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India has a hole where its middle class should be (www.economist.com)
362 points by pbhowmic 7 months ago | hide | past | web | 330 comments | favorite





The article is slightly inflating it's claim. There is a middle class. But, there are two things which drive markets in India - one is mentioned in the article, the price and second is utility. Frequent discussions in offices are about - What is the point of a Starbucks coffee when a "similar" thing can be had for much less. Phones tend to be measured on music volume or camera.

I have seen Domnios in a tier 3 city. The opening night had a huge crowd and continued to do so for next 6 months. Then the novelty wore off. Now there are barely 4-5 people even on a weekend night. People fail to see the point of a "costly" pizza when 2-3 meals can be had for same price. But, if there is a grand occasion like birthday, anniversaries people still land up there.


Agreed. Indians are conservative in spending habits and I think that's a good thing. Eating out is the best example. In West eating out is the default choice, even those who can't afford it will choose to eat out. On the contrary in India, eating out is a conscious choice even for very rich.

But I think with new generation, this culture is changing slowly.


It's better to view saving versus spending in economic rather than moralistic terms. Spending supports production of goods and services in the present, including the jobs necessary to produce those goods and services. Saving helps build the capital base that can be used to increase production of goods and services in the future. In a poor country with a growing population, it makes sense to save so you can increase production in the future. But in most of the west, you have the opposite problem. We have more capital than we know what to do with, and are looking forward to stagnant demand in the future due to a stable or even decreasing population. In that case, it makes sense to spend now.

Also, cooking at home doesn’t really make sense from an economic standpoint when you think about it.[1] Like everything else, cooking has economies of scale and specialization, so it’s cheaper to cook for many families at once. It only seems cheaper because we don’t account for the labor and opportunity cost of the (usually) women who stay home to cook the meals.

[1] Assuming you don't assign an intrinsic positive value to the time spent cooking or getting a home-cooked meal. That may be true for many people, but then you're talking about how people relatively value their free time versus time spent cooking, which is a different issue.


> cooking has economies of scale and specialization, so it’s cheaper to cook for many families at once

But eating out also causes negative externalities because the incentives between restaurant and food consumer aren't properly aligned.

Restaurants have every incentive to offer cheap, unhealthy, but more addictive foods because the resulting health issues are externalized towards the buyer and to the rest of society.

It's this incentive structure that gives rise to Supersized sodas, unlimited breadsticks at Olive Garden, etc.

One way to look at it is that the industrialization of food production (including cooking) is better at moving atoms around and making whatever people choose to eat cheaper, but worse at managing the bits of information that help people make wise decisions on what they actually should be eating.

It's also harder to verify that you got what you paid for -- my family used to go to the market every weekend to stock up, and you become intimately familiar with what's in season, what is fresh, and what tastes good, but it's easy for a restaurant to buy cut-rate produce and then dress it up with seasoning and technique.


One interesting side effect of large chains cooking cheap, addictive, shitty food is that they have cornered that market. At least near me, all of the small restaurants make excellent food. They appear to know that they can't compete on price so they compete on quality.

But if they go for high price/high quality, we've come full circle and cooking at home is cheaper again.

Greece. There, people regularly eat out with friends and family. Prices are reasonable, food is same traditional dish you’d make at home. It’s nothing perverse or cunning, just a group kitchen

I think the main reason is culture not pricing per se. Greeks spend where they live, Italians spend muco more on vacations, but not as much where they live.

> Restaurants have every incentive to offer cheap, unhealthy, but more addictive foods because the resulting health issues are externalized towards the buyer

Another excellent example of why I've stopped listening to arguments of the form "X needs to be regulated because it produces such-and-such externality".

"Externalities" aren't just things you as an observer don't like. A negative effect on the buyer can never be an externality.


So you've stopped listening to arguments about things that exist because some people misuse a word?

That's an interesting hypothesis about the economies of home cooked food. I'm not so sure about your conclusion though. Certainly there is no way I could purchase equivalent food that I cook for even a vastly inflated accounting of my own labour costs. I'm not entirely sure why that is, but here are some ideas:

Some food I cook has to be prepared fresh. This becomes a last mile problem, where to have someone else do it they must either already be in my home or travel to it when I want food. There is still a travel problem if we instead say that I have to go somewhere else to eat.

I do cook some food ahead of time (lunch, for example) which would be more feasible. But I still have some problems with this. One of which is customization -- allergies, food preferences etc are numerous and present infinite combinations. That kind of customization eats into economies of scale rapidly.

Freshness is still a problem here -- say you can make food for the next week ahead, but that still basically means the travel/shipping time from the point of 'manufacture' is limited to a few hours at best if refrigerated.

Another problem is it becomes much harder for me to verify what was put in the food. There are strong incentives for a third party to put preservatives, sugar and salt, or cheap substitute ingredients that I don't want. You can work to regulate something like that, but it's expensive to police products with such a short life span.

Maybe no one has tried hard enough to solve this yet, or there are big cultural obstacles, but I'm not convinced that there really are economies of scale here, even if you account for unpaid labour.

These are real economic costs to outsourcing food making. I would love to outsource it, but there just isn't a cost effective way of doing it. I suspect that if the economies of scale here were real someone would already be doing it on a large scale and making a lot of money.


Besides all the points you elaborated, I think even from labor perspective it is cheaper for me to cook in sense I would not get paid my professional or any wage for that matter beyond 8-10 hrs of work. Same as being chauffeured around would be cheaper if I get paid full wage even when driving.

Presumably you value your marginal hour of free time at more than what you could earn driving an Uber/doing Taskrabbit/doing a side hustle instead.

This can't be a serious take, except perhaps for a single person making above $60k/year. One, your marginal labor cost is $0. Most people don't want to work more than their normal job. Two, if you have a family, the idea of eating out for every meal is a non-starter financially. I just cooked dinner for our family. Nothing fancy, just hamburgers. Total cost for four of us was approximately $7. Fresh ingredients, healthy beverages, etc etc. 1/4lb hamburgers, not wimpy ones like McDonalds. If I took the family to a decent restaurant (not fast food) it would cost me at least $40, not counting travel costs.

> Most people don't want to work more than their normal job

Exactly why I don't want to go home to my second "job" as a line cook / dishwasher for an hour every day at a "wage" 5x lower than my day job.


Cooking and eating your own dishes is a very enjoyable activity. Dishwasing can be also - it's a matter of attitude.

I would rather not equate home cooking to a "job". Sure if you consider pure economics it's probably 5x lower. But if you factor in health, then it is 100x your first job. The reason being that it takes just one badly cooked meal to make you sick enough to lose a week or month of your first job. However good the restaurant maybe, you can never know when it may have a bad day.

> One, your marginal labor cost is $0.

They're not, because presumably you value your free time at something greater than $0. Why don't I drive Uber for $15 an hour after work? Because I value those hours more than the $15 I could earn doing something else with them. If I spend an hour cooking and doing the dishes, instead of order Grubhub and throwing away the waste, you have to count the lost value of that hour.


"Spending supports production of goods and services in the present, including the jobs necessary to produce those goods and services. Saving helps build the capital base that can be used to increase production of goods and services in the future."

Saving is also mandatory for people who aren't already rich to be able retire and deal with other crises in life where you need significant money (for example unemployment or health problems).


> Also, cooking at home doesn’t really make sense from an economic standpoint when you think about it

It depends where you live. In some countries, you can't find healthy food outside (e.g. infamously (parts of) the U.S.). In other countries (where cost of labor is high), eating outside is much more expensive than eating home.


where in the US can't you find healthy food "outside"?

Yodsanklai is referring to the mythical food deserts.

We study the causes of “nutritional inequality”: why the wealthy tend to eat more healthfully than the poor in the U.S. Using two event study designs exploiting entry of new supermarkets and households’ moves to healthier neighborhoods, we reject that neighborhood environments have economically meaningful effects on healthy eating. Using a structural demand model, we find that exposing low-income households to the same food availability and prices experienced by high-income households would reduce nutritional inequality by only 9%, while the remaining 91% is driven by differences in demand. In turn, these income-related demand differences are partially explained by education, nutrition knowledge, and regional preferences. These findings contrast with discussions of nutritional inequality that emphasize supply-side issues such as food deserts.

https://web.stanford.edu/~diamondr/AllcottDiamondDube_FoodDe...


The sodium and oil quantities disqualify most places automatically.

It's also more expensive to provide healthy, fresh food and restaurants being famously low margin businesses can't afford to give this to you unless you're in a wealthy area with others who are willing to spend for it.


I did several road trips (mainly in the West) in the US and I clearly remember that I would go for days only eating junk food. It was difficult to find anything else.

I am not moralistic, it's just different. Economically also it does make sense when you consider all the waste these restaurant produces competing with each other and catering to visited taste. They have to over stock or cook and then waste it when it goes unsold. All that cost gets transferred to person who buys so I don't think it comes cheap. It does save time though.

Because people never waste at home? :)

restaurants normally cook to order

> It only seems cheaper because we don’t account for the labor and opportunity cost of the (usually) women who stay home to cook the meals.

Well, there's a big difference in cuisines. For instance, I've been to plenty of great Indian lunch buffets, but most East/Southeast asian food is not amenable to buffet timing. If you saute a leafy green, you need to eat it right away, or else it gets all wilty. There's nothing sadder than a bunch of pathetic looking spinach over a chafing dish or under a heat lamp.

Indian food usually tastes better the next day, after the flavors blend in to each other.

As for making sense from an economic standpoint, we should all be eating lentils and rice with no seasoning, with some vitamin supplements once in a while. Problem is, nobody wants to do that.


> Also, cooking at home doesn’t really make sense from an economic standpoint when you think about it.[1] Like everything else, cooking has economies of scale and specialization, so it’s cheaper to cook for many families at once.

Cheaper for the restaurant, yes. In don't see why it's cheaper for me if you add the restaurant's margin to the price.

Not even talking about taxes, labor, equipment, housing and food safety costs the restaurant has (and will pass on to me) that I don't have when I cook myself.

(The quality control I have is another point, though not a purely economic one)


> It only seems cheaper because we don’t account for the labor and opportunity cost of the (usually) women who stay home to cook the meals.

If you labor for yourself you don't pay taxes.


Well if I use my contactor day rate say £50 pounds an hour cooking for my self costs over £100.

I have only ever spent more than that at a restaurant the #1 Grill at the Balmoral aka the best restaurant in Scotland and that was only because my colleague from the press office persuaded me.


This is an interesting Economic argument but I don't get it. It makes sense only if you are working that extra hour earning £50. Out of which you will spend some on taxes and some on food so your return are just diminished.

Cooking is mostly a leisure activity so you actually do other activities like watching you favourite TV show, calling and catching up with friends and acquaintances. Last but not the least, you actually know what you in putting your body.


You might be working 24hrs a day, but most people don't and they can take that time out of the rest of the day just like for taking a bath, chores etc.

Would you not spend at least a significant chunk of that same hour traveling to/from and waiting at a restaurant?

Cooking at home may seem "uneconomical", but directly interacting with the food you take in, act of cooking etc are valuable in qualitative way, which is hidden by economic reductionism.

I think E. F. Schumacher nailed it in his "Small is beautiful" and other works on how this reductionist view of analyzing behaviors/practices in terms of their to economic utility alone is the demon behind various problems of modernity


> Eating out is the best example. In West eating out is the default choice, even those who can't afford it will choose to eat out.

What? Not at all. Maybe in your country, it is.


Agreed. From my experience living in Spain and Germany, at least for me and friends, eating out is not the norm. We reserve dinners in restaurants for the weekend only. Often also, we cook together, which is lots of fun. Indians cook together in big groups and I love that part of their culture.

American website, so to too many people "The West" is US.

I moved to Western Europe and was shocked how much less people eat out in France/Germany/Netherlands/Belgium.


British website

Depends what is meant, HN or The Economist. I think the parent meant HN.


I work in Washington DC and eating out is very much a default choice.

Yep. It's sometimes easier to eat out downtown than sit in traffic to get home to eat.

Or you could not drive out and just pack your lunch from home.

Isn't eating out part of the job for many people in DC?

It’s actually the other way. Cooking is expensive in US. You spend a lot of money, buy recipe books, spend a whole lot of time cooking a mediocre meal. Now we have more options like Blue Apron but even those are expensive.

> buy recipe books

What the hell? Buy some meat, vegetables. Chop them. Chuck in some soy sauce, garlic and ginger.

Don't like East Asian? Grab that red curry paste that lasts for weeks in the fridge and a can of coconut milk... Buy some meat and vegetables and chuck it in a saucepan. Boil some rice.

Don't like Thai? Buy some meat and vegetables. Chuck them in a saucepan with garlic and some herbs. Boil some pasta.

Don't like Mediterranean? Buy some meat and vegetables. Chuck them in a saucepan with incredible amounts of paprika and some potatoes.

Don't like Hungarian? OK. I'm being slightly flippant but it's really not hard. You get a few basic combinations and you vary them. A few flavourings, sauces or spices and the same basic principles will get you a good meal in 30-45 minutes whatever your preferences are.

I sometimes buy premade sauces (which are usually mediocre but give you a good base) and then add some fresh garlic, chilli etc to make it taste less shop-bought. Just make sure you always have a few staples in (rice, pasta, noodles, garlic, chilli, onion, ginger, soy, canned tomatoes - that kind of thing) and grab some meat and veg in your local shop. You can always knock something together.


Only someone who has not tried very hard to plan and cook meals would think this way, which I admit as an American many of my peers do feel this way.

While it might seem like there is a steep learning curve to cooking, there isn't.


By all means, I cannot understand how cooking can be more expensive than eating out. The only possible exception is if you value the time spent in cooking much more. This I do, and I basically only drink bulletproof and soylent shakes.

$14, bourbon beef rib eye for 2, all up.

$4 of green beans + onions + vinegar and I've got a meal for 2 at less than what it'd cost for a single rib eye at a restaurant.

Value your time? Learn to use a pressure cooker, or slow cooker. Once you get good at prep work, it is 10-15 minutes to prepare all the ingredients and put them into a pot. I've spent that long finding parking in DT areas of major cities, not to mention waiting in line at a restaurant just to get a seat.


I think the whole point of cooking for yourself is so you can get better at it.. The first few times you cook an omelette, it might suck, the Denny's $4 breakfast might be better, but it won't take long for you to surpass that point.

cooking is not expensive in the US. you can make it expensive, especially in buying over priced appliances, utensils, and other kitchen gadgets. however raw foods are well priced and when you work out complete meals.

to avoid mediocre meals work you way up the difficulty chain and make sure to adhere to recipes. the number one way to make a mediocre meal is lack of preparation and the second is to short cut a recipe.

plus when you get the hand of it you can make larger meals and freeze/store what you don't eat then so you have something tasty all week long


what? i cook all the time. better food, cheaper, often quicker. you just need a little bit of skill.

https://www.thekitchn.com/search?q=Cooking+Lessons+from+The+...

There you go. No need to buy any more cookbooks.


Cooking is practically free in the US. Many people in the US don't know how to purchase produce and also choose to purchase gadgets. All you need is a simple pan or a pot and some heat. None of that is expensive. Plus, you can get recipes over the Internet for free when needed.

It's an urban density issue. In Manhattan, groceries are expensive, storage is limited and there are many restaurant options across the price spectrum. So very often you end up buying dinner on your way home, whether shopping for groceries, getting take out or dining out. It turns out the price differential is surprisingly low. (If you don't drink alcohol, which is always substantially cheaper at home. )

"In West eating out is the default choice"

I find it baffling how one can put themselves in a position to speak on behalf of the entire West.


Perhaps it's a subtle meta-commentary on the linked article itself that one can't make such huge generalisations ;)

West = Western California obviously!

The entire world is to your west, including you.

Mid-Southern Western California, obviously

I think it's really more of a class marker than a "Western" thing.

Eating out is certainly the default choice for professionals in New York, London, Moscow, Dubai, Singapore, San Francisco, or Hong Kong.


How can you speak for every single one of the 800k people living in San Francisco? I doubt all SFers eat out every single day. It is the default choice for you and your circle of friends perhaps, but I don't think you can generalize that to everyone living in the entire city.

I wouldn't say it's the default choice in Moscow...

In the US*. In Europe, cooking is still by far how most people eat. It's one of those things where our cultures drifted apart over the years.

I think "eating out is the default" was hyperbole? If it's meant literally, it seems simply untrue in the US as well. I can believe that we eat out more, but most people I know eat breakfast and dinner at home and take leftovers to work for lunch. Are there statistics about this?

Remember that HN readers are demographically unrepresentative. Incomes are higher, urbanization is higher, professions are wildly skewed towards software, age is, I think, lower.

In my experience, most people eat most of their meals at home, and lunch is the most likely meal to be eaten out. But some people eat out all the time. For most of my 20s I went out for lunch every day. Now I do so once a month or so on average.


There are very few fast food chains that originate in India - people either cook at home or eat home cooked food out of roadside stalls if they don't have the time to cook. There are a very few indigenous restaurants, even fewer chains. It's simply not part of the culture, in the way that McDonalds is in the US. Only the rich and upwardly mobile go into a restaurant / fast food joint on a regular basis.

To put this in perspective, a meal at McDonalds is affordable to most, if not all Americans. But the cheapest meal at a fast food joint (outside of a roadside stall) is affordable only to a minority.


...eat home cooked food out of roadside stalls if they don't have the time to cook.

I have loved this option, when I've visited places that have it. Much better than "McDonalds", every time. Life in USA is poorer because we don't have this.


Exactly, dhaba are the definition of fast food! They aren't chain restaurants, but it seems like everyone loves them (or has an opinion) and goes to them ...

A huge percentage of Houstonians would eat out for lunch and maybe after work as well, even with a family. In a city of countless inexpensive restaurants, eating out might be the default for a lot more people here.

Perhaps it's not everywhere. I have lived in UK, California, and Netherlands and my experience comes from there.

My point still hold though. Indians still have a value oriented view to buying. Something is not bought just because you fancy it.But I think this is changing slowly. New generation is much more willing to spend for fun.


You’ve lived in the Netherlands, and you experienced people eating out there as a default?

That is entirely opposite to my experience. I’m genuinely struggling to understand how you’ve drawn that conclusion.


To be fair, going 'out' for lunch (i.e., going for a sandwich) is commom and I'd say standard in the Netherlands (in some professions). Going out for dinner not at all.

Netherlands has been all home cooked meals for me as well

> On the contrary in India, eating out is a conscious choice even for very rich.

It's the same in Pakistan, a country similar to India in many aspects, and I think it also has other causes besides economy/frugality:

– The rich have household "servants" to cook for them and their kids at any time.

– Even for the less than "rich" the women are generally expected (and usually content) to stay at home and cook for the family.

So why bother eating out? It's usually an expression of "going out"; doing something enjoyable/entertaining, taking advantage of a day off, a treat for the kids, or to hang out with friends you can't host at home.


Edit: I should add "and/or resigned" next to "usually content" up there.

Women in South-Asian and Middle-Eastern countries are also expected to cook for guests. The males hosting while the women hosts make tea for the guests is an iconic feature [TODO: find a better term to describe that] of society there.


> eating out is a conscious choice even for very rich.

The rich in India have cooks that work for slave wages. The rich don't know how to drive because it is so cheap to have a chauffeur.

I knew an Indian kid in Berkeley, CA who didn't get into any American medical schools. So his parents gave a big "donation" to a medical school in India and got him in. They got him a flat, a maid and a cook. That's what he had at age 22.


Just for discussion's purpose - how do you explain the rising diabetes rate in India through this lens? Data suggests that something, whether it's bad food or soda, is getting more mainstream adoption.

Traditional Indian food is often very rich, with liberal use of oil and ghee. Deep-fried snacks like pakora, samosa and aloo tikki are widely popular. Indian sweets like jalebi, laddu and gulab jamun are staggeringly calorific. With rising incomes, a far wider section of society is able to eat plentifully.

There's almost certainly a substantial genetic component. Punjabi Sikhs have a high rate of type 2 diabetes, despite below-average rates of obesity and tobacco and alcohol use. GWAS data suggests that most ethnic groups in India have an elevated genetic risk of type 2 diabetes.

https://www.ncbi.nlm.nih.gov/pubmed/23300278/

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3636658/


> Traditional Indian food is often very rich, with liberal use of oil and ghee. Deep-fried snacks like pakora, samosa and aloo tikki are widely popular. Indian sweets like jalebi, laddu and gulab jamun are staggeringly calorific. With rising incomes, a far wider section of society is able to eat plentifully.

While these are commonly found in some major cities in India, all of the items you mentioned are limited to specific regions of the country and few are traditionally Indian. I'm not trying to be pedantic, but I think it's important to keep in mind the timeline of these foods in India when considering recent trends in health.


I'll grant you that I oversimplified, but I think the broader point stands - the obesity problem in India isn't caused by the importation of Western fast-food culture, but is largely homegrown.

"Traditional" is a debatable term, but India has a far longer history of using sugar than the west. Jaggery and molasses are praised as health foods in Ayurveda, which isn't exactly helpful when you're dealing with a diabetes epidemic.


Thank you for the links, this was really eye opening for me.

Good point. I think this is because Indians are still sticking to old carb and sweet ricm diet. This was fine when a lot of work was done by hand.

In addition to this sedentary is the another default choice of us Indians.


It’s a numbers issue. From a small base, any rise is a large percentage. And in India the small bases are large in absolute numbers. So if you have 50M people in your middle class and they drink an increasing number of sugary drinks, the rate of diabetes can shoot up.

This is an unsubstantiated claim, see the comment above that referenced NIH studies discussing a genetic link between diabetes w.r.t. a subset of Indians.

Ever hear of a milk bar? It’s like if your grandma opened a fast food place and served her best schnitzel, mashed potatoes, & coleslaw.

I first came across them in Eastern Europe, and they’re amazing. Home cooked meal fast for less than it costs to make it yourself.

Kinda like the ikea cafeteria but with better food.

Apparently there were dozens of milk bars in San Francisco generations ago


Can't tell for other countries, but most of those that are still triving in Poland after system change are subsided by local goverments.

Eating out in the west is expensive. Eating out in the developing world is comparatively cheaper, if you are middle class, you can eat out everyday (or get delivery) and it won’t make a dent in your budget. In china, it really wasn’t uncommon at all, hence the density of restaurants being much higher than in the west. India felt similar when I visited, much higher density of restaurants/street food than in most western cities.

Yeah street food in much of the developing world is incredibly affordable.

I remember getting incredible Banh Mis in Vietnam for 15-20k dong (less than $1).


Or you have servants to cook for you

My parents (in their early 70s) will not even entertain the idea of eating out if they're busy. If they come home at 10pm, they'll still find a way to cook something rather than order something from outside.

It's just something they don't think of.


"West eating out is the default choice, even those who can't afford it will choose to eat out."

This is not my experience in UK. Are you American?


> In West eating out is the default choice, even those who can't afford it will choose to eat out. On the contrary in India, eating out is a conscious choice even for very rich.

But don't they also have cooks who make elaborate meals for them?


In my limited experience, families with working women were very happy to eat out. Families with stay-at-home wives or who lived with parents were often keen to invite me for family dinners. Many did have "servants".

I don't want to overthink this but some of the value in "eating in" sometimes feels like taking advantage of the fact that there's usually a woman at home whose 'job' it is to cook.

> > In West eating out is the default choice

Huh? if you're fresh out of school, maybe. Certainly not in families.

> > even those who can't afford it will choose to eat out

How does that even work? Anyone piling on debt to eat is, well, seriously lacking in financial planning.


No, only a very few houses have cooks. It is usually the housewives that cook the food for the whole family.

Would be interesting to look at this through the lens of 1 vs. 2 working adults in a household.

I grew up solidly middle class and we never went out to eat besides occasional fast food if we were on a roadtrip, I wasn't even allowed to purchase school lunches. However, I had a stay at home mom that cooked everything!

Now, that I am an adult none of my friends that I would call "middle class" have a spouse that stays at home. Only those families that are very well-off have 1 adult that doesn't have to work and they tend to be rich enough that cooking most meals vs. going out doesn't matter much for them.

I think this is a case where "middle class" can mean a million different things. I don't think someone is colloquially middle class if they can't afford the crappiest house within 2 hours of their office (slight exceptions for major cities), yet others define it differently.


Sibling comment by 'firstplacelast seems to have been downvoted to [dead]? Why? Why are many of her comments in that state? I can't see anything in her history that should have led to a hellban.

> In West eating out is the default choice, even those who can't afford it will choose to eat out.

In my experience this is not true at all. I live in Australia, I host a lot of travellers from around the world: Western Europeans (English, French, Italians, Germans), Asians (Vietnamese, Taiwanese, Chinese), North Americans (US, Canada), South Americans (Chilean, Argentinian). None of these people eat out be default.


Not really. The new generation hires cooks. Works out far cheaper than eating out. The demand for cooks has skyrocketed in my neighborhood.

Hold on, going to a Domino’s Pizza qualifies as eating out? In my book it’s “I’m too drunk to even think what I’m doing, would be better of hounding a couple sandwiches and an ibuprofen for the morning hangover...”

Yes. In my country we don't have any of the american fast food. I guarantee you if Mcdonalds opens shop there same thing would happen. HN readers seem to be very unaware of how different lifestyle/culture is across the developing world.

I remember when McDonalds opened its first venue in Piazza di Spagna, cries of wonder and sighs of sacrilege. That was Italy 20-something years ago... its not the stage of economic development that matters, but the amount of subjection to US lifestyle

Pizza cost as much as it in US but people earn 1/10th of US income. So in India unless you are in top 1% of economic pyramid even a chain pizza has high aspirational value. Think of it as <1% people in India earn more than $25K per year. And 25K in salaries are at places where $200K apartment is normal thing.

I would have agreed with you that conservative spending is a good thing a year ago. But, after ready many economics books and data analyzing many other countries including USA, China etc. I'm convinced that non-conservative spending would/could improve businesses and overall progress (GDP, Health, Living Index) of a country. I feel like India is missing out on this by a long margin. If you compare the number of business loans and the amount (personal loans, other loans as well) across many countries it might show what I wanna point out.

Any thoughts?


> Any thoughts?

Yes. My thought is that when one is planning for others to live a certain way to benefit society, that telling them to go into debt to benefit society may work over the long term over a large population. However, this only "works" if you treat people as interchangeable numbers, and if too many of the people deviate from your plan, the debt driven society will stop working as planned.

However, when one runs their own budget which needs to last through the ups and down, and presumably get one into a better place than they started, saving or investing is better than going into debt.

Just because there are multiple books advocating you spend your money ... well - the old adage is, "Don't believe everything you read."


> Yes. My thought is that when one is planning for others to live a certain way to benefit society, that telling them to go into debt to benefit society may work over the long term over a large population. However, this only "works" if you treat people as interchangeable numbers, and if too many of the people deviate from your plan, the debt driven society will stop working as planned.

Agree very much!

> However, when one runs their own budget which needs to last through the ups and down, and presumably get one into a better place than they started, saving or investing is better than going into debt.

I think I should have clarified, I'm talking from a Macroeconomic perspective, when spending boosts economies and saving could lead to devastating deflation. But, on a Microeconomic perspective, totally agree with you.

> Just because there are multiple books advocating you spend your money ... well - the old adage is, "Don't believe everything you read."

Thank you sir for reminding me :)


How do people buying (for example) expensive coffee at Starbucks improve "Health, Living Index"? Can you walk me through the process?

Well, off the top of my head, expensive coffee at Starbucks usually has better nutrition than road-side chai stalls, in terms of milk dilution, calcium content, etc. which leads to stronger bones, fewer fractures and we enter the cycle of health improvement (Refer Poor Economics by Abhijit Banerjee). This is just something I just came up with.

I'm not arguing that expensive spending per se will improve living standards, but they do tend to boost markets, create new markets, improve the standard of living etc. Debt is one such expensive spending


Buying an expensive coffee from the largest coffee brand in the world will not open new markets, increase competetion, etc. That seems tautological

What will do what you seem to want is buying from the 'road-side chai stalls' you say are dangerous?? Which is a pretty strange claim to make but I can almost see where you're coming from


How much milk does coffee have to make a meaningful impact. What about sugar in coffee, we Indians love sugar.

What about the fact that most Indians are lactose intolerant?


I think I was trying to point out, debt-driven economics is not such a bad option

I wondered about this. I have some Indian coworkers who make a lot more than me who rotate between a tiny amount of clothes.

While what you say is true, the article banks on data, and the numbers are abysmal compared to China. Only 8M Indians earn over $20K a year while that number is orders of magnitude higher in China. The rate at which people transitioned into that income bracket also kept Pace with overall economic growth of the nation in China but India has shown aberrations here.

The effects can also be felt overseas. The Chinese are less likely to put up with long wait times for permanent residency in the USA, and simply return home as opportunities and life back home can be just as lucrative. Not the case for Indians, clearly


> Only 8M Indians earn over $20K a year

This is the most underreported thing about India.

> The Chinese are less likely to put up with long wait times for permanent residency in the USA, and simply return home as opportunities and life back home can be just as lucrative.

In my experience, wealthy Chinese are willing to put up with nearly anything to obtain residency in a western country without deadly levels of smog or poisoned baby formula.


You are making the articles point Indians don't have the disposable income to spend on Starbucks which becomes a luxury.

Possibly, though India's savings rate is also >30%, whereas the US's savings rate is ~5%. Median American family retires with like less than one year of income saved up...

Much harder to throw money at luxuries when you're saving a lot.


> Much harder to throw money at luxuries when you're saving a lot.

I think this misses the larger point that Indians overall don't have that much money in hand to spend on luxuries.

I believe GNI per capita ppp [1] is the right comparison. (someone please correct if I'm wrong.) For india thats ~ $6K whereas for the US its ~ $57.5K, almost 10 times. (Also while the savings rate is more, the actual amount saved looks greater for the US.)

I think the parent is right, grand parent just proves the point of the article.

[1] https://en.wikipedia.org/wiki/List_of_countries_by_GNI_(PPP)...


American problem is credit they spent too much of what they don't have to live beyond their means and spend the rest of the life paying it off so do not have savings. The 25% extra that indians are saving is the 25% that american are using to pay for their education, healthcare and car loans etc.

Do you think maybe part of the fiscal restraint comes from them not having much money? In the US people frequent chains that cost much more than cheaper options because it’s still affordable food for their income level. More expensive restaurants get the same reaction in the US. (Why pay $30 for a meal when I can get one for $10.)

I don’t see it as a cultural difference so much as a result of what the article is referring to.


> "People fail to see the point of a "costly" pizza when 2-3 meals can be had for same price. But, if there is a grand occasion like birthday, anniversaries people still land up there."

Ok. But isn't disposal income one of the properties of Middle Class? The purchase of costly things only for special occasions is a lower (?) tier than middle class.

Perhaps the average income appears sufficient. But without that money changing hands the broader economy remains constricted. That is, if ya wanna have a Middle Class ya gotta act like a Middle Class.


Wait, in India I thought that the person-whose-birthday-it-is would be the person that 'treats' everyone else. Typically, you hide that info on your birthday, at least among non family members.

> I thought that the person-whose-birthday-it-is would be the person that 'treats' everyone else.

Yes that is the unwritten rule.


Yes, at least it was the thing when I was in college or working there.

This feels exactly like China in 1990s.

I'm sure the neocons would probably write this off as India being in the early stages of of Kuznets Curve (1), but it's probably a case of what Piketty found when writing 'Capital in the Twenty-First Century'. Ie, in developed nations, the rate of return on capital greater exceeds the rate of economic growth, which creates an increasing gap between rich and poor.

It's difficult to see how they will mobilise these people to become consumers, when nothing suggests a disruption of Indian wealth becoming increasingly concentrated.

(1) https://en.wikipedia.org/wiki/Kuznets_curve


One of the big problems in Indian economic statistics is that a lot of wealth and income if the "middle class" and the rich actually doesn't show up in official statistics. Their income is in what's known as "black money". There are a lot more rich ajd middle class families in India than show up in official statistics. That's precisely why socio economic classes in India used by economists and marketers are defined by a combination of education, occupation and device ownership rather than income.

Source: Am a Market researcher and analyst who segmented Indian market for a major corporate


I’m far from expert on this but how long can India be considered a “developing” nation. It’s starting to feel like continuing to call Dropbox a “startup”

I think that at this point we classify countries as developed mostly by IHDI/HDI: (Inequality adjusted) Human Development Index. I'm from Romania, which I would classify as developing:

Romanian HDI: 0.802, IHDI: 0.714.

Indian HDI: 0.624, IHDI: 0.454

I think India still has a long way to go. So does China, in my opinion.


> I’m far from expert on this but how long can India be considered a “developing” nation

Certainly as long as the Ganges is not safe for human bathing or anything because there's feces, animal carcasses and other waste openly floating around (e.g. https://www.ft.com/content/dadfae24-b23e-11e4-b380-00144feab...).

The problem with India seems to be that it's ultra polarized - you got the parts that have been launching rockets into space since 1975 (one even going to Mars), built nuclear weapons, use nuclear power... and you have the parts that have no roads, no sewage system, no nothing and which regularly make global headlines whenever a journalist goes off the big cities and travels into the deep rural areas and sees stuff that's unbelievable for him.


You don't have to even leave the big cities. In Gurgaon, India's "cyber city" next to Delhi, home to lots of shiny skyscrapers and glitzy shopping malls, you can drive along the main drag MG Road and see women squatting by the roadside manually pounding bricks to rubble, 8-year-olds operating food stalls next to the No Child Labor Certified factory, beggars with babies so sick they're turning blue and shitting themselves (amount of fucks given by passersby: zero), emaciated cows wandering on four-lane freeways, a naked swami doing his thing in a freeway offramp, families of construction workers living in shelters built from concrete barriers and a dusty tarp, etc.

This isn't something unique to India. I seem to remember reading an article somewhere that rural black communities in Alabama face similar issues. Granted, that seems to be more of an exception.

But what I took away from it is that communities that participate in the economic system do well for themselves and generate prosperity for themselves whereas those that don't (including most rural Indian villages) will continue to suffer from these issues.


North Korea now has ICBMs and nuclear weapons. This just shows what a committed state can achieve once it has it's priorities in order.

In India the classes are just looking out for themselves and keep looting each other when they have the opportunity to do so.

Take Bangalore now. The congress government here, has been openly siphoning money from the treasury for election funds or whatever. Now the state elections are going to be held in a few months, they are repairing roads, paying municipal workers and doing things they should have been doing throughout their term.

Now people here take exception to some European/American saying, why the hell does India have a space program etc when you have so many basic problems to fix. I take offense to that as well. Mainly because saving a small amount of money on that isn't automatically going to uplift hundreds of millions of impoverished Indians. It's hardly a drop in the bucket. Also because so many young people here graduate with engineering degrees, and they need something to look forward to.

The problem is that the people in charge realize that organizations like ISRO have to be shielded from the very system they govern and nurtured. They are OK with the same system perpetuating itself and hamstringing everything else. And it's not in their list of priorities to stop and reform this.


India's GDP per capita (in US$ inflation adjusted) has quadrupled since 2000, if that isn't developing then what is?

https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9...


What, you don’t think India is developing? Cause it sure as hell isn’t developed. Malnutrition is increasing in India as people have more opportunity to eat tasty but not particularly nutritious food. Open defecation is common over very large parts of the country. If you go to Mumbai there are migrant workers sleeping on the street all over the place. It’s getting better but there’s no way in hell it’s developed.

The classification as "developing" depends on what is being tracked. If measuring human development is a criteria to be evaluated, the UNDP tracks and computes since 1990 [0] the Human Development Index (HDI)[1] for several countries including India. India's HDI [2] is low relative to a country like Brazil [3].

[0] http://hdr.undp.org/en/data

[1] http://hdr.undp.org/en/content/human-development-index-hdi

[2] http://hdr.undp.org/en/countries/profiles/IND

[3] http://hdr.undp.org/en/countries/profiles/BRA


The notion of considering a country “developing” or “developed” is quite outdated. It made some sense fifty or forty years ago but today most countries are somewhere in between and it’s not really possible to group countries into two groups “developed” and “developing” anymore.

Hans Rosling has made some interesting talks on this. Worth watching.

https://www.ted.com/talks/hans_rosling_at_state


most of the Indian population still doesn't have access to toilets

It is surely a bad name, that imply that things are improving. But there is a distinguished set of countries that are not developed, and not undeveloped either.

India's wealth gap is absolutely jarring. There are beautiful fenced mansions with manicured lawns and just outside the fence homeless kids setting up fires for the night.

Same in SF, you see Ferraris driving along Market St. while homeless people shoot up or defecate on the sidewalk.

Very much not the same. In the United States sleeping on the street is associated with addiction and mental illness, or in teenagers with abuse. In India it is commonplace for high-functioning people to sleep on the streets on in illegally constructed shacks with no water or sanitation, for purely economic reasons.

There are a lot of articles published saying half of New Yorkers are a single paycheck away from homelessness, 60% of Americans are a single emergency expense from homelessness, etc., but every month lots of those people lose their jobs and have emergency expenses, and they aren't flooding onto the street or into emergency shelters. Those alarming-sounding numbers come with really important caveats like "without relying on family" and "without relying on friends" or even "without going into debt." Having access to those resources is a really important aspect of social class. Even the people shitting in the sidewalk in San Francisco, a lot of them have friends and family who have money and would love to help them if they could figure out how. The difference when you're homeless in India is that everybody you know is either in the same circumstances as you or knows so many people who are that it doesn't make sense to single you out for help.


There is a safety net here, if for example you get homeless after working or are disabled. There is no such thing in India. Sure you can have an employee contributed benefits plan(if you are lucky to have one of those employers). If you became poor after 20 years of working you are in the same boat as some poor kid teen who was born on the street.

That's a mental health issue in the US. Every city has shelters, food kitchens, etc so if you are mentally stable, clean of drugs, and not too proud to take charity you don't need to be on the streets for long.

Where the US system fails is with mentally unstable people and drug addicts. This is nowhere near the same thing as an entire lower class of 10s of millions willing to work that are still homeless.


Not just willing to work, substantial number of them are working. It is just that income is too low or any kind housing is too expensive.

No, it's not close to the same. There is homelessness in SF, but the level of poverty in India is breathtaking.

Places like India have a much wider spectrum of extremes between incredible poverty and incredible wealth. North America has a subset of that spectrum.

If you don't believe this, I challenge you to drop yourself into 0-star in any place like India and see how it stretches you.


"I don't know what the truth is, but let me idly speculate in favor of my political team"

That's a very succinct way of putting it, thanks.

Almost every economics discussion at these very high levels suffer from sweeping all-encompassing generalizations (about an entire country) that happen to fit perfectly neatly into their political worldview.

Especially for India, which is notorious for having a government economic regulations that fluctuate wildly depending on what province/city you're in. Where you can drive a truck across the country and require 5 different licences/paperwork just to appease each local arrangement. Not a good country to generalize.

A great overview of the complexity of the economy of India: https://www.youtube.com/watch?v=hVwIZzGHxwc


Why should we try to change them into a consumer economy?

I read the article but the problem was identified near the beginning.

The top 1% of Indian adults, a rich enclave of 8m inhabitants making at least $20,000 a year...


What is the problem of wealth being concentrated? Common people do not need wealth to earn money, they earn money from jobs. Gradually business will see it needs consumers to grow further and some measures will be taken to make these people more productive to be able to earn and spend, as rich don't exist in a vacuum.

Besides the scientifically proven downsides for society and general human wellbeing that inequality is known to cause, why should people’s lives be improved or not at the whim of “business” and the “non-common”, most of whom are the beneficiaries of inherited wealth or a gamed system? What gives people the right to live a parasitic, non-contributory existence at the expense of the labour of other humans? You seem to be systematising and forgetting that you are talking about billions of real lives?

> Besides the scientifically proven downsides for society and general human wellbeing that inequality is known to cause .

(Honest question) do you have some citations where this has been studied, specifically in cases where the low-end of the inequality spectrum isn't poor? (i.e., to demonstrate the inequality and not the absolute state is the culprit)


>What is the problem of wealth being concentrated?

The first problem is that wealth means control (e.g. from how VCs control opportunities to create businesses through their funding, to how the rich can buy politicians and laws).

So concentrated wealth = less democratic country (not in electing government, in actual control of what's to be done and opportunities).

Second problem is that concentrated wealth is not used in directly buying, so it sits out of circulation. A rich person can have 95% of its income sit in idle investments, land, etc, and still live like king with 5% of his earnings per year, while a middle class/working class person will spend most (say 70%-100%) of what they earn, thus keeping the economy going.

And when that 95% the rich keep is much much bigger than the aggregated 70% of what the majority of working people spend (e.g. because 1% of the people control 80% of the wealth), then you have a stifled economy and a dwindling middle class.

And lots of other issues, but those are quite major...


What do you mean by idle investments? land is presumably rented out to farmers so its not idle

Land could be real estate, which, if not just sitting idle, it's still the epitome of rent-seeking.

Plus, land rented to farmers is productive because of the farmers, not because of the land -- and would still be a sinkhole of money from the middle class (the farmers) to the rich person doing the renting, not entering circulation like the money a farmer would make (to buy animal food, seeds, whatever, and to live their family).


You know that a large proportion of the returns from the stockmarket are made by reinvesting dividends.

"rent seeking" seems to either be used by people who don't understand how trade/investment works or want something or subsidies'

or its a dog whistle that tends to go with gold bugs, cryptocurrency fantasists and then on to much less pleasant things


i could actually respect libertarians if you guys would stop pretending that trickle down is a thing and embraced that a society with .1% superrich, 19-20% well off experts and 80% serfs is the natural endgame of your ideology

Don't blame libertarianism for the state having broken the market so badly that wealth inevitably gets funneled to the few. Crony capitalism is not libertarian, rabidly competitive markets are.

The natural end of that is generally going to be prosperity across the board, and hopefully a government financially solvent enough to actually pay for those in need and essential services, all of which should be lower as a result of a better market doing much of that naturally.


I have never seen even a simple argument for why your second paragraph should be true.

On the other hand I understand the principle that money makes more money (the principle of investment and ROI), and I don't see how "competitive market" tackles this.

It basically feels like the capitalism starts off from fairly-level playing field, but over time becomes more and more unstable, the gap ever-widening. We have already seen it fall (at the beginning of communist regimes), and I'm afraid we'll see it fall again.

That's a pessimist view, which I hope won't turn out to be true, but I'd be interested in exploring alternatives.


> the principle that money makes more money (the principle of investment and ROI), and I don't see how "competitive market" tackles this.

It doesn't address that because it doesn't make that argument, in that way. One of its starting axioms is that economy is a positive sum game. In the case of your statement, it might argue that (in the very general sense) money makes more money in a positive sum way -- more total wealth in the economy. Then to the latter it merely says that business that are better at making money (and generally, wealth) get to out compete those that don't. Its premise is it optimizes for wealth creation of the entire economy. I think that's the place to take the argument -- either that you fundamentally disagree with that premise or some outcome of it.

> It basically feels like the capitalism starts off from fairly-level playing field

Historically I don't think so. I"m not expert but read a lot and I'm currently under the impression that economies were historically locked down by government or tightly coupled government / mercantile entities.


In truly competitive markets it wouldn't be so easy to park money for guaranteed returns.

>Don't blame libertarianism for the state having broken the market so badly that wealth inevitably gets funneled to the few.

It's not a market problem. Even in a perfect market, a rich person would have most of its assets sitting or slowly moving, whereas a middle/working class person would spend their income.

So one gets the economy moving, while too much concentrated wealth stifles it.


A rich person would have most of their assets invested, existing in the form of factory equipment, buildingsin active use, truck fleets, etc. That is, pretty much moving.

I don't think you have any idea what "libertarianism" is, as most of your post describes a well-functioning social democracy, which is the exact opposite of libertarianism.

Why do you claim it's the "exact opposite"?

What happens in libertarianism with under performers?

Soylent finally gets that ‘Green’ variety we all crave?

Edit: Love your name, love the reference.


Trickle down is not the libertarian ideology. No serious academic economist AFAIK actively promotes "trickle down". It's a left-leaning strawman.

Right-wingers (not necessarily libertarians) use it in the media all the time.

the term "trickle down economics" is to the right as "political correctness" is to the left. both terms were created as strawmen to smear the other side's position.

Really? When? I learned that the term was coined in derision to Reagan-era policies.

Without the rent seeking enabled by government-enforced ownership of natural resources, inequality would be greatly diminished. My biggest problem with most libertarians is that they act as if the government's largest and most pervasive intervention in free markets is just a natural law and then claim that any intervention to mitigate the effects of that intervention is a horrible infringement on freedom.

Royalty, bourgeoisie and peasants?

> Gradually business will see it needs consumers to grow further and some measures will be taken to make these people more productive to be able to earn and spend

To rephrase: You're saying that the "common" people are just not working hard enough and the rich need to take measures to make them work harder so that they can be better consumers.

It's the "common peoples" fault that there is no middle class because they don't work hard enough.

According to you...India has a half billion lazy people.


Here's a pretty decent technical note which covers definitions and quantifies 'middle class' in India: https://www.cgdev.org/doc/2013_MiddleClassIndia_TechnicalNot...

Most data that I'm familiar with is from the National Survey of Household Income and Expenditure (NSHIE) by the NCAER, or the NSS by the gov. But they hold these surveys rarely, I'm hoping to see an update to the 2011 NSHIE data for example, this year.

Another decent study building on NSHIE data: http://www.thesuniljain.com/files/thirdparty/NCAER%20How%20I...

Does anyone know where to get more recent data?

In any case, the middle class in India is quite small, probably around 100m people, but definitely not above 200m. What's somewhat left unsaid by the Economist is that growth prospects are pretty good, with the middle class group doubling less than every decade, in addition to growth of the rich group.

India will also be this century's most populous country, outgrowing China probably next decade and will keep growing a few decades after China's population will have started shrinking. And looking at the age-demographics, China is headed into difficult territory whereas India will have mostly young (i.e. productive) population for a long time.

So I agree with most of this article, but it definitely also leaves a few things unsaid. In terms of India's attractiveness as a new global market, I'm cautiously more optimistic about India's position than most, but not by much.


I don't know how to better put this, but the Economist comes off as very condescending whenever it talks about countries not in the West. India doesn't have a hole where its middle class should be - it is just smaller than what you would expect for a country of its size. I grew up in India and probably went from lower middle class to a upper middle class with time. The Indian middle class is not on par with with the American middle class - they can be much poorer, and have different priorities and often span a wide spectrum. And to be honest, I don't see why rampant consumerism is good for any society. India has a huge native market for Indian consumers - it is the fact that so many people cannot afford those goods is appalling.

The argument they’re making is that those people should be able to afford those goods and the fact that they cannot at this point in time means there’s a massive hole where there should be a middle class.

This assessment seems to suggest that either the Indian economy has stalled or there’s rampant corruption or both or something else altogether entirely.

It seems they’re merely making an observation.


Speaking as someone who grew up in India, I've noticed a very real lack of understanding of non-western countries by Western media (specifically India, but I'm guessing if there is so much misunderstanding about an English speaking country, probably more so about other non-English speaking ones). I was rather appalled by articles in NYT, Times and Economist in particular. Sometimes even BBC, although that usually got it mostly right.

I have noticed that NYT has become a LOT better in its coverage of India recently. I wonder if that's because they've hired quality talent in the country? Whatever the reason, I'm glad for that change.


Care to elaborate what sorts of lack of understanding you see?

Entire benefit of globalization in India has only reached the top 10% (or maybe 1%). If you think about Indian exports it is mostly concentrated in IT and high skill crafts like jewelry. Only a few Indians can take benefit of that.

What we need is a system which can mass export cheap goods like clothes or shoes. China and Korea have crawled out of poverty by following this simple formula of exporting cheap goods which need some basic skills.

But sadly even Indias much smaller neighbor like Bangladesh is doing far better in such sectors. Archaic labor laws are still holding back India in mass manufacturing


Automation is rapidly closing that window.

>The fact that barely a quarter of women work—a share that has seen a precipitous decline in the past decade

Wait, fewer women are working in India over time? Why is that?


They say it's a smaller share, which doesn't necessarily mean fewer women, depending on what is counted as "work".

It could be (I'm just guessing here), that the type of work that men do has been "legalized" (and hence counted) to a much greater extent than the type of work that women predominantly do.


Most people in India work in the informal sector and are not counted.

That also means these most people won’t have acceptable work conditions and other employee rights that the formal sector has.

Or they work on farms, or they build crafts as craftsmen/craftswomen in their own workshops, etc. Definition is very broad.

http://www.bbc.com/news/world-asia-india-39945473

"Improved stability in family income can be understood as a disincentive for female household members to join the labour force"


I don't have data to back it up. But this simply is not correct. Social norms have changed over the last few decades and that alone means the percentage of working women have gone up. Very few of the women of my age group are housewives, which was the default a few decades back.

Few points which i would like to add:

1. India does have very large middle class population and most of their income is unaccounted.

2. Majority of middle class Indians who belong to certain religion/caste hide their income so as to get many freebies and reservation benefits.

3. Very few rich individuals pay taxes and file correct income tax return. Government is very much responsible for this as filling a simple itr form consist of many different sections and people avoid getting into official paperwork.

4. Though poor people are given various subsidies on paper but because of lack of education they barely know all the scehmes running around them and politicians eat most of their money.

5. Longer judicial proceedings make it even more tough for the system to catch corrupt individuals and implement good policies.


> Very few rich individuals pay taxes and file correct income tax return. Government is very much responsible for this as filling a simple itr form consist of many different sections and people avoid getting into official paperwork.

the complexity of the form is not the reason people avoid paying taxes - people don't pay taxes because they can get away with it.


> People don't pay taxes because they can get away with it.

This certainly is one of the reason behind hiding income. But majority of the middle class don't even file itr 1 form (for income below 2.5 lakhs per annum ). For filling an itr 1 form, people don't need to pay any tax.

Though people are not paying taxes but the money is being accounted and my point here is that of accountability.

However, if the income was recorded the analysis of stats could have been done more efficiently.


> India does have very large middle class population and most of their income is unaccounted.

At least until Nov 2016, wouldn't this income have been cash given that cash transactions accounted for 95+% of transactions[1]? (Percentage by total amount would have been useful too but I couldn't find that stat.) If these were 'unaccounted' then demonetization would have caught that. But only 1% of banned currency wasn't deposited (as of Aug 2017) [2]. The initial estimates given were for about 20% to not show up [3]. That didn't turn out to be the case.

So while I'm sure there is unaccounted income, I'm not sure this is most of the income of a very large middle class.

[1] https://www.forbes.com/sites/wadeshepard/2016/12/14/inside-i...

[2]https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...

[3] https://www.forbes.com/sites/wadeshepard/2016/12/10/indias-c...


Very good point but i believe the cash in hand doesn't account for all the money you have.

There are many facets for accountability. And I don't think that any middle class person having more cash in hand while exchanging his cash could potentially prove that his money is accountable because there exist some form of money which he has given to some other person or may be has invested in some business.

My point is by totalling out just the amount of cash maybe 5-10k rupees the income cannot be accounted.


> .. the cash in hand doesn't account for all the money you have.

Yes, but your original point I was addressing wasn't about all the money you have but specifically income.

My point is that income is coming from some transactions and 95% of transactions were cash based pre Nov 2017. And only 1% of cash outstanding was unaccounted for after demonetization.

> My point is by totalling out just the amount of cash maybe 5-10k rupees the income cannot be accounted.

Sorry don't understand what this means.

But this is probably moot now.


> Majority of middle class Indians who belong to certain religion/caste

Which religion/caste is getting freebies and reservation benefits ? I am not aware.


Are you kidding me? 50% of the seats at IITs and every other government institution - including civil services - are reserved for people whose parents were also eligible for these reservations.

https://en.wikipedia.org/wiki/Reservation_in_India


From my very subjective experience, and my long trip around India in 2017, I can agree on all points raised by the Economist article.

The state of education is appalling. And yet at the same time, you see tons of those in the low 90% of the population checking out Facebook in their cheap phones with 4G connectivity.

Either way, my outlook for India is very positive. IMO They need only 1 or 2 more generations to truly rival or even surpass China.


Too religious. China's great advantage is that they're all atheists.

Highly religious societies have a strong desire for tradition, and tradition is "women don't work and have no power, corruption is rampant, new things are bad (because they destroy the golden geese that keep the upper class rich and in power)". Pakistan and India are going nowhere soon.


As an ex pakistani, I have always admired how much India has been able to overcome the odds and continues to prosper and charge forward. I think the gp has some merit in hoping that within a generation or two, India has a chance to overcome a number of these challenges. I do concur with your assessment of Pakistan however.

This is actually very sad. I had hoped the economic development would change society in Pakistan as much as it has changed it in India; perhaps that would finally end the enmity that exists b/w the countries. My Parents generation cared very much about Caste/Religion etc. while my friends and I are very much secular, and I imagine the next generation will be even more so.

China is one of the fastest growing countries for religion both in absolute numbers and in percentages. There are more people living in China who describe themselves as "evangelizing Christians" than there are in the USA, for example. This has been the case for around two decades now.

But percentage-wise they are the most atheist country in the world, right? That's at least what I thought off the top of my head

Actually, I thought it was Albania -- which was for a while the only "officially" atheist country in the world, but checking up on Wikipedia, once Islam was made legal again, it seems to be back to developing-nation levels of religious activity.

So, yes, you're right, it's China. At a rough pulling-numbers-out-of-a-hat, China will be back in sync with the rest of the world average (for levels of religious activity) somewhere around 2050, when it will be mostly Christian and Buddhist.


A small subset of Indians will probably continue to prosper.

"The state of education is appalling."

"They need only 1 or 2 more generations to truly rival or even surpass China."

These two seem to be in contrast. Do you know what is being done to change education for most people that would radically improve outcomes within 1 generation or 2?


The governance in India has stagnated and haven't kept pace with changing times. I thing the problem is its half-born federal structure. Without the states having sufficient power to enact meaningful policy, there is little or no competition between the states, because of the fact that there is barely anything to differentiate between them.

From the far side of the world, it looks like India is sustaining a huge fight against corruption.

This can only make its governance improve, not stagnate. I'd bet only the appearances are getting worse.


> I thing the problem is its half-born federal structure.

And corruption, political dynasties, general incompetence and huge cultural baggage.


I agree, and this is exacerbated by the absolute power the Supreme Court can exert over all states.

The problem is religion. That's why there's too many people (birth control is evil and God doesn't want it, etc.), and that's why they have a lazy culture.

There is no 'birth control is evil' concept in Hinduism. 80% Indians are Hindus. Poverty is the reason for there being too many people. Poor people tend to have more children.

Pulling out is specifically prohibited in the Bible. So is oral sex. But nobody gives a shit. The funny thing about religion is that there's so much nonsense in their official texts that you can make it mean whatever you want :)

Religious flamewar is not allowed on Hacker News. We ban accounts that do this, so please don't do it.

I mistakenly upvoted your comment. There's no way to undo it in Materialiatic app for Android. :(

What is a "lazy culture"? It sounds like there is a one true way of living: working yourself to death, for what? To have a bigger number on your bank account than your neighbours? To have a faster car to be stuck in a traffic jam on the way to office where you will do meaningless work for 60-80 hours a week? This not a proper way to live life in my opinion.


I agree but I think the large majority of my old college classmates are doing this in America. I moved to Europe because I couldn't stand it.

How does one go figuring out income levels? India has such a poor tax base just 2%[1] of people pay taxes.

> If nearly 300m Indians count as “middle class”, as HSBC has proclaimed, some of them make around $3 a day.

Then, I would be curious to know how one accurately is someone "measuring" what a middle class is since only 2% of the population sample is available.

[1]https://www.npr.org/sections/parallels/2017/03/22/517965630/...


There is a disconnect between hard economic data that NPR talks about and media/marketers/financial analysts like HSBC talk. So a person hustling wares on a moped for 12 hrs a day, making $2-3K per annum is poor enough to not file for income tax. But for media hype generators if that person ate out at McDonalds on his kid's birthday, he would be the face of new, confident, aspirational middle class who enjoys international cuisines.

There are other ways of arriving at it, apart from tax-filings, such as cars/electronics/consumer goods purchased.

It is hard though Car owner ship is < 2% in india[1] And Cars is probably the second most expensive asset after a home (assuming stock and bonds are not really owned by that many people).

[1] https://www.fastcompany.com/40422065/inside-indias-plans-to-...


We need more middle class people who are educated to come into political stream to counter the existing political class which caters to the rich and the poor. Then things my change for the better.

The state of indian population is so abysmal and all Modi/Shah/yogi talk about is Ram temple, construction of Statue of religious figurines, hindu muslim love affairs, national vs anti national and other such non sense. such a shame on the government.

Govt of India spends less than 1.5% of its GDP on education and an equal share on its health. Now compare this with shares of other countries like US and European countries. Indians save money (who ever can save) to take care of these.

How does it happen India has Gini coefficient close to that of Canada (and better tan that of the USA, UK and even Australia) then?

It could be that Gini coefficients don't make that much sense in general, especially since you can skew the numbers in favour of "equality" simply by having more poor people. There are alternative measures of income inequality, but they seem not to be used basically at all by the broader public.

What? If there are more or all poor people with largely equal income, then I would say the country is equal. Even the top 1% holds much less in India as compared to US[1].

[1]: http://www.thehindu.com/business/income-share-of-top-1-surge...


The Gini coefficient only accounts for relative differences and not absolute differences. A person/household at around the 25% income level in India might be below the US/Canada poverty line.

Because inequality is really low, almost everyone’s poor.

This article is very weird. It's written by someone in a first world country, presumably USA, for companies based in West(Amazon, Starbucks , IKEA etc) on how to monetize in India. The primary complain is that India doesn't have enough people who can spend money on certain luxuries, when compared to China.

I find it hard to believe that companies had to make only minor tweaks to their business model to succeed in China.

For ex, Amazon is making a "killing" in China, by doing exactly what it did to bolster it's business in USA. http://www.businessinsider.com/amazon-is-struggling-to-find-...

It's no wonder that businesses have to adapt to local markets. Lamenting that there are too many poor people is a bad idea, because as many comments here have mentioned, it's a different mindset in India when it comes to spending than the West.

If companies can adapt to break into the market, let them. But claiming that its not worth it, would be a bad choice.


By design or a bug in the system?

It seems inevitable in a system where owners of capital reap all the benefits of automation and efficiency. Since most people do not own sufficient capital, they get less and less of the pie.

Oh. The west’s middle class will vanish too, soon enough.


"If you care about equity, it doesn’t look good."

It's declining already.

Talking about India could be The Economist's attempt to warn about the dangers of a continued merciless pummeling of the western middle class without having to come out and say, "gee, maybe Trump has a point..."

While he has s point it's pure talking point. His policies are dumping on the middle class even harder.

Hint increase the debt and you increase taxes. So, you need to look at how the tax burden shits not nessisarily the specific rates. Aka if you get 50$ off your taxes this year but your share of the national debt increases by 5,000$ then you are far worse off.


> Aka if you get 50$ off your taxes this year but your share of the national debt increases by 5,000$ then you are far worse off.

Why? Do you suppose in the future, we'll all pay off the debt equally?


Benefits or profits? Are there more cancer treatments today than ten years ago?

Maybe, but who is going to allow you to benefit without paying them (with the profits, that you're not getting)?

Rockefeller for all his wealth, could not buy penicillin.

I’m just trying to make the point that productivity improvements diffuse out to everyone over time. Cell phones were $10K when they came out and now how many Indians have them?



The US is moving that direction too.

To most of the comments here, inequality is not the same as poverty. Everyone agrees India is poor, but most stats(except this) don't support India has too much inequality for its league.

A movies has been made out of the aspirational eating out part

https://www.youtube.com/watch?v=oSt5_uw49Mc


Sad. As an NRI, I keep thinking about moving back to India to help improve the situation of my homeland.

No worries! History teaches us that people do move from destitute to better situations. India is sure as hell a gigantic mammoth task, but not giving up.

Unless you have kids, I would suggest you to try moving back and attempt a helping hand. If we fail, we can again look for other opportunities. Just a personal perspective.


Are there any promising startups in India working on anti-poverty, anti-hunger schemes?

There are, but I don't think you should be seeking them unless you are willing to take a significant hit in your quality of life.

Generally speaking, Western economies compensate much better for being highly educated or advanced scientific/engineering skillsets. The rule of thumb I've come up with, after talking about it a lot with other NRI's, is to go back only if you really "love" your home city/country etc. e.g. my cousin went back because he simply wouldn't be happy if he couldn't visit the extended family at least once a month (i.e. very lonely) and really missed the food.

If you go back and work in a job you don't like, YOU will be unhappy. That is perhaps the most important factor in making these decisions... you cannot help others unless you are yourself happy and content.


Sounds like a very interesting article, but could you modify the title to include '[paywall]'? I realize that paid news is the way things are going, but we don't have to give paywalls free clicks, do we?

The Indian 'middle class', is composed generally of descendents (literal and/or otherwise) of the old Angrezi babus who were colonizing the country for the British, and thus are extremely wealthy (in relative terms) since they control the system. The system has itself became self-sustaining in a big way after 'independence', and thus continuing the large-scale inequity, often entirely along linguistic lines (English vs rest).

No wonder, everything, including the highest courts continue to be run by the (cultural) Anglical retainers. It's almost amusing when FabIndia + Bindi wearing bimbos (faureign/desi) come and lecture about the 'caste system'. This is the market demographic that the Americans are so keen to tap into; the other neither has much wealth nor is it culturally Anglo-Saxon (and thus American recipes are not transplantable, effective, or profitable).


The fact is that the well off in India come from traditionally "upper" castes. Linguistically speaking too (like English speakers), the caste correlation is quite strong. Even among the non-English speaking rich (like wealthy farmers in the rural areas), the same caste correlation pops up. In a country where upwards of 90% of marriages are within the same caste[1], wealth accrued to certain castes stays within them (a self-sustaining system). So it shouldn't be surprising to see caste used an explanation for inequality.

1. http://www.thehindu.com/data/just-5-per-cent-of-indian-marri...!


It’s not about who speaks English but about who was born Brahmin - that’s been true in India for 5000 years!

India couldn’t function as a modern state with out a de jure lingua franca, that being English is an enormous advantage for international trade too.


Not true. The fascination with Brahmin has been replaced with the Rich quite a while back. Not saying that there is no cast discrimination in India, there is. But being born Brahmin is not as big an advantage today as it was in the past. Being born rich however is a different story.

Caste still matters in rural areas, not so much in urban ones. But most of India is still rural, so I would say that statistically, Caste is still a very big deal.

I don't think this is true; I come from a caste that is known for being scholars and hence had much better knowledge of imperialist languages (English, French, Urdu, etc.) than Brahmins since they traditional study Sanskrit and the Vedas. This allowed our caste to penetrate court & minister positions over the last millenium and surpass the wealth and power of the Brahmin community.

Even today our community is one of the strongest middle class communities in our region. This might not have happened in other regions, but at least in our region knowledge of languages help the community get embedded in the aristocracy and acquire wealth for generations.

Knowledge is power.


Kayastha?

Which part of the country do you live in? I’m have trouble both understanding and relating to what you’re saying.

I'm also having trouble relating with this comment. Lived in India for the entirety of my life and this makes no sense at all

That's a lot of bullshit. Article itself quotes 9% as middle class which will be around 100 million people. You think 100 million Indians belong to Babu Class.

This article does not do a very good job of getting its argument right. Some of the comments does a better job of explaining why companies are setting shops in India.

I too am pissed at Angrezi culture. Having said that English has become the defacto language for the world. Just google "learn english in paris" and see how many hits you see.


>The system has itself became self-sustaining in a big way after 'independence', and thus continuing the large-scale inequity, often entirely along linguistic lines (English vs rest).

Pretty much the same for Pakistan to say if we are to start conversation about that.

While Urdu is a state language, the amount of people eloquent in it is even less than ones who can speak passable English (8%), and is popularly associated with local hollow intellectuals and creative class. The also the same vicious circle of meritless cadre policies where mediocre people who were granted a post solely for the knowledge of the language perpetuates the practice.

Pakistani middle class, or better to say the virtual middle caste, were the Punjabi old money clans for generations without much change.

I don't say that Pakistan has no middle class. It has it: there are capable, educated, talented people ready to compete in globalized industry, just there are very few of them. Talented youth has to work twice as hard to enjoy that middle-classer living in Bahria Towns, compared to a person who just got to be born in a clan with assumed middle-class status and English speaking family.


My family was from UP, I don't think knowing Urdu helped us very much when the registrar at University of Sindh in Jamshoro tore up my cousin's matric certificate in front of him for being a Mohajir when he tried to register for classes...

I'm saying that it is English that is a privilege language, not Urdu

You've made an odd comparison about a market demographic for American producers, that you could aptly apply to China too, which is quite a good comparison - and somehow related this to colonialism with logic that doesn't hold for people who are familiar with India.

However in China the market most adept to American type clothes & idiosyncrasies have no similarity at all to reasons you describe as to India's American cultural preferences: which by the way you could apply to most countries today.


I'd be hard pressed to believe that 40% of Indians are on par with the most destitute bits of Africa. Any source to validate this ?

I live in India, so I can give a bit of overview. I don't have sources right now, but I have experience.

You can roughly divide India into two parts, the British controlled, and the non-British controlled, based on the pre-independence situation.

The british controlled areas, mainly the northern states like UP, bihar, bengal have huge number of poor families. UP has too many people, and most of them are poor.

The non British controlled ares, like Maharashtra and some southern states, are generally a bit better off, and here is where you find most rich and middle class.

The central states are riddled with decades old insurgency, which could be solved using military, but govt doesn't want to use military on it's own people. These areas contain tribal people, and they are very poor.

Now, all this is not a perfect science, but this is how it generally is. Now when a foreigner visits India, he/she might visit places like Delhi, Mumbai, Bangalore, maybe North eastern Himalayan areas, Goa and some beaches in Lakshadweep. The image you get is that of extremely rich people and extremely poor people, along with a lot of middle-class people living in these cities.

But outside these cities, when you go to central India(you won't, as rebels will kidnap you), you can see extreme poverty. Same with other non-tourist areas.


This is incorrect. Bombay Presidency contained the city of Mumbai and most of Maharashtra and Gujarat, perhaps one of the most industrialized/developed regions in India.

The poverty of the Northern areas is not in lieu of them being exploited by direct British Governance (although I'm sure it contributed much towards it). Its mainly lack of coastal trade routes, population explosion and ridiculously high levels of corruption/poor governance.

The Southern states have done better mostly because their populations have not exploded as much, and being on the coast, they're able to participate in international trade a lot more (key to prosperity in the modern economy). There also seems to be more emphasis on getting more education in the cultures of the South which has led to a highly educated labor force.

(I don't have statistics on hand, this is from reading other analyses)


> when you go to central India(you won't, as rebels will kidnap you), you can see extreme poverty

You dont even have to go to central India, just go 90 kms outside Mumbai.

http://www.hindustantimes.com/mumbai-news/over-254-children-...


70 years after independence and you are still blaming the british.

When will this finger pointing stop?


I wonder, if you will agree, the rich always have an advantage compared to the poor. In terms of education, better life etc. So I can see why we blame British; the parts where they were most effective are factually poor when compared to the other side.

Not in any way mean that we should blame them even after 70 years.


> So I can see why we blame British

We blame Britain because it's easier to have scapegoats, it's much harder to acknowledge failure and actually fix the problems.


I am not blaming British. It's just a fact that the places they ruled strongest are generally poorer compared to those places where they didn't.

Yes you are blaming the British. By the way have you heard correlation does not imply causation?

First of all your original comment is factually wrong. Bombay and Pune were British controlled so your theory is wrong that non British controlled areas are doing better.


Likely true, but it also depends on how you define it. The OPHI (Oxford Poverty & Human Development Initiative) has been tracking what they call "multidimensional poverty", which is a holistic view of poverty over health, education, and living standards, and is far more insightful than the X dollars a day metrics. They have found the poverty rate (and destitute rate) in India is very high and is comparable to that of Sub Saharan Africa: https://www.theguardian.com/world/2010/jul/14/poverty-india-...

This doesn't prove the Economist's claim per se, but it indicates to me that it's not absurd.

A lot of the extreme poverty in India is concentrated in the northeast and in rural populations, so it's not always super visible to visitors outside the segregated slums of cities.


Some Highlights from Credit-Suisse Global Wealth Report. https://www.credit-suisse.com/corporate/en/research/research...

1. Richest 1% of Indians now own 58.4% of the country’s wealth making it the second highest inequality in distribution of wealth after Russia.

2. 96% of adults in India have net worth less than USD 10,000, whereas this percentage is only 68% in China.

3. India accounts for 3.1% of mid range wealth while China has 33%, 10 times more than India.

4. 80% of adults in India are in the global bottom half, and Africa is close behind at 79%

5. India's bottom wealth individuals increased by 4.6% where population growth of 2.5 has offset growth of household wealth. China's representation has halved over the last 10 years.

India's explosive population growth rate is offsetting the growth in GDP in the near future. State of infrastructure is abysmal even in the top metro areas. Most of the upcoming industries still face a huge number of logistical and bureaucratic hurdles to get off the ground. Corruption is high as usual. Most of the politicking involves well marketable slogans run by dedicated media cells and whitewashing of development metrics. Just one annual visit to India every year shows me zero improvements to anything I have grown up with. Trains are dirtier and more expensive, Mumbai and Delhi top the world in air pollution, productivity is ultra low owing to long hours of commute in high paying jobs leading to mass emigration of "highly skilled economically well to do" labour force to Western countries, The coveted and prestigious colleges of education are insanely competitive to get in for the few who can.Destitutes line up the streets everywhere you go. You just need a visit.



Poor article, even by the already low standards of The Economist. In effect, trying to tell business leaders they don't understand their market as well as the Economist column-writers do.

> Firms peddling anything much beyond soap, matches and phone-credit are targeting a minuscule slice of the population

Well, yes, but tell us something new. Even this minuscule slice is (a) A large market and (b) is growing quite rapidly. For example:

Automobiles: growing at around 6% p.a, shifting towards more expensive models. Now 4th largest in the world in terms of numbers (no doubt, lower in total $ sales)[1]

Smartphones: 2nd biggest in the world [2]

Consumer Durables: growing at over 10% [3]

Business leaders are not interested in India because they're stupid and they think India is a rich, egalitarian country. They are interested because of a fast rising middle class with a booming consumer economy, which, contrary to the claims of the article, is true. For millions of people like myself, who emerged into the middle class thanks to private sector jobs that only emerged after the 90s, this is lived experience.

For a much better take on the topic, please read:

https://swarajyamag.com/economy/demonetisation-how-neo-middl...

[1]http://www.moneycontrol.com/news/business/india-trumps-germa...

[2] https://techcrunch.com/2017/10/27/india-second-largest-smart...

[3] https://www.ibef.org/industry/consumer-durables-presentation




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