The first economic theory anyone understands is about the demand supply gap and how our needs and wants create that gap. Any such gap, in economic terms, is called as “scarcity”.
In Indian society, there is a very large section of people whose most basic needs are not yet fully met – such as food, clean water, shelter, et al. The percentage of this section of people has been dropping in recent years, but it is still very large both in percentage and absolute terms – the biggest in the entire world.
We also have a significant section of society today (after 19 years of economic reforms and growth, though disjointed occasionally) who have already met their basic needs and are aspiring with their wants. This is an influential part of middle and upper middle class society, with millions of youngsters with long lists of “wants” – things like iPod, iPad, a stylish bike, the most expensive perfumes, and what not. It is a demographer’s delight, especially when that demographer is working for a rich FMCG company ! Above this strata of society, there is also a small though most influential section which comprises of the very rich people in this country for who the brands available in the country do not matter much – they seek what are not available today in the country. They can define or undefine their wants and get the same in a flash.
Such is the economic disparity in India. Most of government’s focus should be on fulfilling the needs of the largest section of the society, otherwise there might be social impact. There is most certainly the impending migration from rural India to the urban India, which will pick up in very large numbers as the rural India folks have now realised that it is possible to make it big in the urban India. If not big, atleast a decent income can be established quickly with literacy and educational investments.
This migration is going to put huge strains on what is already a creaky and decrepit urban infrastructure all over the cities of India. And when these people migrate, they are going to meet their needs in a few years, and look at wants !
When that happens, India will become one of the biggest consumer economies on this planet. That would also put big strains on the scarce resources available on this planet. Combined with the rather “controlled” Chinese brethren, Indians will consume the maximum resources and create scarcity elsewhere. This is a very likely scenario.
If and when Indian and Chinese wants create huge demand, that would eclipse the Western notions of demand for similar goods. Most Western companies will be then headquartered in India or China !
I do not know whether this is good or bad, but from an economic theory point of view, it is going to skew the demand supply gap enormously, and might, in fact, create new economic theories and curves.
Not a bad thought process on a Saturday evening with a strong cup of coffee, I guess.
15th May 2010