some of the same emotions I did after 9/11. Barbarism, after all, is designed to provoke anger and it succeeded. But in September 2001, it also made me ask a question: “Why Do They Hate Us?”

I tried to answer it in an almost 7,000-word essay for Newsweek that struck a chord with readers. I reread the essay this past week, to see how it might need updating in the 13 years since I wrote it.

I began the piece by noting that Islamic terror is not the isolated behavior of a handful of nihilists. There is a broader culture that has been complicit in it, or at least unwilling to combat it. Now, things have changed on his front but not nearly enough…

…By 2001, when I was writing, almost every part of the world had seen significant political progress – Eastern Europe was free, Asia, Latin America, and even Africa had held many free and fair elections.

But the Arab world remained a desert. In 2001, most Arabs had fewer freedoms – political, economic, social – than they did in 1951. The one aspect of life that Arab dictators could not ban, however, was religion, so Islam had become the language of political opposition to these secular regimes.

The Arab world was then left with secular dictatorships on the one hand and deeply illiberal, religious groups on the other – Hosni Mubarak and al Qaeda. The more extreme the regime, the more violent was the opposition.

This cancer was deeper and more destructive than I realized.

Terrorism is a challenge

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Shobana Muratee

Terror, for a journalist, is a challenge not an emotion. They are known to be easy targets for kidnappers, extortionists, crime lords, corrupt politicians, and more recently terrorists. And like soldiers, journalists are fully aware of the risks that come with the profession. Yet because the stories and images that they bring to the people are so invaluable, they sometimes pay the price with their lives. The brazen attack on French journalists of the Charlie Hebdo satire magazine by three Islamic terrorists Wednesday morning has shocked the world. Stephane Charbonnier, the magazine’s editor and cartoonist who was targeted and killed along with three other well-known cartoonists – a total of 12 were killed – it was self-prophesied. “Without freedom of speech we are dead,” he told the ABC news reporter after an attack on his office in 2011. The slain editor had notably stated, “I’d rather die than live like a rat,” and he died for what he believed in.
When children were attacked, heroes (like Malala Yousafzai) are born. When priests and parishes are gunned down, communities are united. When policemen and the men/women of duty were attacked, they became a part our conscious. Ironically for every innocent life taken by a mindless terrorist, something more profound and prolific is born. This time, the people around the world are saying, ‘We are not afraid!’ Because enough is enough! Killing in the name of God is cowardly and ignorant and should be retaliated only with courage and peace and that is what we need today and going forward. Have a safe weekend!

Issues to Watch on Climate Talks

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by David Waskow

After a week of preliminaries, climate change negotiations at COP 20 in Lima, Peru, have reached their mid-point and are moving into high gear. This week will be crucial as talks continue on a draft international climate agreement due to be concluded in Paris at the end of 2015. Here are three issues to watch as the climate meeting heads toward the finish line:
To Assess or Not to Assess?

Negotiators have yet to agree on whether to include in the agreement a process for assessing countries’ proposed climate actions, known as the Intended Nationally Determined Contributions or INDCs. Hanging in the balance is whether there will be an official UNFCCC process for countries and other stakeholders to ask questions about the ambition and fairness of country mitigation proposals and how much of a gap there is between the initial proposals and what’s needed to keep the average global temperature increase below the internationally agreed 2 degree C (3.6 degree F) target.

At the end of the first week, countries were divided on this issue — although not along the usual developed vs. developing country lines. Some strongly supported a rigorous and open assessment process. Others were resisting this approach. Effective assessment provisions would greatly strengthen the agreement. These could include expert workshops, provisions for public UNFCCC forums where countries could engage and respond to one another, and an online bulletin board where governments and civil society groups could comment on INDCs and countries respond.
$100 billion in Dedicated Climate Finance by 2020?

With pledges to the Green Climate Fund (GCF) nearing the initial target of $10 billion, there was welcome momentum on climate finance coming into the Lima talks. Additional pledges this week could push the total over the target, a symbolic milestone that could be welcomed in the decision document issued at the close of the conference. Needed now: ways to accelerate progress on the long-term goal of mobilizing $100 billion by 2020 as pledged at the 2009 Copenhagen climate summit.

Contributions to the GCF count towards the $100 billion, but a good share of the total funds will likely flow through from other channels. Ensuring that dedicated climate finance reaches at least $100 billion will require mobilizing a range of sources, including public funds, investments from national and multilateral development finance institutions and private finance. A high-level finance ministerial in Lima this week is an opportunity for finance ministers to commit to scale up these long-term investments and to agree to work with the UNFCCC and in fora such as the G7 and G20 to make rapid progress. While reaching the $100 billion target is an important prerequisite for an agreement at the Paris COP, addressing climate change will also require ways to ensure that all long-term investments, especially in infrastructure, are climate smart.
What About Adaptation?

Many developing countries continue to emphasize that adapting to climate impacts is as important in the agreement as cutting carbon pollution. These countries are discovering ways to pursue development goals and improve people’s lives, even in the face of climate change, and are asking for support. How to reflect and support these efforts within the agreement is a central question for the negotiations. One issue is whether countries will include contributions to adaptation efforts in their INDCs. Some countries insist this should be required, while others would like the agreement to be silent on this point, making such inclusion optional. A related issue is whether to include in the agreement a regular adaptation assessment cycle for countries to review whether adaptation efforts are achieving needed outcomes and decide on future actions.

One proposal would include in the 2015 agreement a qualitative, aspirational goal — such as all communities having the means to adapt to climate challenges — that would provide a context for periodically assessing adaptation efforts. While these issues do not need to be fully decided this week, it is important that options are included in the framework that emerges from Lima.

The three longstanding issues in the climate talks — mitigation, finance and adaptation — and the value of regular assessment cycles for each, are discussed in Elements and Ideas for a 2015 International Agreement, a blueprint for a 2015 climate agreement prepared by the WRI-led ACT 2015 consortium made up of climate policy experts at nine research organizations around the world. The chart below summarizes the proposal:

Global trade gets boost from US-India deal

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By Vicki Needham

The United States and India have reached a deal to streamline customs rules that could set up a global framework to move goods more efficiently across borders.

U.S. Trade Representative Michael Froman said Thursday that the two nations have hammered out the Trade Facilitation Agreement (TFA) following months of high-level meetings with Indian officials.

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“We have overcome that delay and now have agreement with India to move forward with full implementation,” Froman said.

The deal between the U.S. and India could give new momentum to efforts to reach a broader deal at the World Trade Organization.

India had led a small group of countries that objected to the WTO agreement, which was worked out at a WTO ministerial conference in Bali nearly a year ago. India and the other countries had worried the deal could lead to food shortages in their countries.

To that end, the talks also produced an understanding on food security, which will keep some WTO dispute settlement procedures in place until a permanent solution has been adopted.

The U.S. business community praised the deal.

Linda Dempsey, vice president of international economic affairs with the National Association of Manufacturers, called it “welcome news” and said the deal was “an unparalleled opportunity to boost global growth and commerce.”

Supporters say it could create 21 million jobs — the bulk of them in nations with developing economies — and produce $1 trillion in global economic activity.

President Obama and India’s Prime Minister Narendra Modi discussed the deal during Modi’s September trip to Washington.

Modi had argued that there needed to be considerations around food security issues, and those needed to move in parallel with the trade pact.

The agreement is also intended to show that the WTO itself can still function and perhaps give a boost to the long-delayed Doha talks launched in 2001.

Following the July collapse of the deal, the first multilateral trade agreement in the WTO’s history, Director-General Roberto Azevêdo had questioned the trade body’s effectiveness and suggested a review of how it operates.

Froman said that the agreement reaffirms the United States’ and India’s “joint commitment to the success and credibility of the WTO.”

Is the Indian economic giant finally waking up?

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By Desmond Lachman

Napoleon famously said that when China woke, the world would shudder. With Indian Prime Minister Narendra Modi visiting Washington, President Obama might be advised to consider whether the same might be said of India, the world’s most populous democracy. After many years of slumber, the Indian economy is at last showing signs of awakening. And with reform-minded Modi now at India’s helm, there is the very real prospect that India could emulate China’s impressive economic growth performance of the last two decades

Long after India gained independence in 1947, it was thought the country was condemned to so-called Hindu-style low economic growth of around 3 percent a year. However, following the progressive liberalization of the Indian economy initiated in 1992 by then-Finance Minister Manmohan Singh, India began to experience Chinese-style economic growth. In the years immediately preceding the 2008 global economic crisis, the Indian economy grew at annual rates of 8 percent to 9 percent, making it, along with China, among the world’s most dynamic economies.

Sadly, following the 2008 crisis, India’s economy lost momentum as a variety of its economic weaknesses was exposed by a more challenging global economic environment. Among those weaknesses was the deepening of corruption scandals around the National Congress Party, which had ruled India for almost all of its 70 years of independence, and an overbearing government bureaucracy that found itself increasingly tied down by red tape. Not helping matters was a prime minister’s office that became increasingly ineffective at coordinating policies among the different government ministries.

Fortunately for India, its economic prospects have brightened considerably with the landslide election in May 2014 of Modi’s Bharatiya Janata Party. Not only does Modi have a well-deserved reputation as an effective economic reformer in his native state of Gujarat, he also won the election on a pro-business reform agenda that promised to fundamentally shake up the Indian economy. If he manages to deliver on that agenda — especially in the areas of labor market reform, infrastructural investment and financial market reform — there is every reason to believe that the Indian economy’s best days lie ahead.

To be sure, Modi will face considerable challenges in trying to deliver on his mandate that will test his political abilities to the full. While he does have control of India’s lower house of parliament, he faces strong opposition in the upper house where elections are only scheduled to be held in 2016. At the same time, he faces a cumbersome bureaucracy that is very much set in its ways and that is no friend to basic economic reform.

From a U.S. perspective, India has several advantages over China that might favor its economy over the longer run and that warrant U.S. support. As the world’s largest democracy, India shares certain common values with the U.S and is not prone to the same political and social upheaval that China might eventually face. India also has a very much younger and more rapidly growing population than does China, which implies that it can sustain rapid economic growth for longer than can China. Also favoring India is the fact that it is starting from a very much lower base than China, which affords India with great opportunities of catching up with the world’s more advanced economies.

One has to hope that President Obama gives Prime Minister Modi’s economic reform efforts his whole-hearted support. For not only will a faster growing Indian economy that is opening up to international investment offer U.S. business great opportunities abroad, it will also help lift millions of Indians out of poverty and provide the U.S. with a potentially strong ally as a counterbalance to China’s foreign policy ambitions across the Asian continent.

(Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.)

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