Chocolate and Gold Coins

Sunday, January 01, 2006

Signs of India’s Development

I visited India in 1995 and exactly ten years later in 2005, so it might be interesting to compare those experiences. Before I write anything else, I should say that I had a wonderful time in India and look forward to returning in less than 10 years.

In 1995, there were signs that India was at the cusp of some development. My wife went on and on about all of the changes she saw. Now in 2005, I could see some changes first hand. While some things have changed, the change is really pretty subtle to me. Most of Chennai looked much like it did in 1995. But there were a few obvious changes.

Cell phones


This is obvious: everyone in India seems to have cell phones now.

Motorcycles


I was expecting to see a lot more cars in Chennai. What I saw was a lot more motorcycles. Now at first glance, this might seem to be retrogression since motorcycles would seem to be an inferior good in the West. But a motorcycle is definitely a step up for someone who previously had to walk or ride a bicycle. It is obvious that the motorcycle is a good that is now affordable to the majority of Indians. Even in small villages, I saw lots of people with motorbikes.

Prepared foods


In 1995, my wife’s mother prepared idly and dosa mauva (dough) in a blender. Today, she just buys mauva from the store. She buys yogurt from the store instead of making it herself. She used to grind her own Sambar powder; now she buys it from the store. There may be something lost in the process, but the switch from homemade to store-bought is an unmistakable sign of development.

Price increases


The most obvious sign for me of India’s development is that the price (in dollars) for many luxury items is considerably more expensive, even accounting for inflation. I will give three examples:

Dakshin
One of Chennai’s finest South Indian restaurants is Dakshin at the Park Sheraton Hotel. My wife and I took her parents there in 1995 and had an absolutely wonderful experience. I remember the price very well because I used that as an example for how inexpensive India was in many conversations. The restaurant in 1995 was only half-filled and the price for an outstanding meal was only $36 dollars for 4 people. In 2005, the restaurant was packed and the bill for the same 4 people (plus a child who only ate rice and Indian bread) was $85. This might be partly a story of Dakshin’s success, but generally, we found that prices for restaurant food everywhere was much more pricey.

Raymond’s
In 1995, I bought several shirts, slacks, and coats from Raymond’s, a premier clothier in Chennai. In 2005 we walked in, looked at the prices, and walked out. In 1995 you could get a fine dress shirt for $10; today it is $30. In 1995, fine dress slacks were selling for $20; today they were selling for $70. It was not much of a bargain today.

I did get several nice but simple shirts and chinos from another store for a reasonable price. The big price increase seems to have hit primarily the upscale market.

Carpets
My wife and I shopped at CIE for a nice carpet for our house. The salesman said the price of carpets has gone up by a factor of 4 since 1995. Of course, he might have just been saying that but my wife’s parents who had bought some carpets ten years ago thought that this seem to be accurate. In 1995, you could get an excellent quality silk carpet 4’ by 6’ for less than $1000. Today, they start at $3000.

The price increases probably reflect the new purchasing power of the Indian upper middle class. But the cost of labor has probably increased considerably as well. In the case of the carpets, I think it might reflect the success of reducing the amount of child labor used in making these carpets, or at least one could hope that this is the case.

Counterexamples


Although I saw some examples of India’s development, I saw several counterexamples as well. For example, there was a small village near the lodge we stayed at in Nagarahole National Park that we passed through on several occasions. The children there lacked any footwear and the women had to collect their family’s water in a pot from the common well to carry it back to their homes.

Some of the roads we drove on in 2005 seemed fairly nice but there still are no freeways in India. And some of the roads we drove on in Nagarahole were some of the worst in the world. They purposefully avoided repaving the roads there to prevent too much traffic and disturbing the animals in the National Park. But this is simply decision by indecision. The road through there is the main road connecting Mysore to Kerala and something needs to be done.

In 1995, my wife’s parents said that a public transit was being built for Chennai. In 2005, I saw no evidence of it at all. In 1995, my wife’s mother cooked using a propane tank because there was no natural gas utility in Chennai. In 2005, there’s no difference. Prior to 2005, there was severe water shortage in Chennai and my wife’s parents suffered much hardship because of this. The only reason 2005 is different is due to the rain. The city has done nothing.

Basically, none of India’s development has been aided by any observable government good or service. India is developing despite the lack of government services. But good government services like dependable water supply and other services would be welcome.

103 Comments:

  • hey Mic...
    To tell you the truth..I'm fed up with your wife boasting...

    please write at least a single post without your wife in it...

    No just kidding...anyways..good viewpoints and observations.

    By Anonymous someone, at 11:07 AM  

  • Mike, good thoughts. Are you still in India? Would be good to chat if you are -- send me a note at ddd AT rediff DOT co DOT in with a number.

    I'm glad you mentioned the counterexamples and the lack of footwear and so forth. Especially we who live in the cities tend to see only what's happening around us.

    By Blogger Dilip D'Souza, at 11:10 AM  

  • Thank god my mom still makes yogurt at home - yum :) Nothing like home-made food.

    By Anonymous Anonymous, at 12:19 AM  

  • Hi Dilip and Anon
    Dilip: I'm back in the U.S.

    It would seem that India's modernisation has not filter down much to the villages. My feeling is that most of the villagers were really surplus labor and might as well headed off to the city. But the city is not really ready to accept new migrants - especially poor and relatively unskilled ones.

    Anon: I agree. The move from homemade to store-bought comes at a price. One price is subtle: the store bought yogurt is really rich (it was really more like sour cream). But having the option to buy from a store instead of making it yourself is no doubt a godsend to many families that lacked the good technique or the time to do-it-yourself.

    By Blogger Michael Higgins, at 2:51 AM  

  • Some of the price increases could be because they are exporting that stuff now. Naturally, you being the typical American, would be looking for the stuff typical Americans have started buying up in the US. I am sure that explains Raymonds and the Carpets, but it doesn't explain Dakshin...

    About carpets and child labour, chances are that it is the other way round - the increase in prices cause a decline in child labour, because parents can now send their children to school with the increased income...

    Actually, there is another possibility - increase in prices lead to an increase in child labour, because it is more worthwhile to send children to work rather than send them to school - but I've read that this does not happen. See this if you have a NYTimes subscription, but basically, the gist is that empirically, it turns out that as wages increase, child labour drops - which would make sense only if most child labourers are employed by their parents.

    By Anonymous Ravikiran, at 12:51 PM  

  • Hi Ravikiran
    I could be that there are more tourists (especially NRI's) visiting Chennai now. This could easily explain the increase in demand for the fancier restaurants.

    I don't think that Raymonds exports to the U.S. but they might export to the U.K. (they were obviously English at one time). But most of their business was (and I think still is) custom tailoring. This requires the customer to actually visit the store. There must be more people demanding this kind of service now.

    Definitely, there is an increase in the demand for these kinds of carpets in the west. This might be related to something that is happening to the carpet market in Iran (which I have no knowledge of). Iran is the largest supplier so if they suddenly increased prices by two or three times, all other suppliers would be affected.

    By Blogger Michael Higgins, at 3:03 PM  

  • hi Michael,

    Most of the development in India has been because of the increase in the purchasing power of the customers. Since 1995, the economy has really opened up very fast and IT companies esp have sprang up in every nook and corner. Also someone had written it very nicely that for every indian who crosses a certain salary level creates numerous other jobs for others(like drivers, maids etc.) This increase has led to the increase in consumer business in India.

    About infrastructure, you are correct in observing that government initiatives have been slower in that aspect. But freeways have started becoming visible in Northern India and the quadrangle project and interlinking of rivers project wouldbe very beneficial for this country. Though we are largely victims of what was described in the paper "crisis of the commons".

    Regards,
    Gaurav Agarwal

    By Anonymous Gaurav Agarwal, at 1:06 AM  

  • Even if Raymonds doesn't export to the US, they'll be buying from factories that also export.

    Also, shoes are an interesting example, because lacking shoes in India is not quite the sign of degrading poverty it would be in a cold country. Especially in South India, providing children with footwear would be very low priority for a poor family, as they'll outgrow them anyway...

    By Anonymous Ravikiran, at 1:01 PM  

  • The Chennai Government's idea of taking care of people is to feed poor people through temples and churches. Your right, our Government does not care for the people. And the people are to blame because we don't question our elected leaders enough.

    By Blogger Quit India, at 2:08 AM  

  • dont u think ur comments r patronizing.. typical to a western observer? true, india has gone thru all the changes u hav mentioned above.. but the basis for the observation of development in india is very much based on only the purchasing power changes.development is not defined within certain restrictive parameters.
    the change in attitude, capacity to accomodate mayb a different style of living ( namely the western style )permeates in some areas of the indian life today more than ever. but tht in no way is an indication of it being for the good or not.

    By Anonymous subtler.me@gmail.com, at 1:33 PM  

  • then what is it??

    sure I feel just technology is not the answer!

    The government does play a role somewhere, or is it perfect blend of capitalism, socialism and democracy working is way??

    By Blogger vinu, at 5:17 AM  

  • your post has been picked up at SlashIndia

    By Anonymous Anonymous, at 3:00 AM  

  • That was very interesting, thanks.

    Chris
    http://amateureconblog.blogspot.com/

    By Blogger Speedmaster, at 9:13 AM  

  • Hello Michael:
    As an economist, surely you must have noticed the incredible amount of liquidity now flowing through the Indian economy. And that's the net result, and scorecard, of THE PROGRESS everybody is talking about. There is nothing subtle about that! I guess if you look for progress on the streets of India, you won't see much difference from ten years ago. But if you look at the macro stuff, the progress is nothing short of startling.

    Ten to fifteen years ago, Indians could not afford to buy consumer durables such as houses, cars and AC's not because they lacked adequate income but because there were no financing option. In other words, there was not enough money in the economy. Today, young couples are buying homes that my parents' generation could afford to but only when they had worked for 20 some years. India now has mortgage lending.

    I would present another not so subtle example of India's incredible economic growth. In the olden days, India could not afford to build any major project - roads, refineries, airports - without some form of foreign aid. World Bank used to be India's favorite uncle for borrowing money. Russia was a close second.

    Today, the various governments in India are paying for multi-billion dollar projects such as the Delhi metro, expressways, and alas, the Central government is paying for defense spending out of their own pocket.

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