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Week of 6.20.08

Transcript: India Rising

BRANCACCIO: Here in New Delhi you can see one of the unintended consequences of battling poverty around the world. Places like India and China are making huge strides toward building what is starting to look like an American-style middle class. But what happens when you add a billion new consumers to a supersized global economy? One result may be supersized prices for steel, gasoline for the car, even the food you eat.

From Pune, India, correspondent Paul Beban and producers Jason Maloney and Kira Kay have our report on one of globalization's trade offs.

BEBAN: It's sunrise over the Indian city of Pune...and in a bustling gym, people are kicking their day off with a workout: on the treadmill, pumping some iron...to the thumping beat of a live DJ.

Just around the corner, buses are rumbling up ... they're unloading waves of software engineers, developers, researchers and clerks... they're all here to fuel Pune's surging information technology sector.

Pune used to be a sleepy backwater... now it's a boomtown the size of Atlanta, with the skyline spreading up and out in every direction. The din of construction fills the air. And as you sit in the endless traffic, hundreds of billboards advertise brand-new, high-rise housing. They promise not just comfort and modern conveniences... but a fantasy lifestyle.

Buying one of those new condos is Ram Kashi. He's a researcher for Avaya, the American telecoms company. Today he's playing a bit of hooky and meeting his wife, Jyothi, in a forest of new construction just behind his office.

BEBAN: So your unit is up here in this side.

RAM KASHI: That's right. It's uh this is building E, it's called the Burnham Park and our apartment is on the 8th floor. This is a complex which has four bedroom apartments, so we wanted to look for an apartment that was more spacious than the one that we currently living in and we decided to go for this.

BEBAN:
Ram and Jyothi Kashi's lifestyle is squarely middle class. And as India's economy booms, millions of other Indians are on the same path to a higher standard of living... they're buying bigger homes made out of steel and concrete... they're driving more cars... and they're eating better food.

This is great for India and great for Indians... but this rising tide might also have a downside... will all these new consumers, competing for a limited supply of resources, drive up prices worldwide...and, in turn, drive down our standard of living?

ROBYN MEREDITH: The last time we saw such a big transformation was really when the United States itself came onto the global stage. This is a big, big deal.

BEBAN: Robyn Meredith covers India and China for Forbes magazine. She's the author of "The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us."

ROBYN MEREDITH: Suddenly hundreds of millions of Indians have better prospects for the future. They can imagine a future that's different from what their parents had. There's enormous freedom for the average Indian now that didn't used to be there. And it's freedom for really simple things that we Americans take for granted. For being able to shop in a mall. For being able to buy an air conditioner or a car. For being able to take your family to McDonald's once a month.

BEBAN:
Ram and Jyothi Kashi's new apartment is in a gated community called a "cybercity"... places like this are popping up all over India. They combine offices... housing... schools... shopping... everything a modern Indian family - like them—could want.

For Ram, one of the perks of living here is something once almost unheard of in traffic-choked India.

RAM KASHI: The huge advantage of course of staying here is because my workplace is just right the tower there, and it's essentially a walk to work concept.

BEBAN: How long does it take you to walk to work?

RAM KASHI: Oh, on a very crowded day it's about 2 minutes.

BEBAN: Two minutes.

RAM KASHI: Yeah.

BEBAN: Cyber city developer Satish Magar says, indeed, if you build it, they - India's newly burgeoning middle class - will come.

SATISH MAGAR: They need a very clean environment. They need a lot of greenery. And then all of the facilities like sports, medical facilities, education is very important.

BEBAN: So this is what the modern Indian family wants. Everything is here in one place.

SATISH MAGAR: Yeah, because the modern Indian family, now has tasted the success story.

BEBAN: The success story...now driving the most profound social transformation of our time ... what happens when as many as 2 billion people worldwide join the middle class.

India's growth in often described in technical terms like rising GDP. But in cities like Pune, you can watch it unfold in real time.

And the impact of this progress is certain to shake the world.

GURCHARAN DAS: In 1980 our middle class was only 8% of the population. That was about 65 million people. Today it's close to 30% of the population, that's about 300 million.

BEBAN: Gurcharan Das is a former CEO of Proctor and Gamble India. He's now one of India's foremost writers and thinkers.

GURCHARAN DAS: I believe that this middle class will cross and become 50% population around 2020.

BEBAN: So we're talking about 500 million people.

GURCHARAN DAS: Five to 600 million people.

BEBAN: In India's consumer class.

GURCHARAN DAS: That's right. And clearly this is the fastest growing part of our society.

BEBAN:
Who are they? What kind of jobs do they have?

GURCHARAN DAS: Well they have jobs, middle class jobs that exist all over the world. I mean a, a clerk in an office, that clerk would not have been middle class 25 years ago. Today that clerk is middle class.

BEBAN: The McKinsey Global Institute predicts that if current growth rates continue, India's middle class will top 583 million by 2025... nearly twice the size of the U.S. population today. Average household income will triple.

And as Indian incomes rise, they'll be able to spend their money not just on what they need... but also on what they want... in other words, just like Americans.

BEBAN: Is there an Indian dream like the American dream?

GURCHARAN DAS: Well I would say so and frankly it may not be that different. These are ordinary people who are, whose children are getting much better education than they did, who are eating better, who are working in all kinds of new jobs that are opening and retailing in insurance, in all the modern sectors of the economy I would say that the aspirations of the middle class are the same as middle classes anywhere.

BEBAN: This new Indian middle class: how much money is the average person making? What are we talking about here?

ROBYN MEREDITH: Well to be middle class in India you need to earn somewhere between $5,000 a year and $25,000 a year. And that doesn't sound like much coming from America, but it goes a lot further in India. $25,000 a year salary in India equates to more than $100,000 a year in the United States.

BEBAN: And Meredith emphasizes that India is not alone... whatever is going on there is also going on in its neighbor over the Himalayas: China.

ROBYN MEREDITH: China's growing in double digits. Continues to, has for about the last 10 years. The high growth rates in India and China though are really, really important to the global economy because they're pushing these nations each with more than a billion people quickly into the ranks of some of the largest economies of the world. And that's really changing the landscape for all the rest of us too.

BEBAN: Kiran Lokande is one of those young Indians about to leap from modest means to middle class comfort. Although he is still studying for his final exams, he already has a job lined up for after he graduates college: with Infosys, India's I.T. services powerhouse.

The gleaming office parks where Kiran will soon be working are a very long journey from his rural village... it's where we meet Kiran's parents in front of their one-room house. They got electricity just a few years ago and they have one of the only outhouses in the village.

Kiran's father is a farmer, and they take us down the road to the family fields, where Kiran grew up helping his father work the land. He did it every day before he went to school, and many days after finishing his homework.

BEBAN: Are you glad Kiran is not going to have to work like this?

SHANTARAM LOKANDE: Yes, I am happy about since I have done such hard work I feel that my son should not have to do hard work.

BEBAN: You feel like all your hard work for years here in the field has paid off?

SHANTARAM LOKANDE: Yes, I definitely feel that.

BEBAN: And although the town still feels remote... there's a sign of change right on the horizon, literally: a new Philips electronics plant is going up not far away.

How do you think your life might change, your own life might change because Kiran is going on to such a big career in such a different place?

SHANTARAM LOKANDE: We're farmers... and the fact that a farmer's son has gone ahead and become an engineer is a matter of great pride. That will certainly cause our life to change and improve.

GURCHARAN DAS: No son of a farmer today wants to be a farmer. That's the truth. They want to go into the city, they want to be able to go to the movies, they want to be able to go to good schools, they want to be able to have cars, have the kind of life that people enjoy that they see. It means in the summer to have a fan or an air conditioner, it means to have cold water from the refrigerator. These are very practical conveniences.

BEBAN: Practical conveniences that Kiran and his family are likely to buy as soon as they can afford them... those home appliances, maybe a bigger house to put them all in, maybe even a car. Whatever they decide, there's no doubt they'll all be much more comfortable. And it is clear that more and more Indians are also looking to make their lives more comfortable, as their incomes rise.

This is the old Lakshmi Road shopping district, It's the bustling heart of old Pune, where people have been coming to shop for centuries. Used to be, anything you wanted in life, you could find it right here. But today, times are changing and tastes are changing and India's new middle class is taking its money down the road.

To places like this... Pune's sparkling new Ishanya Mall. Shoppers don't come here for clothes or the small stuff... they come to buy big ticket items.



SHOPPER: I'm here looking for a washing machine, dishwasher, and, you know, a bigger size refrigerator. I'm moving into a new house.

BEBAN: So 10 years ago a place like this was inconceivable.

SUNANDA MEHTA: Absolutely. No one would have bought stuff like this because people were not into buying so much which is not essential. People were not, certainly not into designer homes, they were not into buying you know.

BEBAN: Appliances, I mean everything . . .

SUNANDA MEHTA: Yeah, appliances.

BEBAN: Sunanda Mehta is the senior editor of the local edition the Indian Express national newspaper. She's made a career out of charting the meteoric rise of her hometown. She took us to the Ishanya Mall because she considers it ground zero of the changing face of Pune.

Is India just becoming more consumer-oriented? Is it becoming more sort of Americanized?

SUNANDA MEHTA: Uh well yes. It's like something you've been denied something for very long and then when you get it you just go a little berserk about it. That's precisely what's happened to India. People believe in spending and living for today and living for now.

BEBAN: When Ishanya is finished, it's going to be bigger than any mall in the United States, even Minnesota's famous "Mall of America." But for now, it feels a bit like a new airport - with sweeping halls that perplex first-time visitors, like the Kumbhars. Their son, Sagar, brought them here to buy them a gift for their home.

So you are here doing a little bit of shopping for your mother and father? And what are you looking for today?

SAGAR KUMBHAR: Yeah, we are looking for a microwave.

BEBAN: OK, a microwave for you?

MRS. KUMBHAR: Yeah.

BEBAN: Six months ago, Sagar got a job with a software company. Now he's towing his family up the economic ladder into the material comfort of the middle class.

Buying a first microwave is something of a watershed moment. And while it might look out of place in the family's traditional kitchen, new appliances are about to become a familiar sight in millions of kitchens like this, all over India.

And for some, change just can't come fast enough... which brings us to an office tucked in a dingy shopping mall.

Behind this door with the image of money falling from the sky, a group of aspiring day traders are hard at work.

PRADEEP MOULE: That is a weak stock.

BEBAN: Pradeep Moule used to be a bakery salesman. He gave it up to run the Pune branch of the Rajiv Kumar stock market class.

PRADEEP MOULE: We teach them how to make money from the market. Firstly they have got many prejudices that share market is a gambling, so we remove all those prejudices that this is not a gambling. You can come here and just, yeah, with a good technical system, with a technical background, you can make quite good handsome money.

BEBAN: You keep looking at me but you keep looking back. You want to keep an eye on what's going on

PRADEEP MOULE: Ya, ya...what's going on with the market.

BEBAN: Moule has heart set on what he'll buy with his stock-trading profits.

PRADEEP MOULE: I've got a dream car. A Mercedes car.

BEBAN: A Mercedes?

PRADEEP MOULE: Yeah. And definitely I'll buy it one day.

BEBAN: If the stock market keeps going up?

PRADEEP MOULE: It is going to keep going up, and I am going to buy it.

BEBAN: And Moule is not the only one dreaming of a new car... as incomes rise, India is going car crazy.

GURCHARAN DAS: People who were walking on the street are now on bicycles, people who were on bicycles are now on two wheelers, people with two wheelers are in cars, so there you are. And sort of it's a story of upward mobility.

BEBAN: And it's not just a story of Indians moving up, its Indians moving back. Ram and Jyothi Kashi left a comfortable life in New Jersey to explore their options back home... in India. Their transition, thanks to India's recent growth and modernization, was seamless.

JYOTHI KASHI: The kids go for Tai Kwon Do, they go for yoga, they go for swimming. And I understand there's a multiplex coming up.

RAM KASHI: So clearly things have changed from 10 years ago to right now.

BEBAN: More cars on Indian roads, more shoppers in India's malls ... more Indians eating and living well. But back here at home, there is genuine worry... what does the rise of the world's middle class really mean?

PRESIDENT GEORGE BUSH: There are 350 million people in India who are classified as middle class. Bigger than America. Their middle class is larger than our entire population. And when you start getting wealth, you start demanding better nutrition and better food. So demand is high. And that causes the price to go up.

ROBYN MEREDITH: All of us are going to have to share. There's only so much on the planet. There's only so much energy. We're either going to have to pay a lot more for the privilege of using it, or we're going to have to do, decrease our use or both. We're now in a competition, not just for jobs but also for resources. We've been lucky, but the game's over.

BEBAN: Let's start with food: there is, it turns out, a nugget of truth to what President Bush had to say about the middle class and its appetite.

Worldwide, food prices are soaring, some have more than doubled in just two years, and analysts say one reason is simply that people are eating more - and better - than ever before.

Supermarkets like these... stocked with meat and energy-intensive processed foods... are becoming more and more popular all over India.

ROBYN MEREDITH: In the case of India and China as well, a lot of people who were too poor to afford much choice in food are now able to buy more of what they'd like to eat at any time. And what they're buying is more meat and fish and protein in their diet. And more variety. And what that means is that food prices are rising as a result.

BEBAN: Then there's all those new roads and highways being paved... and all those high-rises going up...

ROBYN MEREDITH: There's greater demand for steel around the world as a result of developing economies, like India and like China coming online. It costs more for the concrete that's being poured in places like India and China. And when we pour concrete in the United States, we will feel those same increases as well.

BEBAN: And then there's oil, of course, which seems to hit a record high every day. India and China - and the United States - are using more of it than ever before. This means a lot more than getting hit at the pump - it means rising costs for anything that requires oil for manufacturing or transportation... and today, that means just about everything.

ROBYN MEREDITH: We're seeing a lot more demand for natural resources, particularly oil and natural gas. And that's pushing up the prices. It's not the only factor pushing up prices for those commodities but it's one of them and that is an impact feel-,that we're feeling around the world.

BEBAN: The citizens of India say they only want what developed nations already have: a chance at the good life.

How many have jobs lined up when you graduate?

GROUP: Everyone.

BEBAN: And what was clear when we talked to students at this dormitory was that Indians are not about to put a brake on their own ambition, just to make American lives easier. They say, it's our turn.

STUDENT 1: India will be a superpower by 2020.

STUDENT 2: And we people will do that. Like me. India will be a superpower.

BEBAN: What do you want America to know about India?

STUDENT 3: Be careful!

BEBAN: Are we in a sense paying a price for setting an example that is really not sustainable for the world?

ROBYN MEREDITH: I think it's making Americans look in the mirror a lot too. We're saying to India and China, oh no. They want to be like us. And then you think about what you've been doing. Hmm, maybe I shouldn't have bought such a big house. Or maybe I should have bought a car that doesn't consume as much gas. Those are the kinds of questions that we Americans are going to be asking more and more as other people have the means to live like us.

BEBAN: India still faces high hurdles. It remains a place of stunning poverty, without enough good roads... electricity... or clean water. So far, India's economic growth has outpaced the government's ability to build new infrastructure... or to shake off its history of corruption and inaction.

MR. KRISHNAN: Don't view politics as something you've got to run away from.

BEBAN: Challenging the old ways of India's government is the brand new Professionals Party of India, or PPI. The PPI believes it can harness the new power of the Indian middle class to transform Indian politics.

KK IYER: As professionals you're always trained to solve problems in whatever sphere of your profession you are in, so why not the same philosophy and approach to government?

R. KRISHNA KUMAR: The Indian middle class has this chance and we should grab it, we must grab it otherwise our children will not forgive us.

BEBAN: We live in an age of rising commodity prices, we've seen across the board, commodities prices are rising. Do you think the world can sustain the growth of the Indian middle class? Hundreds of millions of people?

R. KRISHNA KUMAR:
I think it's a little bit of an unfair question. Cause you're saying, we came late to the party and now the food is over, right, so that's, that's yes, that's true, we came late to the party and the food is getting over, but the whole world has to get together and, and figure out a way to support it because you can't ignore it, it's going to happen. You know you can't say it don't grow. Don't grow the middle class, whether it's to India or to China.

BEBAN: But as politicians always do... they say that if they succeed, there's something in it for America, too.

R. KRISHNA KUMAR: I think it's a tremendous opportunity for America because the Indian middle class is growing so they're going to, you know demand more and more products, and part of those products are going to come from America so I don't think America has any reason to be scared or upset by the rise of the middle class because it's a tremendous opportunity.

BEBAN: An opportunity that author Gurcharan Das believes fuels innovation and will eventually offer a solution to our current resources crunch.

GURCHARAN DAS: I'm a believer in technology and so far the record of the world is such that it has delivered, technology has delivered. And I think the same thing will happen. I think yes we should be concerned about crowding in the world, about the shortage of energy, but we'll find an answer for a prosperous India, a prosperous China, and a prosperous world.

BEBAN:
Ram and Jyothi Kashi are optimistic. Their kids are studying hard... and their future looks bright - a future in India, not necessarily abroad, like their parents.

There is an optimism, there is a confidence that wasn't there before. Is it felt throughout the country?

GURCHARAN DAS: I think it's felt certainly in the rapidly growing middle class. Now you still have people below the poverty line, etc., you know there for them eeking out a living is the thing, but the future of India is not going to be written by them, the future of India is going to be written in the cities by the middle class.

BEBAN: And, perhaps not only the future of India, but the future for all of us.

ROBYN MEREDITH: India and China inevitably if they continue to connect to the global economy and continue to grow their economies, inevitably are going to rise. We can't stop them even if we wanted to.

BRANCACCIO: India's middle class is shaping up to be much, much larger than America's. But do they want all the very same things? It's all on our website.

And that's it for NOW. From New York, I'm David Brancaccio. We'll see you next week.