Peter Passell
Editor, The Milken Institute Review; Senior Fellow
California and Capital Markets and Europe and Finance and Global Economy and Labor and Public Policy and U.S. Economy
Peter Passell is editor of The Milken Institute Review, the Institute's economic quarterly. A senior fellow, Passell joined the Institute after eight years as economics columnist for the news department of The New York Times. He previously served on the Times' editorial board and was an assistant professor at Columbia...
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What price Indian growth?

By: Peter Passell
November 10, 2010

While President Obama’s visit probably won’t alter U.S. relations with India much (and certainly didn’t cost $200 million a day), it does provide a handy excuse to look closely at India’s economic miracle.

Everybody knows that India is coming into its own -- without emulating the top-down Chinese model based on export incentives, artificially cheap capital and distorted, bizarrely high rates of savings. But, as in China, there are rumblings that economic success is coming at the price of growing divisions in society, as underscored by the ostentatious displays of the newly rich cheek by jowl with great poverty. Hence the value of the U.N.’s index of human development (as opposed to economic growth), which is sliced and diced in great detail on the Human Development Report’s jazzy new website.

In broad terms, the U.N. numbers show that India has a very long way to go. It ranks 119th out of 169 countries in development (China = 89th). And some of the component statistics are truly sobering. Life expectancy at birth is just 63 years (China = 73), while the percentage of Indian children who die before age 5 is more than three times higher than in China. Still typically married off young, India’s teenage girls have seven times as many babies as their Chinese counterparts. And then there’s education: On average, today’s Indian adults left school after four years vs. seven years in China.

But look again and you can catch a glimmer of the promise of a kinder, gentler path to development. Income inequality (as measured by what statisticians call the Gini coefficient) is considerably lower in India than in China, the Philippines and pretty much everywhere in Africa and Latin America. While income per person is still less than half that of China, household consumption is only about 20 percent less. Consider, too, that India is spending one-third more (as a percentage of GDP) on education than China.

A big question is whether economic growth will further erode India’s egalitarian ethos (an ethos, admittedly, that led to economic stagnation for much of the country’s post-colonial history). But maybe, just maybe, India can have it both ways, maintaining its growth momentum without accepting the levels of collateral damage to people and places that dog China.



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