Mr Luthra, the shopkeeper in my local market who sells me ancient imported cheese, packets of sliced salami and a variety of other once-scarce western delicacies that he produces like some kind of illicit contraband from a fridge buried in the back of his store, has views on many subjects.Oddly, the new measure brought in by the Indian government last week to allow foreign supermarket chains to sell directly to customers rather than retailers such as him is not among them. Though he is one of the millions of small businessmen who critics of the new measure say are likely to lose their livelihoods, Mr Luthra is unconcerned, even when told Walmart has said it hopes to open a store in India within a year to 18 months.
“I have been here 30 years. I know everybody. They know me. How can some American compete with that?” he asks.
Fly into Delhi and you’ll arrive at the international airport’s new terminal building, opened in 2010. It is a vast sprawl of glass, steel and orange carpets, and it is busy 24/7. It is a concrete – in every sense of the word – manifestation of what 20 years of sustained economic growth can produce. Since a package of reforms designed largely by the then finance minister Manmohan Singh was implemented in the early 90s, India – or rather, some Indians – have enjoyed the effects of an economy expanding by up to 9% each year. The amount that has trickled down to the most needy may have been derisory, but that huge sums of cash have been created is undeniable. A recent report from the Indian National Council of Applied Economic Research quoted in the local Hindustan Times said that the famous “Indian middle class” grew from 2.7% of the population in 1995-96 to nearly 13% today.
Leave the airport and within a few minutes you will have really entered India. The roads are chaotic, clogged and pitted, a new tunnel ends beside a shanty town and the new Metro link to the airport is broken. All the gaps in India’s growth story – so often ignored in the west and elsewhere – are glaringly obvious. The most recent batch of Indian reforms, introduced by the very same Manmohan Singh, now prime minister, is inspired by the fear that these holes will swallow all the progress of the past decade if drastic action is not taken soon.
Whether they are implemented could determine if India’s growth picks up again, whether it continues to flatline or whether it continues to slow, with India set back several decades in shortish order.
Up in South Block, part of the monumental red sandstone complex designed by the British to house their administrative staff in the centre of what they called New Delhi, close aides explain that Singh’s sudden courage stems neither from fears of further loss of confidence in international markets, nor from concern over his “legacy”, but from victory in an internal battle within his own party.
The ruling Congress party has long been split between those favouring economic policies that owe much to the decades of socialist-style central planning and those looking to boost private-sector growth and foreign investment and cut back state spending. But first came a change in finance minister and then the party president Sonia Gandhi was convinced by Singh that unless some money was generated soon, the various big dole schemes she believes are essential to improving the lot of India’s poor (and her party’s electoral chances) could not be funded.
“It’s understood now that without money there is no welfare,” an aide to the prime minister says. “There are many more [reforms] to come.”
This is a huge shift, in a country that is home to around a fifth of the world’s population. But the problem is that the most recent reforms, though impressive in the context, are less so in the grand economic scheme of things. They may bring in a little more investment and reassure the markets, but they won’t tackle the real fundamental bottlenecks that are stifling growth – runaway public expenditure or the soaring inflation that punishes the poor most. For this, lots of new legislation is needed. Even the PM’s loyal aide, particularly as last week’s announcements cost the government a coalition partner, admits that new laws are impossible.
The result then is that India, at least until the next election in 2014 and almost certainly beyond, will not see the deep reform needed to return to high growth. It will putter on at 6% at best. A lot by current western standards, but economists here say it is only just about enough to meet the current needs of the growing population.
Outside the prime minister’s office, the sun is slanting across the stupendous vista down towards the India Gate. It is the first evening that is cool enough to convince me that the brutal summer is once more over. Children play, exhausted labourers sleep under trees, couples are strolling on the thick, monsoon rain-watered grass and the sellers of street snacks are doing brisk business. Like Mr Luthra, no one seems very worried about the imminent arrival of Walmart.
This article originally appeared on guardian.co.uk
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