Slowing economy hits India’s poorest

Source: Financial Times

Sher Singh has not found work in weeks. The 33-year-old day-labourer – who lives in one of India’s largest industrial districts outside Delhi – says things were different a year ago.

“Every day I would get up to three different jobs,” he says, leaning against a rickety wall along Harola Labour Chowk road, where hundreds of labourers gather each morning to look for work. “I used to make Rs6,000 ($108) a month.”

But since India’s economic growth rate started cooling from the 8 per cent highs of 2010 to 6 per cent in late 2011, Mr Singh’s wage, like that of millions of other day labourers, has dropped sharply.

“The benefits of growth are very unequally shared, and the poor are gaining much less from it than they would otherwise. This applies at 8 per cent as well as at 6 per cent,” says Jean Dreze, a development economist. “Having said this, the decline from 8 per cent to 6 per cent could certainly make things more difficult for them.”

“Little was done before to share the benefits of high growth, now we can expect even less,” says AK Shivakumar, a member of India’s National Advisory Council.

The nightmare scenario presented by slowing growth and rising inflation will be a tough one for India’s policy makers to untangle.

Keeping interest rates high to battle inflation could mean choking off investment.

It could mean that companies cannot afford to borrow cash, while India’s middle class refrains from buying cars or houses as they wait for rates to fall.

However, back on Harola Labour Chowk, day labourers say they cannot wait for two years for the economy to recover. “If this goes on [like this] I think its best for my family to eat poison,” says Mr Singh. “There is no other choice.”

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