India has a hole where its middle class should be
economist.com
economist.com
I have seen Domnios in a tier 3 city. The opening night had a huge crowd and continued to do so for next 6 months. Then the novelty wore off. Now there are barely 4-5 people even on a weekend night. People fail to see the point of a "costly" pizza when 2-3 meals can be had for same price. But, if there is a grand occasion like birthday, anniversaries people still land up there.
But I think with new generation, this culture is changing slowly.
To put this in perspective, a meal at McDonalds is affordable to most, if not all Americans. But the cheapest meal at a fast food joint (outside of a roadside stall) is affordable only to a minority.
I have loved this option, when I've visited places that have it. Much better than "McDonalds", every time. Life in USA is poorer because we don't have this.
Well, most of them did. This is the most literal example of 'survivor bias' imaginable. Look up 'sausage disease', to just name one.
EDIT: this line of thinking is similar to people saying 'let children roam free, most abductions are done by people the victims know anyway!' or the anti-vaxxer 'why vaccinate when measles is so uncommon!'. Well yes, all of those things are the way they are exactly because of the thing those people are railing against.
Your EDIT undercuts your argument completely, because it makes clear your utter innumeracy. Abduction is not a thing that USA parents should worry about. Automobile accidents? Childhood obesity? Absolutely they should worry about those, but you don't care because automobiles and lack of physical activity are integral to your comfortable suburban lifestyle.
In my experience, most people eat most of their meals at home, and lunch is the most likely meal to be eaten out. But some people eat out all the time. For most of my 20s I went out for lunch every day. Now I do so once a month or so on average.
My point still hold though. Indians still have a value oriented view to buying. Something is not bought just because you fancy it.But I think this is changing slowly. New generation is much more willing to spend for fun.
That is entirely opposite to my experience. I’m genuinely struggling to understand how you’ve drawn that conclusion.
What? Not at all. Maybe in your country, it is.
to avoid mediocre meals work you way up the difficulty chain and make sure to adhere to recipes. the number one way to make a mediocre meal is lack of preparation and the second is to short cut a recipe.
plus when you get the hand of it you can make larger meals and freeze/store what you don't eat then so you have something tasty all week long
There is a class of American recipes, designed for a mythical 1960s housewife, that amount to little more than dumping various factory-manufactured prepared goods together. Ignore those altogether. Although the meal might be edible, it won't improve your cooking.
Though, if you actually plan your menu, or plan dishes that can carry over to two or three nights, cooking is far cheaper.
True, but most people will probably cook maybe two to three dishes and make them last a week. Even then, you may spend about $30 for the entire week on materials. If you ate a typical fast food combo once a day instead, you're looking at roughly $50 per week.
This is meaningless; what's being compared? Yes, buying and cooking a prime filet is going to be more expensive than hitting up Wendy's, is that unexpected?
While it might seem like there is a steep learning curve to cooking, there isn't.
There you go. No need to buy any more cookbooks.
What the hell? Buy some meat, vegetables. Chop them. Chuck in some soy sauce, garlic and ginger.
Don't like East Asian? Grab that red curry paste that lasts for weeks in the fridge and a can of coconut milk... Buy some meat and vegetables and chuck it in a saucepan. Boil some rice.
Don't like Thai? Buy some meat and vegetables. Chuck them in a saucepan with garlic and some herbs. Boil some pasta.
Don't like Mediterranean? Buy some meat and vegetables. Chuck them in a saucepan with incredible amounts of paprika and some potatoes.
Don't like Hungarian? OK. I'm being slightly flippant but it's really not hard. You get a few basic combinations and you vary them. A few flavourings, sauces or spices and the same basic principles will get you a good meal in 30-45 minutes whatever your preferences are.
I sometimes buy premade sauces (which are usually mediocre but give you a good base) and then add some fresh garlic, chilli etc to make it taste less shop-bought. Just make sure you always have a few staples in (rice, pasta, noodles, garlic, chilli, onion, ginger, soy, canned tomatoes - that kind of thing) and grab some meat and veg in your local shop. You can always knock something together.
$4 of green beans + onions + vinegar and I've got a meal for 2 at less than what it'd cost for a single rib eye at a restaurant.
Value your time? Learn to use a pressure cooker, or slow cooker. Once you get good at prep work, it is 10-15 minutes to prepare all the ingredients and put them into a pot. I've spent that long finding parking in DT areas of major cities, not to mention waiting in line at a restaurant just to get a seat.
I moved to Western Europe and was shocked how much less people eat out in France/Germany/Netherlands/Belgium.
In addition to this sedentary is the another default choice of us Indians.
There's almost certainly a substantial genetic component. Punjabi Sikhs have a high rate of type 2 diabetes, despite below-average rates of obesity and tobacco and alcohol use. GWAS data suggests that most ethnic groups in India have an elevated genetic risk of type 2 diabetes.
While these are commonly found in some major cities in India, all of the items you mentioned are limited to specific regions of the country and few are traditionally Indian. I'm not trying to be pedantic, but I think it's important to keep in mind the timeline of these foods in India when considering recent trends in health.
"Traditional" is a debatable term, but India has a far longer history of using sugar than the west. Jaggery and molasses are praised as health foods in Ayurveda, which isn't exactly helpful when you're dealing with a diabetes epidemic.
I agree with this including your broader point. The process of refining sugar was apparently developed in India, which (in hindsight) didn't set a great precedent.
However, I would emphasize that Western fast food culture is partially responsible for the problems today. The combination of glorifying Western (usually American, courtesy of media and entertainment) values along with the availability of these items inherently brings many of the advances and dangers from these countries to India. Most would agree that there is a fast-food "problem" among various communities in the US, and anecdotally, it seems like related problems are emerging in certain communities in India as well. Granted, India also has a rich history of more traditional fast, cheap, and easily available street food, which seems to be the closest competitor to Western fast food. It is likely that both have contributed to the current condition, though I wonder if the promotion of Western fast food has contributed to a rise in Indian street food consumption as well.
I remember getting incredible Banh Mis in Vietnam for 15-20k dong (less than $1).
I first came across them in Eastern Europe, and they’re amazing. Home cooked meal fast for less than it costs to make it yourself.
Kinda like the ikea cafeteria but with better food.
Apparently there were dozens of milk bars in San Francisco generations ago
But don't they also have cooks who make elaborate meals for them?
I grew up solidly middle class and we never went out to eat besides occasional fast food if we were on a roadtrip, I wasn't even allowed to purchase school lunches. However, I had a stay at home mom that cooked everything!
Now, that I am an adult none of my friends that I would call "middle class" have a spouse that stays at home. Only those families that are very well-off have 1 adult that doesn't have to work and they tend to be rich enough that cooking most meals vs. going out doesn't matter much for them.
I think this is a case where "middle class" can mean a million different things. I don't think someone is colloquially middle class if they can't afford the crappiest house within 2 hours of their office (slight exceptions for major cities), yet others define it differently.
I don't want to overthink this but some of the value in "eating in" sometimes feels like taking advantage of the fact that there's usually a woman at home whose 'job' it is to cook.
> > In West eating out is the default choice
Huh? if you're fresh out of school, maybe. Certainly not in families.
> > even those who can't afford it will choose to eat out
How does that even work? Anyone piling on debt to eat is, well, seriously lacking in financial planning.
Any thoughts?
Yes. My thought is that when one is planning for others to live a certain way to benefit society, that telling them to go into debt to benefit society may work over the long term over a large population. However, this only "works" if you treat people as interchangeable numbers, and if too many of the people deviate from your plan, the debt driven society will stop working as planned.
However, when one runs their own budget which needs to last through the ups and down, and presumably get one into a better place than they started, saving or investing is better than going into debt.
Just because there are multiple books advocating you spend your money ... well - the old adage is, "Don't believe everything you read."
Agree very much!
> However, when one runs their own budget which needs to last through the ups and down, and presumably get one into a better place than they started, saving or investing is better than going into debt.
I think I should have clarified, I'm talking from a Macroeconomic perspective, when spending boosts economies and saving could lead to devastating deflation. But, on a Microeconomic perspective, totally agree with you.
> Just because there are multiple books advocating you spend your money ... well - the old adage is, "Don't believe everything you read."
Thank you sir for reminding me :)
I'm not arguing that expensive spending per se will improve living standards, but they do tend to boost markets, create new markets, improve the standard of living etc. Debt is one such expensive spending
What will do what you seem to want is buying from the 'road-side chai stalls' you say are dangerous?? Which is a pretty strange claim to make but I can almost see where you're coming from
That said, I'm not saying Starbucks is making us better. But a chai chain, nutritious chai stalls, is long pending for India. It's not dangerous, but we are better off choosing the expensive chai in the long run, in my opinion.
What about the fact that most Indians are lactose intolerant?
You are better off opting the expensive coffee with the alternative options for lactose intolerant people (soy milk etc.) when compared to buying milk from the road-side stalls (right?)
I have been having coffee almost daily for the past three years and I see a significant improvement in my bones and joints. I can feel it and pointed out by the doctor. Note, I take the coffee with whole milk and not the half-and-half or other kind.
So I would guess it does affect in the long run? Personally it did for me. Not sure at a Macro level.
I can't believe you are serious, you cannot just make such wild claims without any evidence.
Why don't you do an experiment, cut coffee from your diet while keeping your rest of the diet same with moderate exercise. I guarantee you there wont be any significant degradation in your bones.
Ping me in three years.
Also, cooking at home doesn’t really make sense from an economic standpoint when you think about it.[1] Like everything else, cooking has economies of scale and specialization, so it’s cheaper to cook for many families at once. It only seems cheaper because we don’t account for the labor and opportunity cost of the (usually) women who stay home to cook the meals.
[1] Assuming you don't assign an intrinsic positive value to the time spent cooking or getting a home-cooked meal. That may be true for many people, but then you're talking about how people relatively value their free time versus time spent cooking, which is a different issue.
I think E. F. Schumacher nailed it in his "Small is beautiful" and other works on how this reductionist view of analyzing behaviors/practices in terms of their to economic utility alone is the demon behind various problems of modernity
But eating out also causes negative externalities because the incentives between restaurant and food consumer aren't properly aligned.
Restaurants have every incentive to offer cheap, unhealthy, but more addictive foods because the resulting health issues are externalized towards the buyer and to the rest of society.
It's this incentive structure that gives rise to Supersized sodas, unlimited breadsticks at Olive Garden, etc.
One way to look at it is that the industrialization of food production (including cooking) is better at moving atoms around and making whatever people choose to eat cheaper, but worse at managing the bits of information that help people make wise decisions on what they actually should be eating.
It's also harder to verify that you got what you paid for -- my family used to go to the market every weekend to stock up, and you become intimately familiar with what's in season, what is fresh, and what tastes good, but it's easy for a restaurant to buy cut-rate produce and then dress it up with seasoning and technique.
> cooking has economies of scale and specialization, so it’s cheaper to cook for many families at once
I'll try to add a little more value to the conversation - there are a lot of hidden costs in cooking at home. A kitchen could take up valuable real estate that is significantly underutilized compared to a commercial kitchen. A personal kitchen also has maintenance costs on top of cooking and cleaning each meal.
I do acknowledge a lot of value - you get to cook exactly what you want, how you want, when you want. For many, cooking itself is valuable (and not a loss of time) because it is enjoyable.
Another excellent example of why I've stopped listening to arguments of the form "X needs to be regulated because it produces such-and-such externality".
"Externalities" aren't just things you as an observer don't like. A negative effect on the buyer can never be an externality.
Some food I cook has to be prepared fresh. This becomes a last mile problem, where to have someone else do it they must either already be in my home or travel to it when I want food. There is still a travel problem if we instead say that I have to go somewhere else to eat.
I do cook some food ahead of time (lunch, for example) which would be more feasible. But I still have some problems with this. One of which is customization -- allergies, food preferences etc are numerous and present infinite combinations. That kind of customization eats into economies of scale rapidly.
Freshness is still a problem here -- say you can make food for the next week ahead, but that still basically means the travel/shipping time from the point of 'manufacture' is limited to a few hours at best if refrigerated.
Another problem is it becomes much harder for me to verify what was put in the food. There are strong incentives for a third party to put preservatives, sugar and salt, or cheap substitute ingredients that I don't want. You can work to regulate something like that, but it's expensive to police products with such a short life span.
Maybe no one has tried hard enough to solve this yet, or there are big cultural obstacles, but I'm not convinced that there really are economies of scale here, even if you account for unpaid labour.
These are real economic costs to outsourcing food making. I would love to outsource it, but there just isn't a cost effective way of doing it. I suspect that if the economies of scale here were real someone would already be doing it on a large scale and making a lot of money.
Cooking is the same thing. I could almost certainly earn an extra $15 each night driving Uber for an hour, instead of going home to my family. The fact that I don't do that puts a lower bound of $15 on how much I value that hour. If I'm forced to do some chore during that hour instead, like cooking or cleaning dishes, you have to account for the $15 in lost value of free time.
I think the hard part is that cooking and cleaning (some items) can be done while effectively multi-tasking, chatting about someone's day or collecting one's thoughts. I have a young daughter and when I put something in the microwave, cut up vegetables, fetch spices, or load the dishwasher, we can generally keep the conversation and activity going. Cooking or baking something from scratch is obviously much more time-intensive. Getting food delivered doesn't really save that much time. However, cleaning the bathroom or vacuuming are generally blocking activities and thus easier to rationalize outsourcing. I would agree that we as humans have a very hard time valuing our present and future time, so I would always love to have sometime critique my day. "Hey, you enjoy your job at tech company X enough for the next two years, so it seems like you can afford a laundry service for the next 10 years, time which you can spend more at playgrounds and working out, why don't you do it?"
Well, there's a big difference in cuisines. For instance, I've been to plenty of great Indian lunch buffets, but most East/Southeast asian food is not amenable to buffet timing. If you saute a leafy green, you need to eat it right away, or else it gets all wilty. There's nothing sadder than a bunch of pathetic looking spinach over a chafing dish or under a heat lamp.
Indian food usually tastes better the next day, after the flavors blend in to each other.
As for making sense from an economic standpoint, we should all be eating lentils and rice with no seasoning, with some vitamin supplements once in a while. Problem is, nobody wants to do that.
Saving is also mandatory for people who aren't already rich to be able retire and deal with other crises in life where you need significant money (for example unemployment or health problems).
If you labor for yourself you don't pay taxes.
I have only ever spent more than that at a restaurant the #1 Grill at the Balmoral aka the best restaurant in Scotland and that was only because my colleague from the press office persuaded me.
ok I spent >3 hours doing a special recipe the other weekend because I like to experiment with cooking some times other times I just goto a pizza place.
Cooking is mostly a leisure activity so you actually do other activities like watching you favourite TV show, calling and catching up with friends and acquaintances. Last but not the least, you actually know what you in putting your body.
It depends where you live. In some countries, you can't find healthy food outside (e.g. infamously (parts of) the U.S.). In other countries (where cost of labor is high), eating outside is much more expensive than eating home.
We study the causes of “nutritional inequality”: why the wealthy tend to eat more healthfully than the poor in the U.S. Using two event study designs exploiting entry of new supermarkets and households’ moves to healthier neighborhoods, we reject that neighborhood environments have economically meaningful effects on healthy eating. Using a structural demand model, we find that exposing low-income households to the same food availability and prices experienced by high-income households would reduce nutritional inequality by only 9%, while the remaining 91% is driven by differences in demand. In turn, these income-related demand differences are partially explained by education, nutrition knowledge, and regional preferences. These findings contrast with discussions of nutritional inequality that emphasize supply-side issues such as food deserts.
https://web.stanford.edu/~diamondr/AllcottDiamondDube_FoodDe...
Not sure how the researchers at Stanford couldn’t conclude that poor people aren’t going to pay rich people prices
> would reduce nutritional inequality by only 9%, while the remaining 91% is driven by differences in demand.
Most of the difference in what the underclass and others eat is because of taste. And Americans spend less of their budgets on food consumed at home than any other nation.
https://ourworldindata.org/food-prices/#consumer-expenditure...
And healthy food is at worst only very slightly cheaper than unhealthy food
http://bmjopen.bmj.com/content/3/12/e004277.full?sid=820d6e1...
Yodsanklai appears to have been referring to the availability of healthy prepared foods, particularly restaurant foods. It is entirely possible to live in an area well-served with supermarkets and bodegas and only have 'unhealthy' restaurants to choose from due to the peculiar demands of that area. You can drive through parts of the US and see nothing but greasy spoons or pub food, while the local at-home cooks have access to a wider variety of healthy foods from the markets.
It's also more expensive to provide healthy, fresh food and restaurants being famously low margin businesses can't afford to give this to you unless you're in a wealthy area with others who are willing to spend for it.
Exactly why I don't want to go home to my second "job" as a line cook / dishwasher for an hour every day at a "wage" 5x lower than my day job.
But cooking to save money when you're a software engineer is almost certainly a poor use of your time. Better even to take on debt and spend your time studying for interviews to switch jobs to a higher salary.
You should absolutely cook if it makes you happier or healthier but not (purely) as a strategy to become richer when it's making you less happy.
I agree with what you're saying, but think your reasoning misses the forest for the trees a little :)
A rump roast, bag of veggies, and can of tomatoes in a slow cooker can make dinner for 4-7, is warm when you get home, and is way cheaper than takeout while also taking less time than takeout. With a family the scale makes the investment yield a better ROI at every step, while the marginal costs of eating our could be untenable.
In pure financial terms for a single high earning individual then, yes, you will almost always be better off to get your food sourced and focus on working more hours. That math changes when you're talking about multiple people, though, and start factoring in the opportunity cost of "eating out". Being at home coding, studying, or work-emailing in your productive home environment while a casserole cooks will yield better productivity than driving around getting food or being disrupted in a restaurant/coffee shop environment.
There are also externalities to consider: eating out leads to poor food habits which leads to poor health which leads to poor productivity and reduced working lifespan. Specifically, how many overweight IT people are dying from heart attacks before retirement age, and how would an analysis of total productivity reflect that massive lost productivity from losing 40+ hour a week over many years?
Equally as relevant: much of the "time loss" in the kitchen is just blatant incompetence with cooking. By pretending that food prep is an optional life skill thousands of productive work hours will be lost that could otherwise be dedicated to making your employer more money or building up your own business, while also fixing capital that could otherwise be gaining value in interest bearing bonds or assets.
"Home Economics" is all about saving capital through intelligent resource management. On the whole economics is an amazing reason to cook. Young, single, software types in urban centers with no special dietary needs or long-term health requirements slightly withstanding ;)
I spend most of my productive time thinking. That happens while cooking, walking, reading a book, taking a shower, sleeping, etc.
I would even go so far as to say there is an inverse relationship between hours spent 'working' and productivity.
Spend more time poorly. It's great for your career.
They're not, because presumably you value your free time at something greater than $0. Why don't I drive Uber for $15 an hour after work? Because I value those hours more than the $15 I could earn doing something else with them. If I spend an hour cooking and doing the dishes, instead of order Grubhub and throwing away the waste, you have to count the lost value of that hour.
Cheaper for the restaurant, yes. In don't see why it's cheaper for me if you add the restaurant's margin to the price.
Not even talking about taxes, labor, equipment, housing and food safety costs the restaurant has (and will pass on to me) that I don't have when I cook myself.
(The quality control I have is another point, though not a purely economic one)
The rich in India have cooks that work for slave wages. The rich don't know how to drive because it is so cheap to have a chauffeur.
I knew an Indian kid in Berkeley, CA who didn't get into any American medical schools. So his parents gave a big "donation" to a medical school in India and got him in. They got him a flat, a maid and a cook. That's what he had at age 22.
I find it baffling how one can put themselves in a position to speak on behalf of the entire West.
Eating out is certainly the default choice for professionals in New York, London, Moscow, Dubai, Singapore, San Francisco, or Hong Kong.
It's just something they don't think of.
This is not my experience in UK. Are you American?
It's the same in Pakistan, a country similar to India in many aspects, and I think it also has other causes besides economy/frugality:
– The rich have household "servants" to cook for them and their kids at any time.
– Even for the less than "rich" the women are generally expected (and usually content) to stay at home and cook for the family.
So why bother eating out? It's usually an expression of "going out"; doing something enjoyable/entertaining, taking advantage of a day off, a treat for the kids, or to hang out with friends you can't host at home.
Women in South-Asian and Middle-Eastern countries are also expected to cook for guests. The males hosting while the women hosts make tea for the guests is an iconic feature [TODO: find a better term to describe that] of society there.
In my experience this is not true at all. I live in Australia, I host a lot of travellers from around the world: Western Europeans (English, French, Italians, Germans), Asians (Vietnamese, Taiwanese, Chinese), North Americans (US, Canada), South Americans (Chilean, Argentinian). None of these people eat out be default.
I don’t see it as a cultural difference so much as a result of what the article is referring to.
Much harder to throw money at luxuries when you're saving a lot.
I think this misses the larger point that Indians overall don't have that much money in hand to spend on luxuries.
I believe GNI per capita ppp [1] is the right comparison. (someone please correct if I'm wrong.) For india thats ~ $6K whereas for the US its ~ $57.5K, almost 10 times. (Also while the savings rate is more, the actual amount saved looks greater for the US.)
I think the parent is right, grand parent just proves the point of the article.
[1] https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(PPP)...
The effects can also be felt overseas. The Chinese are less likely to put up with long wait times for permanent residency in the USA, and simply return home as opportunities and life back home can be just as lucrative. Not the case for Indians, clearly
This is the most underreported thing about India.
> The Chinese are less likely to put up with long wait times for permanent residency in the USA, and simply return home as opportunities and life back home can be just as lucrative.
In my experience, wealthy Chinese are willing to put up with nearly anything to obtain residency in a western country without deadly levels of smog or poisoned baby formula.
Yes that is the unwritten rule.
Ok. But isn't disposal income one of the properties of Middle Class? The purchase of costly things only for special occasions is a lower (?) tier than middle class.
Perhaps the average income appears sufficient. But without that money changing hands the broader economy remains constricted. That is, if ya wanna have a Middle Class ya gotta act like a Middle Class.
It's difficult to see how they will mobilise these people to become consumers, when nothing suggests a disruption of Indian wealth becoming increasingly concentrated.
To rephrase: You're saying that the "common" people are just not working hard enough and the rich need to take measures to make them work harder so that they can be better consumers.
It's the "common peoples" fault that there is no middle class because they don't work hard enough.
According to you...India has a half billion lazy people.
(Honest question) do you have some citations where this has been studied, specifically in cases where the low-end of the inequality spectrum isn't poor? (i.e., to demonstrate the inequality and not the absolute state is the culprit)
The natural end of that is generally going to be prosperity across the board, and hopefully a government financially solvent enough to actually pay for those in need and essential services, all of which should be lower as a result of a better market doing much of that naturally.
On the other hand I understand the principle that money makes more money (the principle of investment and ROI), and I don't see how "competitive market" tackles this.
It basically feels like the capitalism starts off from fairly-level playing field, but over time becomes more and more unstable, the gap ever-widening. We have already seen it fall (at the beginning of communist regimes), and I'm afraid we'll see it fall again.
That's a pessimist view, which I hope won't turn out to be true, but I'd be interested in exploring alternatives.
It doesn't address that because it doesn't make that argument, in that way. One of its starting axioms is that economy is a positive sum game. In the case of your statement, it might argue that (in the very general sense) money makes more money in a positive sum way -- more total wealth in the economy. Then to the latter it merely says that business that are better at making money (and generally, wealth) get to out compete those that don't. Its premise is it optimizes for wealth creation of the entire economy. I think that's the place to take the argument -- either that you fundamentally disagree with that premise or some outcome of it.
> It basically feels like the capitalism starts off from fairly-level playing field
Historically I don't think so. I"m not expert but read a lot and I'm currently under the impression that economies were historically locked down by government or tightly coupled government / mercantile entities.
WWII was a great leveling of the playing field. There are many times in history when Gini coefficients dropped precipitously. All the evidence points to the fact that wealth tends to accumulate in capitalist economies until crises or government intervention prevents it.
Edit: Love your name, love the reference.
(I think HN didn't like your very cynical comment :D)
It's not a market problem. Even in a perfect market, a rich person would have most of its assets sitting or slowly moving, whereas a middle/working class person would spend their income.
So one gets the economy moving, while too much concentrated wealth stifles it.
Only if they're so inclined and even only part (they'll keep large parts in less risky form, including land etc -- also not sure how "investing" in "buildings in active use" is not rentierism and how it helps the economy. Whereas the middle/working class have no other option but to put the majority of their income directly in the economy again (buy things to live).
And that's not even taking into account the fact that the rich could very well invest elsewhere, or hide their money in tax havens, invest in foreign housing markets, and such, in which case the society they live in, and which they make their money, gets zilch of those money. Again, not the case for middle/working class people.
But assuming that the rich did invest most of their money, that would still have the problem of the rich calling the shots (through their investments and wealth), which is less of a problem in a less unequal society.
"And we see the whole trickle-down through the economy, and that's good for the economy."
That's Gary Cohn, the chief economic advisor for Donald Trump.
The first problem is that wealth means control (e.g. from how VCs control opportunities to create businesses through their funding, to how the rich can buy politicians and laws).
So concentrated wealth = less democratic country (not in electing government, in actual control of what's to be done and opportunities).
Second problem is that concentrated wealth is not used in directly buying, so it sits out of circulation. A rich person can have 95% of its income sit in idle investments, land, etc, and still live like king with 5% of his earnings per year, while a middle class/working class person will spend most (say 70%-100%) of what they earn, thus keeping the economy going.
And when that 95% the rich keep is much much bigger than the aggregated 70% of what the majority of working people spend (e.g. because 1% of the people control 80% of the wealth), then you have a stifled economy and a dwindling middle class.
And lots of other issues, but those are quite major...
Plus, land rented to farmers is productive because of the farmers, not because of the land -- and would still be a sinkhole of money from the middle class (the farmers) to the rich person doing the renting, not entering circulation like the money a farmer would make (to buy animal food, seeds, whatever, and to live their family).
"rent seeking" seems to either be used by people who don't understand how trade/investment works or want something or subsidies'
or its a dog whistle that tends to go with gold bugs, cryptocurrency fantasists and then on to much less pleasant things
Not sure what you're going about re: gold bugs, and "less pleasant things"...
If you don't believe this, I challenge you to drop yourself into 0-star in any place like India and see how it stretches you.
Where the US system fails is with mentally unstable people and drug addicts. This is nowhere near the same thing as an entire lower class of 10s of millions willing to work that are still homeless.
There are a lot of articles published saying half of New Yorkers are a single paycheck away from homelessness, 60% of Americans are a single emergency expense from homelessness, etc., but every month lots of those people lose their jobs and have emergency expenses, and they aren't flooding onto the street or into emergency shelters. Those alarming-sounding numbers come with really important caveats like "without relying on family" and "without relying on friends" or even "without going into debt." Having access to those resources is a really important aspect of social class. Even the people shitting in the sidewalk in San Francisco, a lot of them have friends and family who have money and would love to help them if they could figure out how. The difference when you're homeless in India is that everybody you know is either in the same circumstances as you or knows so many people who are that it doesn't make sense to single you out for help.
Almost every economics discussion at these very high levels suffer from sweeping all-encompassing generalizations (about an entire country) that happen to fit perfectly neatly into their political worldview.
Especially for India, which is notorious for having a government economic regulations that fluctuate wildly depending on what province/city you're in. Where you can drive a truck across the country and require 5 different licences/paperwork just to appease each local arrangement. Not a good country to generalize.
A great overview of the complexity of the economy of India: https://www.youtube.com/watch?v=hVwIZzGHxwc
Source: Am a Market researcher and analyst who segmented Indian market for a major corporate
Romanian HDI: 0.802, IHDI: 0.714.
Indian HDI: 0.624, IHDI: 0.454
I think India still has a long way to go. So does China, in my opinion.
https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9...
Certainly as long as the Ganges is not safe for human bathing or anything because there's feces, animal carcasses and other waste openly floating around (e.g. https://www.ft.com/content/dadfae24-b23e-11e4-b380-00144feab...).
The problem with India seems to be that it's ultra polarized - you got the parts that have been launching rockets into space since 1975 (one even going to Mars), built nuclear weapons, use nuclear power... and you have the parts that have no roads, no sewage system, no nothing and which regularly make global headlines whenever a journalist goes off the big cities and travels into the deep rural areas and sees stuff that's unbelievable for him.
But what I took away from it is that communities that participate in the economic system do well for themselves and generate prosperity for themselves whereas those that don't (including most rural Indian villages) will continue to suffer from these issues.
In India the classes are just looking out for themselves and keep looting each other when they have the opportunity to do so.
Take Bangalore now. The congress government here, has been openly siphoning money from the treasury for election funds or whatever. Now the state elections are going to be held in a few months, they are repairing roads, paying municipal workers and doing things they should have been doing throughout their term.
Now people here take exception to some European/American saying, why the hell does India have a space program etc when you have so many basic problems to fix. I take offense to that as well. Mainly because saving a small amount of money on that isn't automatically going to uplift hundreds of millions of impoverished Indians. It's hardly a drop in the bucket. Also because so many young people here graduate with engineering degrees, and they need something to look forward to.
The problem is that the people in charge realize that organizations like ISRO have to be shielded from the very system they govern and nurtured. They are OK with the same system perpetuating itself and hamstringing everything else. And it's not in their list of priorities to stop and reform this.
Hans Rosling has made some interesting talks on this. Worth watching.
[0] http://hdr.undp.org/en/data
[1] http://hdr.undp.org/en/content/human-development-index-hdi
I read the article but the problem was identified near the beginning.
The top 1% of Indian adults, a rich enclave of 8m inhabitants making at least $20,000 a year...
Most data that I'm familiar with is from the National Survey of Household Income and Expenditure (NSHIE) by the NCAER, or the NSS by the gov. But they hold these surveys rarely, I'm hoping to see an update to the 2011 NSHIE data for example, this year.
Another decent study building on NSHIE data: http://www.thesuniljain.com/files/thirdparty/NCAER%20How%20I...
Does anyone know where to get more recent data?
In any case, the middle class in India is quite small, probably around 100m people, but definitely not above 200m. What's somewhat left unsaid by the Economist is that growth prospects are pretty good, with the middle class group doubling less than every decade, in addition to growth of the rich group.
India will also be this century's most populous country, outgrowing China probably next decade and will keep growing a few decades after China's population will have started shrinking. And looking at the age-demographics, China is headed into difficult territory whereas India will have mostly young (i.e. productive) population for a long time.
So I agree with most of this article, but it definitely also leaves a few things unsaid. In terms of India's attractiveness as a new global market, I'm cautiously more optimistic about India's position than most, but not by much.
This assessment seems to suggest that either the Indian economy has stalled or there’s rampant corruption or both or something else altogether entirely.
It seems they’re merely making an observation.
I have noticed that NYT has become a LOT better in its coverage of India recently. I wonder if that's because they've hired quality talent in the country? Whatever the reason, I'm glad for that change.
What we need is a system which can mass export cheap goods like clothes or shoes. China and Korea have crawled out of poverty by following this simple formula of exporting cheap goods which need some basic skills.
But sadly even Indias much smaller neighbor like Bangladesh is doing far better in such sectors. Archaic labor laws are still holding back India in mass manufacturing
Wait, fewer women are working in India over time? Why is that?
It could be (I'm just guessing here), that the type of work that men do has been "legalized" (and hence counted) to a much greater extent than the type of work that women predominantly do.
"Improved stability in family income can be understood as a disincentive for female household members to join the labour force"
1. India does have very large middle class population and most of their income is unaccounted.
2. Majority of middle class Indians who belong to certain religion/caste hide their income so as to get many freebies and reservation benefits.
3. Very few rich individuals pay taxes and file correct income tax return. Government is very much responsible for this as filling a simple itr form consist of many different sections and people avoid getting into official paperwork.
4. Though poor people are given various subsidies on paper but because of lack of education they barely know all the scehmes running around them and politicians eat most of their money.
5. Longer judicial proceedings make it even more tough for the system to catch corrupt individuals and implement good policies.
At least until Nov 2016, wouldn't this income have been cash given that cash transactions accounted for 95+% of transactions[1]? (Percentage by total amount would have been useful too but I couldn't find that stat.) If these were 'unaccounted' then demonetization would have caught that. But only 1% of banned currency wasn't deposited (as of Aug 2017) [2]. The initial estimates given were for about 20% to not show up [3]. That didn't turn out to be the case.
So while I'm sure there is unaccounted income, I'm not sure this is most of the income of a very large middle class.
[1] https://www.forbes.com/sites/wadeshepard/2016/12/14/inside-i...
[2]https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...
[3] https://www.forbes.com/sites/wadeshepard/2016/12/10/indias-c...
There are many facets for accountability. And I don't think that any middle class person having more cash in hand while exchanging his cash could potentially prove that his money is accountable because there exist some form of money which he has given to some other person or may be has invested in some business.
My point is by totalling out just the amount of cash maybe 5-10k rupees the income cannot be accounted.
Yes, but your original point I was addressing wasn't about all the money you have but specifically income.
My point is that income is coming from some transactions and 95% of transactions were cash based pre Nov 2017. And only 1% of cash outstanding was unaccounted for after demonetization.
> My point is by totalling out just the amount of cash maybe 5-10k rupees the income cannot be accounted.
Sorry don't understand what this means.
But this is probably moot now.
Which religion/caste is getting freebies and reservation benefits ? I am not aware.
the complexity of the form is not the reason people avoid paying taxes - people don't pay taxes because they can get away with it.
This certainly is one of the reason behind hiding income. But majority of the middle class don't even file itr 1 form (for income below 2.5 lakhs per annum ). For filling an itr 1 form, people don't need to pay any tax.
Though people are not paying taxes but the money is being accounted and my point here is that of accountability.
However, if the income was recorded the analysis of stats could have been done more efficiently.
The state of education is appalling. And yet at the same time, you see tons of those in the low 90% of the population checking out Facebook in their cheap phones with 4G connectivity.
Either way, my outlook for India is very positive. IMO They need only 1 or 2 more generations to truly rival or even surpass China.
Highly religious societies have a strong desire for tradition, and tradition is "women don't work and have no power, corruption is rampant, new things are bad (because they destroy the golden geese that keep the upper class rich and in power)". Pakistan and India are going nowhere soon.
So, yes, you're right, it's China. At a rough pulling-numbers-out-of-a-hat, China will be back in sync with the rest of the world average (for levels of religious activity) somewhere around 2050, when it will be mostly Christian and Buddhist.
"They need only 1 or 2 more generations to truly rival or even surpass China."
These two seem to be in contrast. Do you know what is being done to change education for most people that would radically improve outcomes within 1 generation or 2?
And corruption, political dynasties, general incompetence and huge cultural baggage.
This can only make its governance improve, not stagnate. I'd bet only the appearances are getting worse.
What is a "lazy culture"? It sounds like there is a one true way of living: working yourself to death, for what? To have a bigger number on your bank account than your neighbours? To have a faster car to be stuck in a traffic jam on the way to office where you will do meaningless work for 60-80 hours a week? This not a proper way to live life in my opinion.
> If nearly 300m Indians count as “middle class”, as HSBC has proclaimed, some of them make around $3 a day.
Then, I would be curious to know how one accurately is someone "measuring" what a middle class is since only 2% of the population sample is available.
[1]https://www.npr.org/sections/parallels/2017/03/22/517965630/...
[1] https://www.fastcompany.com/40422065/inside-indias-plans-to-...
[1]: http://www.thehindu.com/business/income-share-of-top-1-surge...
I find it hard to believe that companies had to make only minor tweaks to their business model to succeed in China.
For ex, Amazon is making a "killing" in China, by doing exactly what it did to bolster it's business in USA. http://www.businessinsider.com/amazon-is-struggling-to-find-...
It's no wonder that businesses have to adapt to local markets. Lamenting that there are too many poor people is a bad idea, because as many comments here have mentioned, it's a different mindset in India when it comes to spending than the West.
If companies can adapt to break into the market, let them. But claiming that its not worth it, would be a bad choice.
Hint increase the debt and you increase taxes. So, you need to look at how the tax burden shits not nessisarily the specific rates. Aka if you get 50$ off your taxes this year but your share of the national debt increases by 5,000$ then you are far worse off.
Why? Do you suppose in the future, we'll all pay off the debt equally?
Yes, there is some wiggle room if the tax burden shifts again, but if your taxes are dropping significantly less than average as a % of overall revenue you are going to be significantly worse off in the future. (Assuming you're not going to die soon.)
Cutting spending works, cutting taxes is meaningless without that.
Reducing income can't help us reduce spending. To reduce spending, we have to actually sit down and do the difficult task of reducing spending. Nothing else will do. At best, we are kicking the can down the road.
(Poor nations who have had debts forgiven are excluded from this question.)
Take your pick of the data.
I’m just trying to make the point that productivity improvements diffuse out to everyone over time. Cell phones were $10K when they came out and now how many Indians have them?
Unless you have kids, I would suggest you to try moving back and attempt a helping hand. If we fail, we can again look for other opportunities. Just a personal perspective.
Generally speaking, Western economies compensate much better for being highly educated or advanced scientific/engineering skillsets. The rule of thumb I've come up with, after talking about it a lot with other NRI's, is to go back only if you really "love" your home city/country etc. e.g. my cousin went back because he simply wouldn't be happy if he couldn't visit the extended family at least once a month (i.e. very lonely) and really missed the food.
If you go back and work in a job you don't like, YOU will be unhappy. That is perhaps the most important factor in making these decisions... you cannot help others unless you are yourself happy and content.
No wonder, everything, including the highest courts continue to be run by the (cultural) Anglical retainers. It's almost amusing when FabIndia + Bindi wearing bimbos (faureign/desi) come and lecture about the 'caste system'. This is the market demographic that the Americans are so keen to tap into; the other neither has much wealth nor is it culturally Anglo-Saxon (and thus American recipes are not transplantable, effective, or profitable).
However in China the market most adept to American type clothes & idiosyncrasies have no similarity at all to reasons you describe as to India's American cultural preferences: which by the way you could apply to most countries today.
Pretty much the same for Pakistan to say if we are to start conversation about that.
While Urdu is a state language, the amount of people eloquent in it is even less than ones who can speak passable English (8%), and is popularly associated with local hollow intellectuals and creative class. The also the same vicious circle of meritless cadre policies where mediocre people who were granted a post solely for the knowledge of the language perpetuates the practice.
Pakistani middle class, or better to say the virtual middle caste, were the Punjabi old money clans for generations without much change.
I don't say that Pakistan has no middle class. It has it: there are capable, educated, talented people ready to compete in globalized industry, just there are very few of them. Talented youth has to work twice as hard to enjoy that middle-classer living in Bahria Towns, compared to a person who just got to be born in a clan with assumed middle-class status and English speaking family.
1. http://www.thehindu.com/data/just-5-per-cent-of-indian-marri...!
India couldn’t function as a modern state with out a de jure lingua franca, that being English is an enormous advantage for international trade too.
Even today our community is one of the strongest middle class communities in our region. This might not have happened in other regions, but at least in our region knowledge of languages help the community get embedded in the aristocracy and acquire wealth for generations.
Knowledge is power.
This article does not do a very good job of getting its argument right. Some of the comments does a better job of explaining why companies are setting shops in India.
I too am pissed at Angrezi culture. Having said that English has become the defacto language for the world. Just google "learn english in paris" and see how many hits you see.
You can roughly divide India into two parts, the British controlled, and the non-British controlled, based on the pre-independence situation.
The british controlled areas, mainly the northern states like UP, bihar, bengal have huge number of poor families. UP has too many people, and most of them are poor.
The non British controlled ares, like Maharashtra and some southern states, are generally a bit better off, and here is where you find most rich and middle class.
The central states are riddled with decades old insurgency, which could be solved using military, but govt doesn't want to use military on it's own people. These areas contain tribal people, and they are very poor.
Now, all this is not a perfect science, but this is how it generally is. Now when a foreigner visits India, he/she might visit places like Delhi, Mumbai, Bangalore, maybe North eastern Himalayan areas, Goa and some beaches in Lakshadweep. The image you get is that of extremely rich people and extremely poor people, along with a lot of middle-class people living in these cities.
But outside these cities, when you go to central India(you won't, as rebels will kidnap you), you can see extreme poverty. Same with other non-tourist areas.
When will this finger pointing stop?
Not in any way mean that we should blame them even after 70 years.
We blame Britain because it's easier to have scapegoats, it's much harder to acknowledge failure and actually fix the problems.
First of all your original comment is factually wrong. Bombay and Pune were British controlled so your theory is wrong that non British controlled areas are doing better.
You dont even have to go to central India, just go 90 kms outside Mumbai.
http://www.hindustantimes.com/mumbai-news/over-254-children-...
The poverty of the Northern areas is not in lieu of them being exploited by direct British Governance (although I'm sure it contributed much towards it). Its mainly lack of coastal trade routes, population explosion and ridiculously high levels of corruption/poor governance.
The Southern states have done better mostly because their populations have not exploded as much, and being on the coast, they're able to participate in international trade a lot more (key to prosperity in the modern economy). There also seems to be more emphasis on getting more education in the cultures of the South which has led to a highly educated labor force.
(I don't have statistics on hand, this is from reading other analyses)
This doesn't prove the Economist's claim per se, but it indicates to me that it's not absurd.
A lot of the extreme poverty in India is concentrated in the northeast and in rural populations, so it's not always super visible to visitors outside the segregated slums of cities.
[0] http://hdr.undp.org/en/content/human-development-index-hdi
1. Richest 1% of Indians now own 58.4% of the country’s wealth making it the second highest inequality in distribution of wealth after Russia.
2. 96% of adults in India have net worth less than USD 10,000, whereas this percentage is only 68% in China.
3. India accounts for 3.1% of mid range wealth while China has 33%, 10 times more than India.
4. 80% of adults in India are in the global bottom half, and Africa is close behind at 79%
5. India's bottom wealth individuals increased by 4.6% where population growth of 2.5 has offset growth of household wealth. China's representation has halved over the last 10 years.
India's explosive population growth rate is offsetting the growth in GDP in the near future. State of infrastructure is abysmal even in the top metro areas. Most of the upcoming industries still face a huge number of logistical and bureaucratic hurdles to get off the ground. Corruption is high as usual. Most of the politicking involves well marketable slogans run by dedicated media cells and whitewashing of development metrics. Just one annual visit to India every year shows me zero improvements to anything I have grown up with. Trains are dirtier and more expensive, Mumbai and Delhi top the world in air pollution, productivity is ultra low owing to long hours of commute in high paying jobs leading to mass emigration of "highly skilled economically well to do" labour force to Western countries, The coveted and prestigious colleges of education are insanely competitive to get in for the few who can.Destitutes line up the streets everywhere you go. You just need a visit.
> Firms peddling anything much beyond soap, matches and phone-credit are targeting a minuscule slice of the population
Well, yes, but tell us something new. Even this minuscule slice is (a) A large market and (b) is growing quite rapidly. For example:
Automobiles: growing at around 6% p.a, shifting towards more expensive models. Now 4th largest in the world in terms of numbers (no doubt, lower in total $ sales)[1]
Smartphones: 2nd biggest in the world [2]
Consumer Durables: growing at over 10% [3]
Business leaders are not interested in India because they're stupid and they think India is a rich, egalitarian country. They are interested because of a fast rising middle class with a booming consumer economy, which, contrary to the claims of the article, is true. For millions of people like myself, who emerged into the middle class thanks to private sector jobs that only emerged after the 90s, this is lived experience.
For a much better take on the topic, please read:
https://swarajyamag.com/economy/demonetisation-how-neo-middl...
[1]http://www.moneycontrol.com/news/business/india-trumps-germa...
[2] https://techcrunch.com/2017/10/27/india-second-largest-smart...
[3] https://www.ibef.org/industry/consumer-durables-presentation