Economic Disparities: The New Economy

• Saturday, November 21st, 2009

The success of the Emerging Economies has brought the spotlight on India, as a global economic growth engine, along with China. India registered a robust GDP growth rate (adjusted for inflation) of 9.35%, 9.67% and 9.06% in 2005, 2006, and 2007 respectively. India continued to grow amidst the global meltdown and achieved a growth of 7.08%. Unlike China’s manufacturing prowess, India has written its success story in the terms of knowledge service – an attribute of the developed economies – that sets the stage for a long and sustained growth. The question that often pops up however, is whether this growth is ‘real?’

India’s achievements in the knowledge sector have remained limited to a fragment of the economy. According to a finding, in 2006, out the total working population of 400 million, only 1.3 million of the workforce was employed in the new economy services. Rest of the employed class remains unskilled or semi-skilled, which leads to their much lower income levels, as compared to the new-age workers. This makes the income levels highly skewed in the favor of the skilled employees employed in the IT-ITES and business process industries.

Similarly, India is also plagued by the regional economic imbalance. Bihar, Madhya Pradesh, Rajasthan, and Uttar Pradesh are abbreviated as BIMARU states, which refers to their tight economic situations and less than optimum growth. South Indian TAKK (Tamil Nadu, Andhra Pradesh, Karnataka, and Kerala) states, on the other hand, are known for their roaring economies, driven on the back of the knowledge services boom. Therefore, so far Indian growth and economic success is being savored only by some parts of it, making it a curious case of rags and riches!

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