Trickle-down now a ripple effect

Trickle-down now a ripple effect
The New York Times

It has been a little more than a year since the government of Prime Minister Manmohan Singh came into power promising to embrace those excluded from the country's new economic prosperity.

While the impact of his government's efforts to help the poor - like increasing credit to the country's many farmers and pumping in money for infrastructure, especially in rural areas - will not show for another few years, experts say, the bounty from the expansion in manufacturing and services that has been putting money in the hands of millions of Indians is now noticeably trickling down.

"What is happening is amazing," said Joe Paul, the founder and chairman of the Uthsaha Society, a networking group that encourages slum dwellers in Bangalore to become financially independent. "It is a ripple effect."

For now, though, the ripple is largely an urban phenomenon, and seen mostly in the country's more developed regions. Elsewhere, especially in rural India, millions of poor people continue to eke out a living on less than $US1 ($1.35) a day.

"Though India's villages desperately want to join in the growth, the changes are not yet enough to wipe out social inequities," said Chiranjib Sen, an economics professor at the Indian Institute of Management, Bangalore, the country's premier business school.
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Still, where the new prosperity is percolating, it spans a broad spectrum and reflects much more than an isolated success story. A big catalyst is the construction boom in high-tech cities like Bangalore and Madras. Besides the demand for construction workers, workers at factories supplying the building materials, and drivers to transport those products, there is a demand for housekeepers, cooks and drivers to cater to the double-income families who live in the new residential complexes and high-rises. Caterers are needed to supply food to the office workers. Security guards are also in demand. Trained nurses are needed to tend to ageing parents of workers travelling overseas or living in other cities.

"The last few years of strong growth have facilitated poverty reduction, even though the fruits of growth were not distributed evenly," said Ping Chew, a sovereign credit analyst at Standard & Poor's in Singapore. "The middle-income group continues to be the biggest beneficiary and this will ensure that the benefits continue to pass on to the lower-income class."

Economists expect the source of the trickle to continue. After last year's 8.5 per cent growth, growth in the year ended in March 2005 was 6.9 per cent.

Though India's progress in poverty reduction can slow, a continuing study, Rethinking India's Future, by the Strategic Foresight Group, a research organisation based in Mumbai, has tracked upward mobility for an increasing number of Indians at all economic levels.

According to a recent update of the study, the top level, the country's so-called business-class economy - covering those who can afford things like air travel and internet connections - grew from 20 million Indians in mid-2002 to 24 million this year, or from 2 per cent of the population to 2.2 per cent.

The "bike economy", including those who own a motorised two-wheeler and a phone and can afford to travel by train, increased from 15per cent of the population to 16.8per cent, while the "bullock cart category", or those without even basic amenities and who can afford only to ride a cart pulled by a bull or go barefoot, had contracted 2 percentage points, to 81 per cent.

"Opportunities are expanding for the lower classes, whether vendors, domestic workers or garment factory workers," said Santosh Vaz, chairwoman of Janodaya, a Bangalore-based non-government organisation that helps place domestic help and factory workers. Ms Vaz has even been able to negotiate minimum wages of up to three times a worker's previous salary, and standard labour benefits, something unheard of for domestic labour even a few years ago.

Mr Paul, whose networking group is spread across several Bangalore slums, says housing is one of the best indicators of change, and in the last few years most of the ramshackle huts with plastic sheet roofs in Ejipura, Bangalore's biggest slum, have transformed into one-room concrete houses.

Televisions, refrigerators and mobile phones are high on the shopping lists of residents, and in many cases both husband and wife work "because they want to have that much more"