Page last updated at 22:54 GMT, Monday, 30 March 2009 23:54 UK

Inequality threat to Indian power

By Daniel Gallas
BBC Brasil, in Delhi, Mumbai and Hyderabad

Extreme Poverty in India
Lakshmi in Mumbai works on one of the city's landfills

The strong economic growth that has put India on the list of emerging nations has also increased social inequality and could seriously threaten its aspiration to be a true global power by 2020.

BBC Brasil travelled to India as part of its series looking at where the Bric economies (Brazil, Russia, India and China) will be in 2020.

They talked to two women called Lakshmi.

Daily struggle

Lakshmi from Mumbai works with her husband, scavenging among other people's waste trying to scrimp together enough to sell on and scrape together enough to live on.

And she is not alone - 10,000 others struggle to survive by spending their days doing back-breaking work, sifting and sorting through the rubbish in the landfill site.

IT manager Lakshmi
Lakshmi from Hyderabad leads a team of 60 IT engineers

It is hot, dusty and dirty work.

All around the site in shacks and makeshift shelters more than 600,000 people live in one of the local slums.

With over 20 million residents, Mumbai is considered to be a miracle of India's economic growth.

Lakshmi decided to move to the big city in the hope of getting a better life.

Now she lives on $2 (£1.40) a day. It is not much, but she says it is more than she earned working in a rural village.

Such poverty is a challenge for India's ambitions of power. The economy grows, but so does social inequality.

Different path

In Hyderabad a little over 750 km away from Mumbai the BBC met up with another Lakshmi.

This Lakshmi leads a team of 60 engineers who work for one of India's biggest IT companies, providing services to clients in Europe and the US.

Workers here are trained to survive in the competitive IT sector, a part of India that looks to a richer future.

Only 60 years ago, the company produced cooking oil.

A garbage collector returns home after picking his children from school in Hyderabad, India
28% of our population is young, they speak English and are capable and well educated. This will be our big advantage
B. Krishnamurthy

Now with almost 100,000 workers, it illustrates the path India chose in the 1990s.

Lakshmi in Hyderabad says demand from rich countries drove India's technology boom until now.

But she now says that such has been the growth of the Indian economy that domestic demand is also significant.

In this rapidly growing part of the Indian economy these are companies with highly qualified work forces, competing with multinationals from developed countries.

For this India, the forecasts for 2020 are positive according to Lakshmi's boss, B. Krishnamurthy, one of the vice presidents of Wipro Technologies.

"The competitiveness of the Indian technology sector will remain for the next decade and beyond," he says in his modern office.

His company is one of the symbols of the new India: The India which keeps getting richer.

Like many Indians, Mr Krishnamurthy trusts that India's population growth will keep its economic growth on track.

"India has the largest population of young workers in the world, 28% of our population is young," says Mr Krishnamurthy.

"They speak English and are capable and well educated. This will be our big advantage. While other countries try to catch up with us, I am sure our advantage will keep us ahead of the rest."

Spread the wealth

But with such terrible, stubborn poverty, economists say that India has to spread the benefits of prosperity to avoid instability.

The tide of the Indian economy rises, but not all the boats are managing to rise with it

"Indians need to stop believing that the country will continue to grow above 6% a year automatically, without any effort, and that our inevitable destiny is to become a world power," says Rajiv Kumar, an analyst from the Indian Council for Research on International Economic Relations in Delhi.

The development model adopted by India - which has resulted in an average growth of 8% in the last four years - also contributed to the inequality that now threatens to undermine it.

The index that measures the gap between the rich and the poor - the Gini coefficient - was stable throughout the 1980s, but shot up in the following decades and is still growing.

Similarly, the Indian states that hold the most wealth grow faster than the poorer states.

Alarmed by this disparity, the International Monetary Fund (IMF) says that the "tide of the Indian economy rises, but not all the boats are managing to rise with it".

In recent years, the growth of inequality, especially in rural India, strengthened extremist movements with Maoist tendencies, such as the naxalists, who preach social revolution and insurgency against the government.

Today, they are already present in 40% of the territory. The Indian prime minister, Manmohan Singh, has already said that the naxalists are the main threat to India's security.

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