Wednesday, February 10, 2010

Wealth Distribution in India & China

This week BusinessWeek carried an article by John Lee, a fellow at Australia's Center for Independent Studies, a visiting fellow at Washington's Hudson Institute, and the author of Will China Fail?

Some of the comments the article generated can be disregarded as patriotic whiplash. But the article has flaws. What is accurate is that extreme poverty has been reducing, incomes are growing and rising rural purchasing power is a rising trend in India. But wealth distribution is not homogenious in India as the article says it is. One of the other factual flaw of the article was on the share of the rural economy. For one, I don't quite agree that 41 % of  India's GDP is now driven by its rural economy. Rural India is still Agriculture driven Agriculture contributes to something like 16 % of GDP.
The key point John Lee missed is that in India too much wealth is with too few people unlike China which is distributed fairly widely. The net worth of Indian billionaires (52) in dollar terms, according to Forbes, exceeded the networth of Chinese billionaries (79) in dollar terms by $ 100 bn. Bulk of the Indian wealth is anchored in surge of the local financial markets.

The combined fortune of India's 100 richest is $276 billion, almost one-fourth the country's GDP, which incidently is the approx amount of money individual Americans give away to charity every year. It would be very noble if we were to begin measuring our 'richness' by the amount of money we give away rather than make.
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