Earlier, the criticism/skepticism came from the left-of-center/leftist activists/academicians... then it was the politicians like Manmohan Singh and Mani Shankar Aiyer, who voiced their concern about the uneven social impacts of what goes in the guise of globalisations/free-trade, etc., ... or whatever
and now this comes from one of the central stakeholders of the current zeitgeist, the Executive Director of Morgan Stanley, Chetan Ahya:
"Globalisation and capitalism have been the two key drivers of India’s GDP growth acceleration over the past five years.... The business environment is changing, allowing entrepreneurial spirit to flourish. This trend is reflected in the divergence in corporate profit and wages relative to GDP. Over the past five years, retained corporate operating profits (gross of capital charges) to GDP have shot up to an estimated 9.1% in F2007 from 3.7% in F2002, while wages to GDP have declined to an estimated 28.7% from 31%.
These two trends (globalisation and capitalism) have helped accelerate India’s GDP growth to an average of 7.6% over the past five years from 5.7% in the 1990s... The worrying aspect of the trend in globalisation and capitalism is the rising social challenges on account of increasing inequality. We believe the rise in inequality, when absolute poverty levels are still very high, poses a major political challenge.
Although recent data are not available, the World Bank gauges that income/consumption inequality (as measured by the Gini Index) increased to 30.5% in 2004 from 27.7% in 1994 (the point from which growth started accelerating) in rural areas and to 37.6% in 2004 from 33.3% in 1994 in urban areas. We believe that this is likely to have increased further over the past three years.
The inequality gap in wealth is even starker... our analysis indicates that India has witnessed an increase in wealth of over $1 trillion (over 100% of GDP) in the past four years — and that the bulk of this gain has been concentrated within a very small segment of the population."
so why does this wealth not trickle down?Chetan Ahya offers 3 domains of wealth creation ("
three key sources of wealth accretion have been the equity market, property and gold") and how/why the nature of wealth creation remains confined to the upper-end of the society:
1. Equity Market:"Stock market capitalisation has increased from $120 billion as of March 2003 to $1 trillion as of May 2007. Adjusted for foreign and government ownership, the implied overall gain for domestic shareholders is $570 billion. As per the Securities Exchange Board of India, only 4-7% of the population own equities. Even within this group, the ownership is likely to be highly concentrated as almost $350 billion of the increase is accounted for by promoters (controlling stakeholders)."2. Property:"...household wealth creation through residential property will have been at least $300-500 billion. However, only an estimated 47% of the population own a ‘pucca’ house (a house wherein walls and roofs are made of stable construction materials). Even within this segment of ‘pucca’ housing, the higher-income classes own a large proportion of the area in terms of square feet."3. Gold:"On our estimates, the market value of India’s stock of gold has increased by approximately $200 billion since March 2003 to $370 billion currently. The gains under this asset class, though unequal, should have been more widely distributed than those related to equity and property. According to a survey of household assets conducted by the National Sample Survey Organisation, as of June 2002, the top 34% of households (in terms of wealth) held 71% of the value of consumer durables (including gold and jewellery)."To me, this is actually somewhat simplistic analysis... but what this article does bring home is that somewhere in that sphere, there are - thankfuly - people who are also becoming skeptical about this whole issue of:
"why it does not trickle down?"
