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India's challenge: Raising living standards for the masses

By Geoff Hiscock
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(CNN) -- As international and Indian business leaders gather in India this week to laud robust growth in India's economy, there is widespread recognition that the gap between the nation's haves and have-nots remains a key risk to the Indian economic success story.

Some of the world's top business leaders will be gathering in New Delhi this week as part of the Fortune Global Forum, a conference of business and political officials.

CNN, like Fortune magazine, is part of the Time Warner media group.

What surely will be reviewed are the impressive economic numbers India can boast:

  • An economic growth rate that has been above 9 percent for the past two years;
  • Spectacular gains during the past decade in sectors such as information technology, pharmaceuticals, services and manufacturing;
  • The emergence of more than 100,000 millionaires in India.
  • But equally staggering are the numbers that portray poverty across India. Nearly 40 percent of India's 1.2 billion people must get by on less than a dollar a day, according to the World Bank.

    Almost half its children under 3 years of age are malnourished. In a speech marking India's 60th anniversary of independence in August, Prime Minister Manmohan Singh called the problem of child malnutrition a "national shame" and urged a greater effort to combat poverty, disease and ignorance.

    A few months earlier, Singh had issued a blunt warning to business about the threat posed by the rich-poor gap.

    "If those who are better off do not act in a more socially responsible manner, our growth process may be at risk, our polity may become anarchic and our society may get further divided," he told the Confederation of Indian Industry in New Delhi on May 24.

    His comments reflect the reality that despite bullish economic commentary and India's recent rise to the world's second-most favored investment destination after China, development has been hugely uneven.

    Poverty continues to blight much of Indian society, particularly in rural areas, where child labor is widespread and despairing farmers often see suicide as the only way out. Agrarian pain has helped stoked Maoist-type insurgencies in some states, while terrorism is an ever-present danger, even in major cities such as Mumbai, Hyderabad and New Delhi.

    Adding to the social stress is physical infrastructure that is way behind an economy in high-growth mode. Power brownouts are common, overburdened transport links drag down productivity, air and water quality is poor, and large parts of the education system are dysfunctional.

    U.S. Treasury Secretary Henry Paulson, who will address the Fortune forum on Tuesday, is expected to stress that continuing -- and even accelerating -- India's program of economic reforms begun in the early 1990s is the best way forward.

    "If India slows its pace now, it risks losing the ground it has worked so hard to gain," Paulson told the Council on Foreign Relations in Washington DC, ahead of his five-day trip to India.

    Paulson will also argue that India, like the United States, must resist pressure to protect domestic industries that believe globalization is a threat to them.

    While the theme of this year's Fortune forum is "Mastering the Global Economy," several of the sessions are devoted to social issues. Nandan Nilekani, CEO of the internationally successful Indian IT company Infosys Technologies, will join British banker Sir Evelyn de Rothschild in discussing the role of business in global social responsibility.

    Nilekani is passionate about environmental protection. In a blog posted on the forum site, Nilekani says: "India cannot deny its citizens a decent standard of living; and yet we cannot blindly adopt the same traditional development models that are causing environmental degradation."

    Indian author and former U.N. Under-Secretary General for Communications Shashi Tharoor will discuss globalization's winners and losers with noted U.S. economist and Morgan Stanley Asia chairman Stephen Roach.

    Roach, who has been sounding pessimistic about both the U.S. and China recently, noted after a visit to India earlier this year that in contrast to China, "India has a much deeper and broader stable of very powerful businesses."

    Despite India's myriad shortcomings, overseas investor sentiment toward it is highly positive. The South Asian nation is now the second-most attractive destination after China, and ahead of the United States, according to a just-released annual report on world investment by the U.N. Conference on Trade and Development (UNCTAD),. India polled 41 percent, compared with 52 percent for China and 36 percent for the United States in the UNCTAD survey.

    India is also making its presence felt with investment outflows, driven by big private groups such as Tata, which took over European steel major Corus early in 2007. E-mail to a friend E-mail to a friend

    Geoff Hiscock is author of the just-published book, India's Global Wealth Club (John Wiley & Sons).

    All About IndiaEconomic IssuesGlobalization

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