“On the back of the massive spread of the internet and identification tools, 280 million new bank accounts have been opened — 160 million of these are in rural India, 170 million are connected to Aadhaar. Some of the poorest Indians — which makes them some of the poorest people in the world — have now deposited $10 billion in these new bank accounts!”
(This is the full text of HindolSengupta’s lecture as a World Economic Forum Young Global Leader at the Young Global Leaders Summit in Buenos Aires, Argentina on April 4, 2017. The image is from the British artist Banksy.)
From the oeuvre of Banksy
I come from a country where we have spent the last 25 years trying to make everybody a little richer.
Our GDP grew four times to cross $2 trillion dollars during the last two and a half decades. Our foreign reserves have grown from just under $6 billion to more than $360 billion. But those just numbers until you consider that between 2004–11 alone, India pulled out 138 million people from poverty.
So what’s really going on?
Here are a few things you should know — but isn’t often commonly understood — about interesting subaltern revolution that’s happening in India:
Half of India’s GDP comes from what is known as the ‘informal’ sector. These are small and medium-sized mostly unregistered companies that provide nearly 90% of employment in India. Since 1991, when India started opening its economy, almost always this ‘informal’ sector has grown faster than the formal sector — so all that you see about the Indian stock market, its major companies, its information technology prowess — beneath all that is a buzzing, humming. incredible engine of growth that most people don’t recognize or understand.
Most of these informal sector firms are run by some of the most underprivileged sections of Indian society: for instance, the so-called lower castes in the Indian birth-based discriminatory caste system.
A 2010 study done by a group of scholars from UPenn, Harvard and India’s best known ‘lower caste’ economic researcher in Uttar Pradesh, one of the poorest parts of India — a state with 200 million people, so big that if it were independent, it would the world’s fifth largest country — showed the phenomenal impact of economic liberalization on Dalits (the lowest ranked in the caste system who were at one point in history considered ‘untouchables’ by upper castes).
What changed when the markets opened? 50% more people started living in concrete homes, 33% more had TVs, 45% more had fans — almost every household had a mobile phone. Most importantly, for the first time, a quarter of households had chairs. Now you won’t understand the real importance of Dalits buying more chairs until you understand that in their lives discrimination often had a physical manifestation — when an upper caste person came to their house, they would usually stand or sit on a higher platform while the Dalits would sit on the floor, literally the unhce (higher)-neech (lower) divide. The purchase of chairs, ladies and gentlemen, form a mini revolution.
In fact, even the Indian Dalit scholar Chandra Bhan Prasad who did this research formed his own start-up — an online food business called DalitFoods.com! Now here again you won’t understand why this is revolutionary until you consider that not accepting food from the hands of a Dalit used to be the most fundamental discrimination. Chandra Bhan Prasad is then the Rosa Parks of e-food retail!
Also, more Indians now have an identity — which used to be the biggest hurdle to them acquiring assets, even a bank account — thanks to the unique identity number scheme Aadhaar, it took five and a half years to get to a billion registrations — which means almost every quarter, it was adding registrations the size of a New Zealand. It has brought down cost of authenticating say a mutual fund beneficiary identity by 99% (from Rs. 1,500 to Rs. 10). Aadhaar can authenticate 100 million transactions real time at any given moment using the internet. This is incredibly useful to deliver government services to the poor in a country where it was common knowledge that only 15% of government funds actually reach beneficiaries.
With more than 330 million internet users, India now has more internet users than in the US. Mobile telephony and the internet has become the first class-less (and caste-less) mass product in India.
(You know I like to say that a sari, the Indian sari, can hide a multitude of sins — all the gluttony and laziness, all the times you never bothered to exercise, all hidden away in its folds. The internet is a bit like that — it is letting us leapfrog decades of incompetence about building infrastructure.)
On the back of this massive spread of the internet and identification tools, 280 million new bank accounts have been opened — 160 million of these are in rural India, 170 million are connected to Aadhaar.
Some of the poorest Indians — which makes them some of the poorest people in the world — have now deposited $10 billion in these new bank accounts!
The Global Alliance for Clean Cookstoves estimates that 800 million people in the country are affected by household air pollution. One million people in India — that is a quarter of the global total — die of such pollution every year. Nearly 85% of all rural households in India, or 142 million of them, use some form of solid fuel like cow dung, wood or crop waste. More people die in rural India from inhaling the smoke of wood-fired stoves or chulhas than through any other reason. Even government estimates show around 100 million households that do not have access to cooking gas.
So India is now targeting giving subsidized liquified petroleum (LPG) gas cylinders to 50 million households — more than 17 million have already got one. This frees up incredible amounts of productive energy and leads to massive healthcare cost reduction in one of the most air-polluted places in the world.
Finally nearly half of all Indian women cannot afford — or access — sanitary napkins. So the Indian capital is showing the way by making the simplest (and cheapest) napkins that cost less than 30 cents free of cost and dropping tax on all other more fancy kind of napkins from more than 12% to 5%.
So what’s really happening? All the India that no one from the outside world could never see is more visible than ever — unregistered firms are being regularized, there is a big attempt to solve the identification challenge using digital infrastructure and another $59 billion being spent on physical infrastructure — from roads to airports to the world’s largest solar power plant. So a combination of soft and hard infrastructure is bringing millions of new Indians into the formal economy which would, and is, pushing domestic demand. Domestic demand will be India’s engine of growth and the not exports.
In a nutshell, the great Indian dream is being fueled bottom-up by factors most people don’t grasp — I hope this will be the beginning of all you understanding this a little better.