India's economy:

Feeling rich, looking poor

Is India poor? To western eyes, unaccustomed to ragged children begging and handless stumps knocking at car windows, the answer is obvious. To many Indians even the question appears absurd and insulting.

Instead of focusing on the abounding poverty, the country appears entranced by newspaper headlines that speak of record stock market highs, record mobile phone sales and record car production figures.

Little wonder that one columnist was outraged that a guest on Oprah had described Delhi as "one of the poorest places on the earth" after a visit to a slum.

But the celebrity, not the irate columnist, was right. The per capita income in Delhi is about 54,000 Indian rupees or roughly o650. Although this is more than double the national average, it is no fortune.

Even worse can be found in the reports of the world's financial institutions. In the latest World Bank review on India you can read that on average only half the teaching staff at government schools bother to turn up every day. In Delhi, the nation's capital, doctors in state-run surgeries are less qualified than their counterparts in Tanzania.

What is worrying is the defensive response to the blindingly obvious. When the UN pointed out earlier this month that two-thirds of India has no access to sanitation and more than 1,000 people a day die of diarrhoea in the country, putting India a dismal 126th in the world's 177 nations in terms of human development, the minister of water resources questioned why should India be compared to any other nation.

The Indian government is aware of the problem of perverse water subsidies that skew benefits to the rich and not the poor and the fact sewage is not adequately separated from drinking water. Yet the minister did not see these concerns as fit for public debate.

There is no doubt that India's boom is more than just froth. Travelling around the country there are plenty of signs that wealth is trickling down.

Bigger cars, electronic shops and smooth, wide roads are all signs of a spending spree of the kind never seen before in modern India.

The biggest companies talk of hiring 40,000 people in a year; Tata's software arm will probably take on more people than any other company in the world. Investments by the private sector in new projects rose by 60% last year.

Surjit Bhalla, a noted economist with an eye for publicity, has claimed that India is approaching a Chinese-sized spurt, with the economy heading for 10% growth. Dr Bhalla, who in person is charming and chatty, has little patience for detractors. "Pathetically uninformed Communist types" is one of his more printable expressions to describe naysayers.

Growth is a good thing. Pauperising a country means there's no money for education and health. But there are worrying signs that India's frenzied burst of economic growth is not all good news.

While incomes are going up, public cash is not percolating downwards. A large part of the reason is the government, which cannot seem to funnel wealth generation into human development.

The state incapacitation is shown in the erosion of the government's ability to deliver public services such as public safety, education and health.

Little wonder that India has thriving private security firms, schools and hospitals.

The private sector has become a coping mechanism for crumbling public services. Walled-off suburbs hire private cops to do the job of local police who are too corrupt to stop crime.

Students cram into private colleges to get into university while poor children passing through government schools cannot read or write. Foreigners jet in for tummy tucks and heart bypasses as public hospitals run out of blood and beds.

The problem of this secession from society is not a cultural one to be talked away by references to Indian exceptionalism. The indexes of government performance should show improvement during bouts of economic prosperity, not decline.

But the UN shows human development in India slowing during the reform years from 1990 to 2004. During the same period in China, with an economy twice the size of India's, the same figures improved marginally. Perhaps this fact has been obscured by the zooming stock market, which will this year ensure that India has more billionaires than China.

For Indians there are greater opportunities to become rich. There are dazzling new heights to scale, such as sending an Indian into space. But the country's rise will not also lift its people out of poverty unless there is serious reform of the way government acts and thinks. To believe otherwise is to encourage a smugness and conceit that the country cannot afford.

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