(Drivebycuriosity) - Why is India still so poor? India`s per capita income is just $7,200 (cia.gov/library ). The chart below shows that the South Asian country lags far behind China which reached a per capita income of $16,600.
China`s rise is the result of a fundamental change. In the late 1970s, China has moved from a closed, centrally planned system to a more market-oriented one. China has implemented reforms in a gradualist fashion, resulting in efficiency gains that have contributed to a more than tenfold increase in GDP since 1978 (cia.gov).
India instead was kept back by the Gandhi effect. After becoming independent in the year 1949 India`s economic politics was strongly influenced by the thoughts of Mahatma Gandhi, who was an anti-capitalist and an ascetic (wikipedia). He didn`t believe that humans behave rational and are guided by self-interest. The activist cared less about accumulating wealth and economic prosperity. Instead he rejected materialism and preached a policy of self-sufficiency. Gandhi also called for the boycott of foreign-made goods (Swadeshi movement)
In the second half of the 20th century India mostly followed his philosophy and implemented an Gandhian-economics (wikipedia). Jawaharlal Nehru, the first prime minister of India said: “Never talk to me about profit, it is a dirty word” (Economy). India`s policy tended towards protectionism, with a strong emphasis on import substitution (Ghandi`s self-sufficiency), meaning replacing imported cars and other products with Indian made things, even though they cost much more and had a lower quality (Ghandi`s Swadeshi movement). India also focused on economic interventionism (politicians decide what and how much to produce & consume), a large government-run public sector, business regulation, and central planning.
The result was an anemic economic growth at least through the 1990 and the majority of the population was kept in an extreme poverty. I visited the country in 1994 and stayed there 6 weeks. I was surprised how bureaucratic the whole country was organized which slowed everything down and caused high costs. The Gandhi effect suppressed large parts of the country. I felled depressed that so many people lived on a stone age level.
India`s policy began to change in the 1990s, first slowly, but gaining speed after the millennium change. Today India`s economy is growing about 7% annually, a bit faster then the Chinese economy (6,5-7%). I think this acceleration is mostly owed to Narendra Damodardas Modi, who became chief minister in 2001 and India`s prime minister in 2014. According to Wikipedia Modi's government focuses on privatization and liberalization of the economy, based on a neoliberal framework (wikipedia).
That´s good news for India`s population. But, even if India manages to keep the actual economic growth rate of about 7% annually they will need decades to reach the current income level of China.
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