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A Challenge for India

S+B: What are India’s main globalization challenges?
Bringing the benefits of globalization to the rural poor is the single greatest challenge to India’s continued success. Although it has helped urban people enormously, globalization has not made any difference to rural people, who constitute 65 percent of the country’s population. The benefits of globalization have not trickled down to them, and that inequity has created tremendous political tension.

People in rural areas believe our politicians are favoring the urban centers by building infrastructure there and enlarging their global economic role. Rural voters have already voted out pro-globalization leaders in two states. How do Indian business leaders convince the rural voters that integrating the country into the global economy is the best way for us to address the problem of poverty throughout rural India?

First, we have to better articulate how globalization is going to help the entire country. Second, we have to focus more on agricultural productivity. Third, we have to build infrastructure in rural areas to support business development and create jobs. If we don’t do these things quickly, I don’t know whether we can continue successfully on this path.

If we ignore these problems, the poor will start to view corporate leaders as villains, and their elected representatives will start working to reduce the power of business. Anti-business policies will slow our growth.

S+B: What specific measures can India and developing countries take to alleviate poverty and address the problems of the poor?
We have to focus on the low-tech manufacturing and services sectors to create job opportunities for the vast majority of Indians who are illiterate or semi-literate. To do this, as I just mentioned, we first have to quickly build infrastructure in rural areas so that businesses can create job opportunities there. Second, we have to move people from agriculture to low-tech so that we can reduce the number of people dependent on agriculture and thus improve productivity. Third, we must target subsidies directly to the poor, eliminating middlemen. The late Milton Friedman’s voucher system would be a good approach, but if such a system is difficult to implement in India, we may want to provide direct cash subsidies to the bank accounts of women in families below a certain annual income who can in turn spend the money on what they need most. To go with this system, we need a new paradigm, in which the private sector can complement the subsidies by providing basic services to the poor, profitably. Finally, we have to focus on improving efficiency and accountability in government services to the poor, including education, health care, nutrition, and shelter.

Author Profiles:

Sheridan Prasso ([email protected]), a contributing editor at Fortune, is the author of The Asian Mystique: Dragon Ladies, Geisha Girls and Our Fantasies of the Exotic Orient (Public Affairs, 2006).
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