India, China, the US, and Trickle Down Growth

I know what you're thinking: Reaganomics...uggh. But just hear me out. Ask almost any slum dweller or villager in India, and they will confidently tell you that the IT boom and growth in India over the past 10 years has had no marked impact on their lives, except to raise prices. I think they're wrong on the first point - they just haven't noticed (or perhaps the 10 year horizon I gave them wasn't long enough).

To be sure, the slum parents I've spoken with aren't being recruited for call centers en masse. Heck, most of them have little to no education. However, every morning at 8:00am, women in colorful sarees flood into the gated community of one of my translators Manish, who works for an Indian firm that creates software for HP. His roommates create software for T-Mobile and Verizon. The women, who live in nearby pockets of slums, come to homes like Manish's to wash dishes, clean the bathroom, or look after the children.

Meanwhile, the added income allows their children to go to school. One man I met in a Mumbai slum was earning $140 per month for his family of four as a driver for a German company - the 7%+ annual growth and able workforce had obviously been part of the attraction to come to India. The income was enough to put his children in a private school, and the older son was speaking decent English in only grade 5. The father could only speak Hindi, but I could communicate mostly directly with the son. For India, like this family, it's one step at a time, and most people seem confident that their children will have a better life than they.

India needs to grow its knowledge and service sectors such as IT and cinema/media (e.g. Bollywood), which have the potential to employ many more people than the capital-intensive industrial revolution the country never had, but still seems to want. It might be okay for India to skip over Big Industry and focus on its knowledge and service sectors. In doing so, India would focus on growing its middle class, which even at the turn of the century was still less than 20% of the population. To focus on the middle class, as Gucharan Das puts it in India Unbound, "is to focus on prosperity, unlike in the past, when our focus has been on redistributing poverty." This doesn't mean you ignore the poor. Exactly the opposite: the primary purpose of the pro-business, pro-growth policies is to lift the poor into the middle class. Once the middle class expands, the country will have greater resources to work on a smaller group of poor people.

China and the US figure largely into this equation, but relations could be better. Indians think Obama is giving the nod to China, especially after his visit to Beijing and the joint statement that the two countries "would work together to promote peace, stability and development" in South Asia. This seems like a slap in the face to the democratic and English-speaking India, especially considering that China supports India's arch rival Pakistan, among other nefarious practices. To be sure, the fact that China holds over $800 billion in US debt has something to do with it, but to put it plainly, China is also the stronger country and better positioned for the future as of now. Just from my experience in the countries, China seems 10 or so years ahead of India.

India, China, and the US all need each other. Indians like Manjit, who works for Infosys and who I met on a flight from Kunming to Calcutta after he had finished up consulting for a Chinese company, need the other two countries as markets for its IT and BPO (business process outsourcing) sectors. Chinese like Zhuo Ma at Mei Xiang Yak Cheese need Americans to buy Western products like its cheese that are not yet suitable for the domestic population, or various goods in our Wal-Marts. You and I need these countries to buy our airplanes, drive our Fords and GMs (which are "cool" in India and China), or in the case of China, to finance our spending. For each of these countries I'm only providing half of the equation, but you get the idea. If we can grow together instead of bickering we might just be able to improve the lot of all three of our nations' poor, especially the enormous population in India. I'd love to hear your comments or criticism.