By Simon Lazenbatt 

The crowd of young men and women on the dance-floor of the noisy restro-bar, one of many currently opening around the city, were enjoying a mix of local dance numbers and dated western hits. The scene can be observed in any liberal society in the world, except for one detail which typifies Mumbai. Among the bobbing Trendies, in the middle of the floor on hands and knees a slender, dark figure was mopping up spilled drinks with a cloth. The fashionably dressed middle class youngsters, seemingly oblivious to this ‘peon’, danced around and over him, aware perhaps instinctively that he would flinch out of their way, for he belongs to the great masses, and is almost invisible. The scene is revealing because in this society of entrenched inequality there is little sign that the emerging generation of decision makers is any more idealistic about creating an inclusive future for their fellow citizens than their predecessors were. For most young educated Indians challenging the status quo is restricted to deciding to change their brand of denim hipsters or hair gel.

The separation of the factions of Indian society is reinforced in popular culture. A television advert selling kitchen units uses cartoon characters to portray the typical Indian family happily singing about their labour saving convenient kitchen. The fair-skinned representative family members, stand at their modern counters, chopping, juggling food, eating and drinking while their dark-skinned house servant kneels on the floor polishing the gleaming units. The stereotypes may be interpreted as being tongue-in-cheek, even refreshingly politically incorrect, compared to the phony homogenous society represented in European and American advertising, but there is no irony here; they actually express utter complacency. Post-modernism has not caught on in India.

A friend recently attended a party given by a property developer where many of the attendees gossiped politely, and approvingly, of the developer’s recent outlay of 40 crores of rupees ($9m) for his daughter’s wedding celebration. The discussion centred on cost comparisons with other high profile weddings. No one even thought to challenge such profligacy in a city filled with human misery. Certainly, in Mumbai, there will be few who question the tastelessness of such conspicuous consumption.

Even seasoned travellers, familiar with grinding poverty from other parts of the globe on first visiting India will be disconcerted by the juxtaposition of wealth next to extreme privation. It is not just the existence of so many who are clearly living in squalor, as the fact that there is a shared perception amongst the middle class that this situation is somehow acceptable, or at best unavoidable. An adroit and wily local entrepreneur forcefully suggested that it is a patronising liberal misconception to assume that slum dwellers are any less happy than the middle classes; a neat example of eliminating the criticism by redefining the terms of reference. The sophistry of this argument is revealed by a cursory examination of the specifics of basic facilities available in the slums and the human toll measured in suicides, malnutrition and domestic violence.

Nevertheless in a less extreme form many of the middle class seem to believe that the situation is tolerable and one hears numerous explanations for the scenes of human wreckage subsisting by the roadside, ranging from the ravages of alcoholism to the ruse of renting out their apartments in order to take to a life of begging. Most, however, don’t even rationalise in this way – they just don’t notice any more.

India’s current growth is taken as a harbinger of a future as a superpower. Some even see India as providing a model for how democracy can work in a developing country and thus provide a lesson for the world. It is widely assumed that an increase in general prosperity will be achieved due to the economic growth that India currently enjoys. Surely if money is being made at the top of the economic pyramid a significant part will trickle down and alleviate the poverty at the bottom, goes the argument. But does India have the infrastructure to facilitate this assumed wealth dispersal? A comparison with China may be instructive here. According to Forbes magazine India currently can count 36 dollar billionaires compared to just 20 such individuals in China, despite the fact that the Indian economy is a third the size of China’s. Yet, at the other end of the spectrum, the Word Bank estimates 80% of Indians live on less than $2 per day, compared to 46% of Chinese.

Much of the hinterland of India’s cities is in dire straits. There are environmental issues amongst the worst in the world, not only associated with global warming, although that is certainly a factor, but also wholly locally produced (including pollution, water exhaustion and land degradation due to erosion). There is an agrarian crisis (manifested in a spate of suicides by farmers locked into intractable debt) currently leading to real food shortages. There is a health crisis not addressed by an under-funded healthcare system (notably the much overlooked Aids epidemic but also evidenced by a sharp increase in TB and malaria cases and the surge in the number of leprosy cases – India can now boast that it is home to 60% of the world’s lepers). There is widespread illiteracy.

Against this backdrop it is no surprise that there is an unending stream of migrant cheap labour available to the cities. Life in the urban slums may be grim but for many it is a step up from the deprivation of life in the rural areas. A glance at any construction site in Mumbai reveals how little plant and machinery is involved in construction of the new high-rise developments. Often it is more economical for the contractors to use human muscle-power to move all the construction materials rather than cranes and lifts. Child labour, despite regulations, is common.

The migrants also serve the domestic needs of the middle class. The bitter truth is that it suits many to keep the poor in their place. The average urban householder uses cheap labour for almost all day-to-day chores - I know a clean-shaven, middle-aged company driver who has never in his life shaved himself. He has somebody come to his house every morning to perform this basic task. In a myriad of ways the Indian middle class depend on others to perform tasks that in other countries (including much of China) are done by devices, or by the consumer himself. The nature of these tasks means that education of the masses is not a priority. It has been said that in the USA only the truly poor do not own a car. In India only the truly poor do not have a servant.

Current projections anticipate that the Indian population will increase by 60% over the next 40 years to around 1.7 billion. Unless there is the political will to address the root causes of poverty and to develop a workable financial plan to invest in developing the infrastructure there is no sign that this burgeoning population will be equipped to participate in the added value activities that will fuel real economic growth or to significantly improve their own prospects.

One reads frequently of the tensions in Chinese society caused by the unequal nature of the economic growth pattern and wealth distribution but, interestingly, perhaps because India has lived with this massive disparity for so long that it is considered the norm, there are few rumblings about a potential explosion in Indian society provoked by the Have-nots. Mumbai alone has some 10 million people living in slums (perhaps more, who knows?). I have often wondered how London, for example, would cope with that situation. Even if London had only 1% of Mumbai’s slum dwellers I suspect the city would be unworkable. The army would probably have to be mobilised to keep order. So, it is true that the Indian poor have been remarkably docile for a long time. The political landscape is composed of parties representing special interest groups that emphasis the religious and caste differences of their electoral blocks. Perhaps for this reason, and the failure of reaching a consensus, the social balance has not been upset but can it be imputed that this situation will persist?

In the 1960’s there were a rash of doom-laden predictions published as sober analysis in the West that India would disintegrate under the pressures of economic failure, religious divisions and corruption. Those predictions proved to be incorrect. The new paradigm is that India is an unstoppable superpower in the making. This belief has been eagerly and uncritically adopted in India. I would suggest that unless the middle class begins to care and make sacrifices in the interest of a common society these current predictions may also prove to be unfounded.

Beijing, China: The Capital Club, Music Room 

Registration 6:30pm; event starts at 7pm

Members RMB150, Guests RMB200 (includes a light Buffet and drinks).

Chris Devonshire-Ellis, Senior Partner of Dezan Shira & Associates, Publisher of China Briefing, India Briefing and the Chindia blog 2point6billion.com, has just returned meetings with various Ministers in both China and India. Meeting with Indian Prime Minister Dr. Manmohan Singh, Minister of Finance Mr. P. Chidambaram, and Minister of Commerce Kamal Nath, he has also recently met with Chinese Vice Minister of Commerce Liao Xiaoqi, and other senior officials at the MOC, State Administration of Tax, NRDC, Ministry of Finance, Customs and the Banking Regulatory Commission.

Accordingly he is in a unique position to describe the attitude of economic reform and development in both countries, comment on the similarities and differences between them, and draw conclusions as to the direction each country is headed and the opportunities and pitfalls that are present in both. 

RSVP by email to events@thecapitalclub.com or call 8486 2225 x263

This is the sixth in a series of entries Alfred Romann will post from India in the coming weeks.

Few cities in the world do extremes like Mumbai.

Home to one of the oldest stock exchanges in the world, started by a group of 22 traders under a Banyan tree more than a 150 years ago, Mumbai is a city of high flying finance.

It is also home to the largest urban slum in Asia, the residence of poor migrants and urban dwellers who haven’t yet read the news that India is undergoing an economic boom.

This is not much of a secret. Politicians and businesspeople know the wealth gap is there and they know that closing it will not be easy. Just look at China, where they’ve been working at it for almost 30 years and, despite remarkable progress, it remains an uphill battle.

Mumbai is to Shanghai what Delhi is to Beijing and the similarities between the two pairs are striking.

Both Delhi and Beijing are imposing cities, dusty and generally unwelcoming to the pedestrian. There is green, but it is found in concentrated spots between huge chunks of city. People in both are obsessed with politics.

Mumbai and Shanghai are, on the surface, nicer. They boast trees (well, in parts) and streets that can be walked. Both have cosmopolitan communities, top notch restaurants of every cuisine imaginable and, at least in their architecture, an obvious blend of local and European. (While Shanghai is home to buildings of French, English and Japanese design, the foreign flavor of Mumbai is purely that left behind by the British colonialists.)

The people also come in many varieties. In a single day, it is possible - in fact likely - to meet a fund manager looking to place US$100 million in Asia, a driver hoping to earn 500 rupees for the day (a little more than US$10), a Bollywood star or producer, a Japanese tourist and a street merchant selling juice.

Walk around the semi-circular Bombay Stock Exchange building in downtown Mumbai and the contrasts are even more apparent. Inside, billions are traded every day. Outside, homeless people look for a spot to lie down and sleep covered by old onion sacks.

With some luck and a lot of work, the spread of the world’s second fastest growing economy will reach them soon.

Having spent the past two weeks with senior leaders of both the Indian and Chinese Governments, (India: The PM, Minister of Finance and Minister of Commerce; China, similar but at Vice-Ministerial level) the obvious theme to embark upon are the similarities and differences between them. The problem is, I don’t know where to start. So lets begin with some observations. Firstly, Indias British problem. With meeting the Prime Minister and Finance Minister, the delegation I was with was lead by the Economist Group, with one of their senior editors from London, moderating. To be honest I found the chap unbearable in his condescension - ‘witty’ remarks about the Finance Ministers surname, not to mention an almost audible recoiling at having to talk to a ‘chap in a turban’ (The Prime Minister) seem to me to show that the British educated elite still have a long way to go in catching up with globalisation and the fact Empire ended 60 years ago. India I don’t think has a problem with Britain - it’s Britain has has a problem with India. You simply don’t make personal - not to mention somewhat stupid remarks like that unless you are very good friends and are in relaxed surroundings. England once used to be known for it’s adherence to civility and discipline. Now from Eton and Oxbridge we are churning out spoilt thugees whose insecurities delight in demeaning others. Note to the Economist: Even being a thug is an old Indian trade long ago discarded.

Regrettably I do tend to find the British somewhat intolerable and increasingly second rate in their expatriate professionalism these days. The nation is turning out second had car dealers masquerading as businessmen, as in the case of the Treasurer of Britcham in China not actually being registered with the Chinese authorities, and the development of little ‘cliques’ with the organisation. It’s shabby, and shows - in both countries, Britcham is somewhat ‘for the lads’, protectionist and insular. Britain, alas, is sadly becoming small, and small-minded. But enough of the disgruntlement. There are bigger fish to fry.

Much more impressive indeed were the Indians, and the Chinese. Where both differ from the Brits is the can-do, forward-thinking mentality - which both governments displayed in spades. India, with Sonia Gandhi as the essential power behind the throne, opted for Dr. Manmohan Singh to lead the country. An acclaimed economist, and with the support of of one India’s most senior legal counsel, Mr. P. Chidambaram as Minister of Finance, and another home grown economist, the charismatic Kamal Nath as Minister of Commerce, has, intriguingly, a team of professionals, rather than career politicians leading the nation. As Mrs, Gandhi deals with the diplomatic fall out from having to sew together the countries democracy, one can only imagine the behind the scenes wheeling and dealing that takes place on her behalf - leaving the triumvert of Singh, Chidambaram and Nath to get on with what they should be doing - leading the country forward. Capable ? Ethical ? Successful ? Well, as they say, time will tell, and for this observer at least, the current fiscal policies appear to make sense, are backed up by sound previous work, and have a large degree of transparency and pragmatism. I liked the gentlemen in power, and thats always a good thing when dealing with a democratic and forward thinking government. There is a humbleness about the Indian government, yet backed up with a steely resolve to get things right for their nation. It’s a heady brew. I wish them well - for I have a vested interest in doing so - but I do think they are on the right track. And as a believer in peace through trade, it’s great to see the Indians begin to play an increasing part in the global community.

As for the Chinese, well, business-like, and very focussed. Again, with a one-party state it can be simple to assume that with no opposition it’s easier than running a democracy. Somehow, with a country the size of China’s, I rather doubt that to be the case. But the Chinese are intent on moving up the value chain, and in the past seven years of meeting them at this level, never have I seen the various Ministeries so united in their policies. While Jiang Zemin and Zhu Rong Ji acted as salesmen to the West, Hu Jintao has the job of solidifiying their legacy, consolidating it and using the initial thrust of opening up to continue China’s development. Consequently, there are a lot of issues that need fixing internally, and this regime can appear as a result to be more inward-looking. To some commentators, that equates to a withdrawl from foreign investment policies. But I don’t buy this. China now needs to clean up some of the initial mess inevitably created by the first stages of reform, and wisely, is doing so. Three main problems exist for China: The spreading of wealth into the rural areas to kick start Chinese consumerism (and in so doing reduce the trade deficits it has with pretty much most of the world), the moving of Chinese commerce further up the value stream and away from low-cost manufacturing, and the curbing of energy intensive and polluting industries. In short, China is growing up. What impressed me was the unity these days behind these thoughts, and that to me equates to China being able to make this transition. This year, 2007, is a watershed year for the Chinese, with some events taking place that point the intention of the government and the way forward in it’s thinking. A little reported change was announced during last months National Peoples Congress. Property (land) can now be owned by individuals. That is a radical step away from Communism, and required a change in the Constitution to achieve. The implications, in strengthening the legal system and the democratic process to achieve this step, have far-ranging consequences, and while many in the West only look at how China treats foreign investors, the truths behind it’s evolution reside in how it treats it’s citizens. They can now own property for the first time since the founding of modern China, and that has to be a good thing. China remains open for business, and is forging ahead. It is also a country for it’s people.

So what of the changes ? India still is playing catch up, and while GDP figures continue to rise, it’s the darling of the investment media. The reality is that while there is a long way to go, and I believe that the Indians are on the right track, I can also see that the Indian economy will start to inherit some of the international investments that China is now moving away from. Low-cost manufacturing, energy inefficient and polluting industries,  if legislation is not in place to curb the worst of these, India will still achieve short-term growth, but with a price to pay later. I can imagine a scenario in 15-20 years where American congressmen are up in arms over Indias balance of trade deficit rather than China’s, and the US needs to accept that if it wants globalisation then it has to put up with some uncomfortable home truths. The US has to develop sustainable businesses too, and if it is the way of the world that a bushel of wheat costs less to grow in India to place on the world market, American farmers are going to have to develop new crops. Thank goodness for ethelyne.

So to summarize: Yes, both governments are on the right track and will continue to move ahead. These are significant developing countries and they will forge the way the next century looks and behaves. The US needs to adapt it’s economy, while the Brits need to get out of their shorts and into grown-up trousers when dealing with such markets.