Inequality is bad for
economy, democracy and society. Much of the inequality in the US arises
out of rent-seeking -monopoly, exploitive practices by banks and
corporate exploitation of public resources. In the Indian context, you
will call it corruption but we call it corruption American-style, where
you give away natural resources below market prices. India is doing it
now but America has a long history of doing this.
There is a clear
association between inequality and instability. People at the top don't
spend too much, they save a lot but people at the bottom spend
everything. So you redistribute income from the bottom to the top and
demand goes down. That makes an economy weak. That is what happened in
the US. We would have had a weaker economy, but the Feds stepped in by
creating a bubble that created more demand to offset the demand that was
going down. Of course, creating a bubble was creating instability.
The advocates of FDI
have probably put too much emphasis on it. India is in a different
position than a small, developing country. You have a large pool of
entrepreneurs. They are globally savvy, have access to global technology
and they have a lot of wealth. So, if there were large returns to
large-scale supermarkets, the domestic industry would have supplied it.
Not having access to FDI is not an impediment in India. Wal-Mart
is able to procure many goods at lower prices than others because of
the huge buying power they have and will use that power to bring Chinese
goods to India to displace Indian production. So the worry is not so
much about the displacement of the small retail store but displacement
further down the supply chain.
How big is Uttar Pradesh, India’s most populous state? One way of answering the question is to take its total area: 95,000 square miles (246,000 sq km). Another way is to think of it as a country. If Uttar Pradesh were to declare independence, it would be the world’s fifth most populous country (as the map below shows, it has about the same number of residents as Brazil). Yet its economy would only be the size of Qatar, a tiny oil-rich state of fewer than 2m people. That makes it poor on a per person basis. Despite India’s two decades of rapid growth, Uttar Pradesh’s GDP per head is close to that of Kenya. Interestingly Tamil Nadu's GDP has been mentioned as close to that of Angola whereas Maharashtra's is close to Singapore.
A report along with flash presentation in The Economist.Here
