A sizzling economy remakes India: shopping malls, technology, and Western-style consumerism are transforming the nation of Gandhi
Tarun Narula, a 25-year-old computer instructor, celebrated Mohandas K. Gandhi’s birthday on October 2 by going to the Metropolitan Mall. So did so many thousands of others that the parking lot was full, as were those of the other two malls across and down the street. Indian-made sport-utility vehicles, cars, and motorcycles fought for space, choking the roads of Gurgaon, a city south of India’s capital, New Delhi.
Inside the malls, young people in Reeboks sipped coffee at Barista Coffee, the Starbucks of India. They wandered through Indian department stores and stopped for snacks at McDonald’s and Subway. Moviegoers chose between Boom, a Bollywood (India’s Hollywood) film with a decidedly Western touch of vulgarity, and 2 Fast 2 Furious
This is no longer the India of Gandhi, who helped his nation (and Pakistan) win independence from Britain in 1947 and was famous for his simplicity and austerity. The change in values, habits, and options in India–not just from Gandhi’s day, but from a decade ago–is undeniable, and so is the sense of optimism about India’s economic prospects.
Much of India is still mired in poverty, but just over a decade after liberalizing its economy and opening to foreign trade and investment, India is booming. The surge is based on the strength of its industrial and agricultural sectors, rising Indian and foreign investment, and American-style consumer spending by a growing middle class, including those under age 25, who now make up half the country’s population. After growing 4.3 percent in 2002, India’s economy was expected to show close to 7 percent growth in 2003. Only China has been growing faster.
10,000 MOTORCYCLES A DAY
The growth of the past decade has put more money in the pockets of an expanding middle class, 250 million to 300 million strong in a country of 1 billion. India is now the world’s fastest growing telecom market, with more than a million new mobile phone subscriptions sold each month, indians are buying about 10,000 motorcycles a day, and the Bombay Stock Exchange recently hit a three-year high.
The potential for even more growth is enormous: In 2001, according to census figures, only 31.6 percent of India’s 192 million households had a television, and only 2.5 percent a car, jeep, or van.
After huffing and puffing in place for eight or nine years, “the train has left the station.” says C. K. Prahalad, a professor at the University of Michigan Business School, speaking of the Indian economy.
For decades after independence from Britain, the Indian government kept the economy on a tight leash; most industries were state owned, private investment was strictly regulated, and the government set prices on goods and commodities such as grain and cotton.
In 1991, things started to change. India began opening its economy by reducing red tape, lifting restrictions on foreign investment, and reforming its financial sector, including loosening the grip of state control. The changes are starting to show substantial results. India is making a name for itself not just for its software engineers and customer-service call centers, but also as an exporter of autos, auto parts, and motorcycles.
In some places, the economic transformation is startling. Look at prosperous cities like Gurgaon or Bangalore (where U.S. search engine Google plans to open a research facility this year), and you see an India that many Indians would not recognize. They are places where a young fashion designer like Swati Bhargava, 27, who works for a company that exports clothes to American and French retail chains, can buy stylish Indian clothes, eat at Pizza Hut, and contemplate the country mutating around her. “The culture is changing,” she says. “People are becoming more broad-minded.”
SHOPPING MALLS AND POVERTY
One sign of change is the proliferation of malls. India’s first opened in 1999, and its second in 2000, according to Harminder Sahni, 35, a management consultant in New Delhi. By the end of 2004, the country will have almost 150.
Of course, India’s problems have not disappeared. The deficits in basic services, particularly electric power and education, are staggering. Twenty-six percent of Indians still live in poverty, and data suggest inequality is widening even as the poverty rate falls.
The heavy dependence on agriculture, which still accounts for 25 percent of gross domestic product and 70 percent of employment, means that a bad monsoon–the seasonal wind that blows from the northern Indian Ocean–can hobble the economy if it brings too much rain, or not enough. Moreover, not everyone embraces change. Many bemoan the aping of Western culture at the expense of a much older Indian one.
Still, an acceleration of the transformation seems inevitable, in part because the young are the ones driving the booming consumer culture. Yogesh Samat, the chief executive of Barista, which was founded five years ago and now has 125 coffee bars across the country, says that before economic liberalization began in 1991, “there was a great deal of guilt associated with spending of any kind.” But today’s youth–those born in the 1980s–never experienced the shortages or constraints of a state-run economy, he says. “Consumerism as a term is no longer seen as a bad word,” Samat observes, “and the acquisition of material things is no longer seen as going against Indian traits.”
The young people at the Gurgaon malls would agree. Most of those interviewed there are employed, a change from the past, when jobs for college-age students were few. Most of them work in service industries, like hotels or advertising, that now constitute about half the economy. They tend to live at home with their parents, following indian tradition, so almost all of their income is disposable.
Narula, the computer instructor, earns $2,173 a year, more than four times India’s per capita income of about $480. Sahni, the management consultant, marvels how varied life is for young Indians today. “When I was a young person, nothing was happening–every day, life was the same,” he says.
A RACE WITH CHINA
No longer. A year ago, India was in a funk over China’s having surged ahead economically. Now, there is a cautious sense that over time, India could prove the turtle to China’s hare, thanks to its entrepreneurial spirit, its strong higher-education system, and its democracy.
Ratul Puri, the executive director of Moser Baer India, now the world’s third-largest producer of recordable media like DVDs and CDs, says his company recently built the world’s largest factory for those products in Noida, another New Delhi satellite city, in less than seven months.
“Pre-1991, it would have been impossible,” Puri says. “We would have spent six and a half months trying to get the license for construction.”
WORLD’S MOST POPULOUS COUNTRIES
China 1.29 billion
India 1.07 billion
U.S. 292 million
Indonesia 220 million
Brazil 176 million
RELATED ARTICLE: Say hi to ‘Boris’.
By David Rohde
Calling customer service? Making a reservation? You may wind up talking to an Indian at one of the country’s many new call centers.
Varun Sood, a short, boyish 20-year-old college student in Chandigarh, in northwest India, is one of the new faces of his country. Dressed in jeans, a stylish green shirt, and baseball cap, Sood talks cheerfully about making extra cash at what he sees as a hip and exciting job: working in one of the many call centers springing up across India. It’s a job that at times requires working all night, cold-calling people in the U.S.
“It’s good,” says Sood, who adopts an American accent and persona over the phone and uses the name “Boris” (after his favorite tennis player, Boris Becker). “You get to speak to a lot of people outside your country.”
He speaks English well, thanks to a strong local education system in Chandigarh that includes a leading university, engineering college, and medical school. Government officials and local entrepreneurs are trying to transform this sleepy farm-state capital into the “technology hub of northern India.” As tens of thousands of service jobs migrate from the U.S. and Europe, small cities like Chandigarh offer even lower labor costs than India’s “first tier” technology hubs–mini Silicon Valleys like Bangalore, Hyderabad, Bombay, and Gurgaon, outside New Delhi.
The new call centers are working hard to win U.S. business. In Bangalore, for example, workers are being instructed to watch reruns of Friends to acquaint themselves with U.S. cultural norms, business consultants say.
For now, Chandigarh has only about 2,000 jobs in call centers and back offices, and some critics call the work mind-numbing. But Vivek Atray, a 36-year-old electrical engineer, who is Chandigarh’s director of information technology, remains optimistic. “We hadn’t been known as high-technology center,” he says. “With this knowledge revolution, it’s been picking up.”
* Some states are considering legislation that would ban outsourcing of government-related jobs to low-cost countries like India. Would you support such a law? Should the market dictate where jobs should go?
* Why do you think that, while India’s economy is booming, millions of Indians still live in terrible poverty?
To help students understand how and why India’s economy is booming.
BACKGROUND: The article reports that India’s economy began to blossom about a decade following the lifting of protectionism and restrictions on foreign investment. Do students know what these terms mean?
Draw a large circle on the board and tell students to imagine that it represents a walled city of medieval times. Remind students that cities like these, though seemingly impregnable, were not insulated from the world beyond. But that, in essence, is what India tried to do when it “protected” itself against outside products and investment. The goal was self-sufficiency and resistance to foreign influence and values. But the result was economic stagnation.
OPENING THE DOOR: Ask students how opening up the country to foreign investment–McDonald’s and Google, for example–could help energize India’s economy. Explain that new industries create new products and services and these, in turn, help create jobs and money-making exports. (See the graph on p. TE 4.)
EDUCATION IS KEY: Students should understand that McDonald’s and malls are not magic bullets for any economy. Remind them that Narula’s income is more than four times that of India’s per capita income of $480. Narula and his middle-class counterparts can earn and spend as they do because they have the education that the new jobs demand.
WEB WATCH: For information on India’s economy, politics, and other economic and social data, go to the the Central Intelligence Agency Web site at www.cia.gov. Click on “Country List,” then scroll down to India.
FAST FACT: One reason for India’s booming economy is the thousands of U.S. jobs, most of them in computer software and call centers, that have moved to India in recent years. According to one survey, 10 percent of U.S. high-tech jobs will move to India by the end of 2004.
Upfront QUIZ 2
DIRECTIONS: Circle letter next to the best answer or fill in blank.
1. India’s economy is the second-fastest growing in the world, after that of
b the United States.
2. What do economic experts credit for the explosive growth in India’s economy?
a trade with the U.S.
b development aid from the U.N
c a relaxation of government controls and red tape
d immigration from the West
3. Booming economic growth over the last decade has put more money in the hands of the expanding class, including those under age 25.
4. In the days when the government controlled the economy, prices were set on such things as grain and which is key to India’s huge clothing industry.
5. Which of the following was a key factor in boosting India’s economy?
a rising oil prices
b increasing the interest rate on loans
c lifting restrictions on foreign investment
d restricting exports
6. In spite of its recent surge in industry and computer software, India is still a nation dependent on
c food processing.
7. Much of the spending that is driving the economy is being done by India’s young people, who work in service industries such as advertising. They can spend as much as they do because many follow tradition and live. (two words)
8. Some Indian workers at call centers are learning about American customs by watching reruns of
1. (a) China.
2. (c) a relaxation of government controls and red tape.
5. (c) opening up to foreign investment.
6. (d) agriculture.
7. at home.
Amy Waldman is the New Delhi bureau chief of The New York Times.
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