A doctor friend of mine was recently surprised by an announcement on one of the global medical research portals he visits regularly to update himself on the latest developments in medicine. He had free access to what is otherwise an expensive service because of the fact that he comes from a poor country. But he says the online version of the New England Journal of Medicine recently put up a notice that Indian readers would have to pay the full cost to access material on the site.
India, it explained, is no longer a poor country.
“Is that true?” he asked me. It is: India is no longer a poor country. This does not mean that there are no poor people in the country. You only need to look out of your car or bus window to see shocking amounts of poverty on display. There are still too many people in the country who cannot afford two square meals a day or who cannot put their children through school.
But average incomes are climbing very fast. In a report submitted on 12 July, the Prime Minister’s economic advisory council estimated that per capita income in 2007-08 is likely to be $1,021. It was $561 in 2003-04. The fact that the average Indian will be earning more than a thousand dollars a year means that India has moved into a different league globally. (These figures are for incomes at market exchange rates; those at purchasing power parity will be much higher.)
The World Bank defines a low-income economy as one where average incomes are less than $905. A lower middle-income economy has average incomes of between $906 and $3,595. Going by what the Prime Minister’s advisers expect this year, India can now be defined as a lower middle-income country. However, the World Bank website still defines us as a low-income economy, one of the 53 in this group. There are 55 lower middle-income countries, including China.
At current rates of economic growth and stable exchange rates, it will take around 10 years for India to double average incomes. That means that India will need another two decades of such growth to jump through the next hoop and into the higher middle-income club. All this was unthinkable even five years ago, and ample proof that high growth and low inflation are far more effective antidotes against poverty than the populist programmes served up by politicians.
Meanwhile, there seem to be some initial global ramifications of this change. An agency story at the end of July said that the US is likely to cut aid to India by 35% in 2008. The reason: The US government now defines India as a “transforming” country rather than a “developing” one. “India is now taking a different place on the global stage, in terms of diplomacy, politics and economy. Aid programmes had not caught up with these evolving realities,” a US state department spokesman told The Washington Post.
Even multilateral lenders such as the World Bank and the Asian Development Bank will have to figure out what they will do, say, 10 years from now once India and China, the two largest recipients of loans, move further up the development ladder. In fact, China is already an aggressive lender to many African countries, in a marriage of economics and diplomacy. Besides, the Indian government will have to take a hard look at the various “poverty alleviation” strategies and programmes that were designed for an economy that was moving ahead at a tortoise trot.
Perhaps the most interesting thing to watch out for is how well India and its government adjust to the strategic challenges of being a middle-income nation. What role will a post-poverty India play on the global stage? Will it still continue to be bogged down in beggar-bowl diplomacy? Will it use the nation’s growing economic clout as an excuse for belligerence, as a booming China and an oil-rich Russia are busy doing right now? Or will it try to go back to the old Nehruvian approach and try to capture the moral high ground?
It’s hard to tell right now. But there are signs that India has started taking its global role more seriously, rather than only being obsessed with regional concerns like the threat from Pakistan. It perhaps started in a small way when India lent capital to the International Monetary Fund (IMF) in 2003, just 12 years after IMF had bailed it out from its worst-ever economic crisis. And we have seen how seriously India’s negotiating strategy is to further progress in the Doha Round of global trade talks.
Then there are the emerging global challenges that could be so important in the new century—climate change, global financial stability and water availability, for example. Each, it seems, will need global responses. Traditionally, it has been the rich countries that have taken the lead in responding to such global challenges. These are the opportunities that India can, and should, grab to make its mark on the global stage.
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