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Growing middle class is - the real story
There will always be rich people and poor. but as Aristotle once said, a good society is one where the middle class outnumbers everyone else. Yes, India has its share of billionaires, and, according to the government, a quarter of its people live on less than $1 a day. But the most striking characteristic of today's India is the explosive growth in its middle class.
For the past 23 years India's GDP has grown at an average annual rate of 6%, making it one of the fastest-growing economies in the world. The growth rate may have been lower than that of China's, but it is double that achieved by the West during the Industrial Revolution. As a result, India's middle class has more than tripled in size to 250 million people. While the number of rich has certainly grown, about 1% of the poor have crossed the poverty line each year. Pervasive upward mobility may help explain why India is reasonably free of social resentment.
In 1947, when India became independent, the nation's wealth resided with the landed gentry—the zamindars—who lorded it over impoverished peasants. Sure, there were a few trading and industrial families, too—some of them had supported Mahatma Gandhi. After independence, the new government took over the princely states and abolished the zamindari. The industrial families thought their time had come, but their hopes were short-lived. Nehru's socialist government shackled them with stifling controls, and tax rates became extortionate. So wealth did not shift from zamindars to the business class, as it could have done, but went instead to finance state enterprises.
After the reforms of 1991, moneymaking became respectable again, and the old business houses acquired the esteem that had eluded them. But they had been so emasculated by the socialist controls that they didn't know how to respond to the new competitive climate. Some older business leaders began to clamor for protection; some simply died off. But a new group of millionaires took their place. They were professionals, who had made their fortunes in information technology and the knowledge economy, and they reflected a new social contract whereby talent, hard work and managerial skill have replaced inherited wealth. Men like Azim Premji of Wipro and Narayana Murthy of Infosys are "secular ascetics," who live frugally and engage in philanthropy. So for the first time in modern India, the rich are looked up to with pride and reverence.
In the past, Indians did not accord a high place to making money. Traditionally, the merchant was placed third in the four-caste hierarchy. But since the economic reforms, making money has become increasingly respectable and India is in the midst of a social revolution rivaled, perhaps, only by the ascent of Japan's merchant class after the Meiji Restoration. Many of those associated with the old economy have also done well of late. But India Inc. is no longer run by a handful of families. For decades, socialist policies suppressed economic growth and middle-class opportunities. Yet if the present rate of growth continues, India should reach Aristotle's ideal by 2025, when the middle class will be 50% of the population. Middle-class mobility and new meritocratic wealth have made inequality more acceptable. In India today, the rich no longer excite envy but hope and aspiration.
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