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India Insider: Can We Become a Developed Economy on Low Wages?

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The Brutal Nature of a Large and Cheap Workforce

Ms. Nithya (name changed) works in a private school in Tamil Nadu. She gets to school by 9 AM and leaves around 5 PM. The school she works for hasn’t paid a salary for two months and she has no contract. She gets $83.00 USD per month in a small city of Tamil Nadu State. While this may sound extraordinary to some readers, it is not an isolated case in countries like India. 

Salary surveys and labour market studies indicate that many private school teachers in smaller towns and rural areas earn between ₹5,000 and ₹15,000 per month, this despite possessing educational qualifications and working full-time schedules. Though private schools in India often collect exorbitant fees, they pay teachers less and it hasn’t changed for years. 

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USD/INR Six Month Chart as of 15th June 2026

Indian nurses often are treated in the same manner. Those who prefer to work in government institutions or emigrate to foreign countries earn better wages. Attrition in the nursing industry is quite high in India. Why?

Because of the lower wages in most of the private hospitals in India, and the higher wages offered in Singapore or in the Middle East a career and lifestyle choice arises. That’s why many nurses work for a time in institutions closer to their towns. And then switch to more lucrative opportunities when salaries are more handsome in distant Indian cities or in a foreign country.

Male nurses from rural areas also leave and work in GCC countries. As long as wages remain lower and uncompetitive, attrition will prevail in India’s nursing sector.

Perspectives From The Employees Standpoint

India wants to become a 10 trillion USD economy by 2047. How will India increase its total output to achieve the above target? India has to create jobs and better compensation via salaries for its people.

Without sufficient income, how are people expected to pay for goods and services produced in the economy? And if people are not buying, who will buy the goods? Maybe the generous foreigners, but can India accomplish this goal? India’s service exports such as Information Technology are already facing questions of viability, this as AI confronts and makes strong and sufficient intrusions into existing business models of legacy companies.

Gig workers deliver parcels dictated by soulless algorithms. The algorithm doesn’t understand the burdens of hot summers and cold winters. It dictates rules and regulations according to its capital owners’ protocols. Employees who work in this profession have to work no matter whether they have fevers, cold ,body aches or anything else they might be an affliction.

Like feudal landlords who extracted labour without many concerns for the well being of those who worked under their authority, today’s digital platform economy often places efficiency and profits above human considerations. This is called “techno-feudalism” by some economists.

Though individual states in India have labour laws and regulations, India’s readiness and capability to enforce these laws in order to regulate the welfare of the labour market is still not up to standards elsewhere and difficult to enforce.

If your income remains low relative to the cost of living, how do you increase your consumption? A question that India’s ultra-wealthy should ask as their companies produce everything from cars to household goods and understand the importance of making money for themselves, is if they understand the other side of the balance sheet? Perhaps they would make investments that create jobs which in turn would help families spend their extra money on their companies goods and services.

India suffers from the availability of a high proportion of cheap and qualified labour that is easy to manipulate and allows a few to profit from the many. Given the tepid investments by private business in consideration for the other side of the balance sheet, the wages that most employees receive via basic economic models are insufficient.

Ironically and sadly, in some parts of India, especially in smaller towns or rural areas it is true that many private sector nurses, schoolteachers, and other service workers earn less than the international poverty line of $3 per day (around ₹285 at current exchange rates).

Education is certainly a tool for women empowerment, but it is often confronted by employers who take advantage of the educated and still pay poor salaries. This ‘accepted truth’ regarding education becomes questionable given the reluctance of institutions to pay a better salary for those who have spent money on improving their knowledge and skills. Those who work for meager pay, while not earning enough income to save money, nor participate in liquid investments or stock investments are caught in India’s labour market trap.

While writing this article, I witnessed a young married woman in her 30s, delivering parcels on behalf of Flipkart (owned by Walmart) in a vehicle which suffered from the brutality of the afternoon sun. Such is the nature of the labour market right now in India .

India shouldn’t allow people to work in a system that enriches techno-feudalists and business people by putting the welfare of their employees at risk. If India wants to be a developed economy, it should put people first. Economic development should not be measured solely by GDP growth, stock market indices, or the wealth of billionaires. It should also be judged by whether the ordinary workers can earn enough to live with dignity, support their families, and participate meaningfully in the prosperity they are helping create.

Note: 1 USD = 94.90 INR as of 12th June 2026

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Female Work Percents 20260605

India Insider: Growth Matters, Development Matters Even More

by with No Comment AssetsBehavioral SentimentBen EzraCommoditiesExclusive ContentFeatured HighlightsIndiaInvestingUncategorizedWorld

Participation of Women in the Workforce and Advancing Progress

There is more poverty in this world than many of us realize and would like to comprehend when confronted by the facts, and this is also true with India.

Recently, I visited several villages in Tiruvannamalai District in Tamil Nadu State on behalf of Angry Meta Traders to survey household capital formation, wage growth and labor market dynamics. To my astonishment, in many homes, people still use rice and palm oil purchased through ration shops. The important observation is their consumption basket appears narrow and heavily dependent on subsidized essentials. I saw simple aluminum utensils in kitchens, when higher income households often use silver-plated utensils. Things that many middle-class families consider normal like energy drinks, snacks, or packaged foods were often absent.

What struck me even more was the number of women managing families alone. In some households, the husbands had died due to excessive alcohol consumption. Children attended government schools and depended on nutritious meal schemes provided by the State.

Growing up, I have seen people wear torn uniforms in school because their family could not afford new uniform every year. Some did not wear shoes, and many students stood outside the class because the fees in private schools in India are several times higher than what government schools would charge and their families could not pay on time. Yet, through education and perseverance, many people have succeeded. 

However, the poverty I witnessed in Tiruvannamalai District is different. These observations reminded me of a study published in the Lancet Regional Health Center. Researchers followed 251 children in Vellore District (closer to Tiruvannamalai District) and found that poor children living in urban areas were often exposed to calorie-rich but nutrient poor food environments.

If such conditions exist in parts of Tamil Nadu State, one of India’s more developed states, then we should think carefully about the situation across the country.

Another Transformation is Taking Place

For generations, many women carried the burden of childcare, household work, elder care and agricultural labor simultaneously. In many families, they sacrificed their own aspirations for others. Are women born to carry everyone’s burden?

Interestingly, across the globe especially in Southeast Asia, education and economic opportunities have expanded women’s choices. Researchers such as Stanford University’s visiting Professor Alice Evans argue that many women choose marriage only when their partner’s own goals align with their own. If not, remaining single becomes a reasonable choice for them

Female Work Percents 20260605

Female Labor Participation Rates Comparing India and China from 2011 to 2024

As shown in the above chart, India has certainly made progress, but female participation in the workforce remains below that of many East Asian economies. A society that fully allows women to participate in economic life is likely to become more prosperous and productive.

Economic realities are also shaping family decisions. Housing is expensive. Job markets are uncertain. Inflation remains a challenge. Asset prices have risen significantly.

Yesterday, a college friend called me. He recently built a new house in his town. He is 33 years old, unmarried, and works in Oman. Years of overseas employment and remittances have helped him to achieve his goals. I sometimes wonder whether the same outcome would have been possible had he stayed and earned entirely in India, especially outside the software and technology sectors.

India still has demographic advantages, but a demographic does not bear fruit automatically. It requires healthy, educated and economically secure citizens.

We often speak about India becoming a developed nation. However, the real question is whether growth can and will improve the lives of ordinary people, especially women, children and underprivileged. Growth matters, development matters even more.

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India Tamil Nadu State 20260521

India Insider: Capital Formation in Rural Areas and Distress Hill Terrain

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Income Comparison via Two Distinct Districts: Tiruvannamlai and Madurai

India is a vastly developing economy, but its national accounting frequently relies on formal sector performance to extrapolate the conditions of the informal economy. Despite official statistics continuing to rise, the economic reality of rural India remains largely unchanged.

Recently, I was travelling extensively across villages in the Tiruvannamalai district of Tamil Nadu State in South India, trying to understand how capital formation works in rural and semi-rural areas.

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For more than 50 kilometers, there were barely any shops related to consumption activity. There is no absolute poverty in these areas, but income levels are clearly not standard enough to support strong consumption patterns.

Many people in Tiruvannamalai district villages work in neighboring cities liken Tiruppur, Bengaluru or Chennai and send cash back to their families. Apart from these remittances, agriculture and related seasonal income add to household earnings.

The second observation based on my extensive survey with about 55 women, was that I hardly saw anyone wearing gold chains or ornaments in villages. In other words, household income is often not sufficient enough for families to consistently accumulate gold or jewelry, which traditionally act as a form of savings in Tamil Nadu households.

Evidence suggests the reason for weak savings and low capital formation in Tiruvannamalai is due to low household income generation. And the reason for low household income can be attributed to a lack of local opportunities which offer weak wage growth, plus dependence on migration and the seasonal nature of agriculture sector. Education also plays a decisive role, but the broader issue demonstrates inadequacy of stable income generation.

We do not have sufficient recent district level data to fully validate many of these observations. Tamil Nadu State GDDP data (Gross District Domestic Product) exists, but it often lags. RBI remittance data does helps, but that is largely available at the State level rather than district level.

However, these observations do find relevance in prior surveys conducted by the Tamil Nadu Government before COVID-19.  Districts such as Tiruvannamalai were often catagorized as relatively backward compared to more industralized districts where consumption pattern improved dramatically through manufacturing and urbanization.

Instability via MNREGA’s Distress Hills Data

One interesting way to study this phenomenon is from Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) employment data. MGNREGA data is measured in lakh person-days. (A lakh equals 100,000). In simple terms, it measures the amount of labor generated through a combination of workers and days worked under the scheme. 

Say for example, if 100,000 people work for 10 days, or 50,000 people work for 20 days, then: lakh person-days per 100,000*10 equals 10 lakhs person-days. And conversely 50,000*20 equals 10 lakhs person-days.

Sometimes, fewer workers, often work for many days or many workers work for fewer days. Thus, economists use person-days instead of counting only people.

In Tiruvannamalai the pattern of MGNREGA demand reveals a strikingly seasonal and distress driven rural labor cycle. Person-days generated surged to nearly 19.8 lakhs during May, before falling sharply toward November as agricultural activity resumed. The peak compared to it low variation is close to 5:1, creating what can be described as a steep “distress hill” in rural employment demand. 

Such a dramatic fluctuation suggests that a large share of rural households rely on MGNREGA not as supplementary employment, but as an emergency income stabilizer during periods of agricultural inactivity and cash flow stress. The intensity of the spike indicates the absence of diversified rural income sources, exposing the structural vulnerability of the local informal economy.

India Person Days 20260521

Tiruvannamalai District: FY monthly 2024-2025, from MGNREGA person-days shows sharp seasonal distress, peaking near 19.8 lakh person-days during May before collapsing toward November.

In contrast, the Madurai district in Tamil Nadu State presents a far more stable rural employment profile under MGNREGA. Peak demand was comparatively lower, reaching around 11.4 lakh person-days, while the decline across the year was considerably less severe than in Tiruvannamalai. The peak to low ratio was closer to 3:1, indicating significantly lower seasonal volatility in rural wage dependence.

India Person Days Madurai 20260521

Madurai District: FY monthly 2024-2025 displays a smoother MGNREGA employment curve with lower seasonal volatility, indicating stronger economic continuity and more diversified income generation.

Rather than exhibiting a sharp distress hill, Madurai’s smoother employment curve suggests a more diversified local economy. This because households may have greater access to non-farm income sources including urban linkages or more stable agricultural activity. The reduced fluctuation implies that MGNREGA functions more as a supplementary employment buffer than as a critical survival mechanism in Madurai compared to Tiruvannamalai.

Seemingly it is evident that consumption oriented businesses may struggle to scale in districts such as Tiruvannamalai, where disposable income growth and household surplus remain weak.

Industrialisation changes this dynamic because stable wage growth improves consumption depth and household savings. Without stable income growth, retail expansion and capital formation remain structurally weak.

The distress hill therefore represents far more than a simple employment fluctuation. The steep seasonal dependence on MGNREGA highlights how large sections of the rural economy remain vulnerable to agricultural cycles, with insufficient diversification, weak consumption resilience, and limited avenues for sustained wealth creation.

Notes:

Chart Sources: Ministry of Rural Development, Government of India, MGNREGA Dashboard (District level monthly person-days generated data).

Distress hills refers to my analysis of seasonal MGNREGA employment patterns to measure rural income instability and economic vulnerability. When plotted month-by-month, districts experiencing severe seasonal stress tend to exhibit a steep hill shape, characterized by sharp spikes in person-days generated during agricultural lean periods, followed by rapid declines once farm employment resumes. The steeper the hill, the greater the dependence of rural households on emergency wage employment for income stabilization.

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Water India Graph 20260430

India Insider: Water Crisis Has Turned From Severe to Critical

by with No Comment AssetsCommoditiesFeatured HighlightsFinancial InstitutionsIndiaInvestingTechnologyWorld

India Needs Sustainable Water Security With Improved Infrastructure

India’s population has been expanding at a rapid pace and stands at 1.4 billion. Due to the urbanization process, industrialization in cities like Chennai, Mumbai and Delhi must continue to emphasize improving public infrastructures in order to maintain vital growth.

The growing population and urbanization adds noteworthy stress to the nation’s water bodies. With more people living in increasingly congested areas and pumping large amounts of water via borewells, groundwater levels are rapidly diminishing.

For instance, India consumes roughly 761 billion cubic meters of water per year, making it the largest water consumer in the world, ahead of China and the United States. 85% of rural India is dependent on ground water for agriculture and consumption, this because lake and pond water are not accessible. Rural India suffers from a lack of maintenance and sewage water that often contaminates these important sources.

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Tap Water via Total Dissolved Solids Comparison in Various Cities Worldwide 

Only a few years ago, water facilities provided by municipalities and urban systems were relatively accessible in India. Low and middle income households relied on pipelines, wells and tap water for their daily usage. However, with sharp rises in population, government capital expenditures on water pipelines and sanitation has not kept pace and often fails to meet needs.

For example, rainfall in Chennai City always ends up staying on roads and platforms in the last few years, this despite the city’s infrastructure which has expanded multifold. In many parts of Chennai, water contamination has become severe with high levels of iron, hardness, turbidity and nitrate levels visible. The government has been inefficient when addressing the contamination. As I witnessed in 2019, many parts of Chennai cannot use ground water due to inadequate rainfall, storage and lack of proper municipal supplies.

And due to excessive extraction of ground water and an inability to channel rain water into the ground, many parts of Tamil Nadu now report total dissolved solids (TDS) ranging from 500 to 1000 parts per million, reaching extreme levels of 3000–5000 ppm in some areas. The World Health Organization recommends much lower levels for safe and palatable drinking water.

Water treatment for households using reverse osmosis plants, which were not normal a few years back have become essential for people seeking safe drinking water. Despite being a coastal region , cities like Chennai cannot rely solely on seawater desalination to meet their drinking water needs. While desalination plants contribute to supply, they account for only a fraction of total demand.

Desalination is an energy intensive and expensive process, making it difficult to scale for universal, affordable access. More importantly, producing water is only one part of the solution and delivering it efficiently remains a major challenge.

India endures 3 to 4 crore (30–40 million) waterborne disease cases every year, mostly from contaminated drinking water. As borewells go deeper, they draw water containing high concentrations of fluoride, arsenic, nitrates, and heavy metals. This creates significant health risks, especially for low income households that cannot afford advanced purification systems. The depletion crisis and contamination crisis are increasingly converging.

Due to rapid urbanization and high population with inefficient audits, many water bodies such as lakes and ponds have been encroached upon by the real estate sector or contaminated by waste disposal by surrounding settlements. This is quite visible in Chennai.

Experts claim that many water officials do not have a clear understanding of how pipeline networks are laid out across cities. As Frontline magazine columnist Vedaant Lakhera wrote in April 2026, India’s water crisis stems less from hydrological scarcity and more from a failure of governance.

The absence of water sensitive designs have allowed cities to expand unchecked, almost freely, contaminating local water sources such as lakes and ponds. This has led to a significant depletion of groundwater availability, which were supposed to act as reserve water reserves.

Addressing this crisis requires a multi-dimensional approach. Rainwater harvesting must be scaled to improve groundwater recharge and long-term availability, while modern purification systems remain essential to ensure safe consumption in the short term. At the same time, systemic reforms such as regular pipeline audits, mandatory replacement of ageing infrastructure, and better urban water management are critical to prevent contamination at its source.

Without such integrated efforts, cities will continue to face a paradox of water scarcity amid abundance. Sustainable water security in India does not depend only on how much water is available, but on how effectively it is managed, protected and delivered.

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Indian Diaspora 20260325

India Insider: Why the Gulf Remains a Vital Economic Lifeboat

by with One Comment AssetsBen EzraExclusive ContentFeatured HighlightsIndiaInvestingUncategorizedWorld

Indian Expat Labour and Recalibration Realities

The skyline of Dubai, once a symbol of untouchable prosperity, now sits under a shadow of regional recalibration. As Reuters recently noted, Dubai has successfully transitioned to a non-oil economy, with oil accounting for less than 2% of its GDP. It is now a powerhouse of trade, high-end real estate, and financial services. 

However, its “backyard” – the Strait of Hormuz – remains a strategic bottleneck. With 20% of global seaborne crude passing through this narrow vein, the recent tensions in March 2026 have forced a shift in perception: the Gulf is no longer an insulated sanctuary, including Dubai where millions of Indians work and earn for their families in India.

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Indian Diaspora Gulf Representation

The scale of this “labour export” is enormous. As of early 2026, approximately 9.5 to 10 million Indians live and work across the GCC (Gulf Cooperation Council) countries. To put that in perspective, that is nearly the entire population of a country like the UAE, made up solely of Indian expats.

A Remittance Driven Economy

As per Government data sources, India remains the world’s top remittance recipient, with total inflows hitting a record $135.4 billion in the last fiscal year. And despite a rise in high-skilled migration to the US and UK, the GCC remains a juggernaut, contributing roughly 38% of India’s total remittances.

For states like Tamil Nadu, Kerala, and Maharashtra, which receive nearly 50% of these total inflows, it is a macroeconomic stabilizer that funds the current account deficit and keeps the Rupee from a freefall.

India’s Labour Market Paradox

But here is the real question, if people return to India due to the crisis in the Middle East, are there any “good quality” jobs waiting for them in India? The honest answer is no.

Youth unemployment remains elevated, particularly among graduates. Engineers in mechanical and construction fields face limited opportunities. Outside IT, and to some extent automobiles, there are not enough stable, high-paying jobs.

So people adjust. You will find postgraduates working in delivery jobs and informal sectors. I have personally spoken to Amazon delivery workers who told me they hold M.A degrees, or that they had worked in Dubai or Singapore before Covid and are now trying to leave again. This is becoming norm nowadays.

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Indian National Wages and Savings Compared to Expat GCC Averages

In many towns in India, migration itself has become an economic model. People move to Singapore, Malaysia, or the Gulf, and the money they send back drives real estate, consumption, and local business activity. In many such regions, the labour market feels tight, not because jobs are available, but because the workforce has already left.

The wage gap explains everything. A nurse or lab technician in India may earn ₹15,000–₹20,000 per month. The same person can earn close to ₹80,000 in the Gulf. A private school teacher in Villupuram city in Tamil Nadu state earns around ₹8,000.

While nominal wages are  2–2.5x higher in GCC, the true driver of migration is savings arbitrage , which can be 5–6x higher.

This reflects structural differences in labour productivity and capital intensity.

India has a large pool of educated labour. But instead of becoming an advantage, it has turned into a wage suppressing force. There is always someone willing to work for less. As a result, wages remain low and bargaining power stays weak.

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Percent of India’s Remittances From The GCC

At the same time, we are told growth is strong. Yes, the labour force participation is rising, but inequality is also increasing. A large share of employment remains informal and unstable. Inflation continues to erode purchasing power, and disposable incomes remain under pressure.

Right now, for many Indians, prosperous conditions are easier to find outside the country. Yes, the Gulf has risks. However, geopolitical tensions will come and go, and these are short-term disruptions.

Structurally, GCC economies will stabilize and grow again, and when they do, the flow of Indian labour will continue to pursue these opportunities. Because until India creates enough high-quality jobs at scale, migration will not slow down.

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India Insider: Affluence Among the Few, Aspirations for Many

by with No Comment AMT MarketsAssetsFeatured Highlights

India Insider: Affluence Among the Few, Aspirations for Many

A recent report by Franklin Templeton highlighted that India’s per capita income will penetrate the $5,000.00 USD level by 2031, pushing the country into what some analysts consider an affluence trigger zone. Their article celebrates the consumer boom showing the rising sales of premium detergents, growing green tea consumption, and a surge in discretionary spending, as if prosperity has finally crossed over into a mainstream phenomena.

But a closer look reveals something else and a worthwhile critique of Franklin Templeton’s optimistic portrayal.

Who Actually Spends this Money ?

The Franklin Templeton report confidently attributes the wealth effect to rising equities, real estate and gold. Yet, with only 13 crore (130 million) demat accounts in a country of 143 crore people, how can equities be driving broad affluence? Even within those attributed accounts, activity is heavily concentrated in the top decile of income earners like urban professionals in finance, IT and export linked sectors; and over 70% of mutual fund assets under management come from the top ten cities.

The so called upper middle class that fuels premium consumption largely works in these sectors. For the rest of India – especially the 42% still dependent on agriculture – wages have barely kept pace with inflation. Several national surveys and analyses show real wage stagnation since 2015-2016. Data from the Labor Bureau and the National Sample Survey (NSSO) indicates that real wages for rural laborers had near zero growth between 2015-2016 and 2022-2023. In contrast, the period before 2015-16 showed much faster wage growth.

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NSSO Survey data compiled by Idea India Magazine

The Concentration of Savings and Spending Power

The report itself concedes that the top 20% of households hold around 85% of India’s total savings. That’s roughly 26 crore people (260 million) driving most of the premium consumption, while the remaining 104 crore (1.04 billion) share only 15% of savings – a stark reminder that aggregate growth often hides skewed realities. And this is why rural households and lower-income urban families, meanwhile, are facing tighter budgets and are actually cutting back on discretionary spending.

Gold as a Survival Cushion

The report romanticizes gold as a symbol of wealth, but in rural India, the precious metal plays a very different role. Gold is not an indicator of luxury and status, but a financial safety net. In villages around Tiruvannamalai City of Tamil Nadu State. Where I have surveyed about 50 families, average holdings are often below 40 grams. When harvests fail or cash flows tighten, this gold is pledged or sold to fund essentials like health expenses, education or seeds for the next planting season.

Yes, some towns in India have higher gold holdings and savings, sharply due to offshore remittances especially in States like Kerala and Gujarat. This remittance led prosperity fuels local real estate and pushes up rents, but it’s a localized story, not a national one. Most rural communities still depend on seasonal income and informal borrowing.

The Uneven Reality Behind Growth

Premium brands are growing faster, but this signals income polarization, not inclusive growth. The per capita income maybe rising, but it’s an average skewed by the top 10-20% who hold multiple assets. For most, consumption is fueled by rising debt. Until wage growth broadens and rural incomes strengthen, India’s  consumption boom will remain the affluence of a few – not the prosperity of the many.

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India Insider: Manufacturing Strategy to Create Rural Jobs

by with No Comment BusinessFeatured HighlightsIndia

India Insider: Manufacturing Strategy to Create Rural Jobs

Across much of India’s rural landscape, manufacturing remains scarce and finding a solution for this remains a priority. While some towns do have small scale industries that offer jobs, this is still limited. As of financial year 2023, agriculture accounts for only 16% of India’s GDP, down sharply from around 35% in the 1990s, due to a structural shift toward services and manufacturing.

A large share of rural families still depend on agriculture, often engaging in farming and irrigation with modern equipment. However, marketing their produce remains a persistent challenge. Meanwhile, many rural workers are engaged in low-wage trade and commerce, often in informal settings such as small shops and roadside businesses. These roles typically offer limited income and little upward mobility. Falling real wages have pushed many to migrate to India’s urban centers or venture overseas to Singapore, Malaysia, and the Gulf countries in search of better livelihoods, aided by favorable exchange rates.

Capitalism and Efficient Manufacturing

Adam Smith, in his seminal work The Wealth of Nations wrote that, ‘it is not by gold or silver, but by labor that all the wealth of nations is created’. This fundamental idea underpins the modern economic thought that wealth is not derived merely from money, but from the productive capacity of people.

When capital is invested in a capitalist enterprise, it generates profits for the owner, provides wages for employees, and delivers returns (such as dividends) for shareholders. But this cycle of value creation depends on active and efficient enterprise, particularly manufacturing which has been missing or underdeveloped in many parts of rural India.

Unlike countries such as the United States, where people readily relocate across States, India faces some unique challenges. Like the European Union, India is a union of diverse linguistic and cultural regions. It is uncommon for a small business owner from Himachal Pradesh to directly access markets in Tamil Nadu or Karnataka due to language barriers, cultural differences, and logistical constraints. These frictions further isolate rural producers from wider markets.

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Garment Industry Values in India, Bangladesh and Vietnam

Strategic Solutions and the Role of State Governments

To revive rural economies, business people along with their state governments must identify and invest in strategic sectors that create jobs and add value. Kerala is a fine example: as one of India’s top spice-producing States, Kerala has the potential to establish local industries focused on spice processing, packaging, and export. Coordination between agriculture and manufacturing can generate employment, stimulate local economies, and enhance foreign exchange earnings.

Albert Hirschman, a development economist, highlighted this approach through his theory of unbalanced growth and economic integration. He argued that certain industries have strong reciprocal connections with other parts of the economy. By prioritizing sectors with good synergy potential, developing countries can achieve significant growth even with limited resources.

Growing competition from countries like Bangladesh and Vietnam which both enjoy favorable trade agreements do pose new challenges, this must be taken seriously by India and create a focus on forward looking international commerce. There will always be competition from distant enterprises and nations, this must be accepted and planned for via commercial insights.

Within India is Tiruppur, a city in Tamil Nadu, known as the ‘Manchester of South India’ due to its vibrant textile industry. The city has created an ecosystem of manufacturing that consistently offers higher real wages compared to other towns in the region. It has successfully shifted labor from agriculture to industry, thereby increasing productivity and income. It is a bright example and defines one way to make progress.

Protecting New Industries and Creation of Success

In his book How Rich Countries Got Rich and Why Poor Countries Stay Poor, economist Erik Reinert argues that nations develop not just by doing what they are currently good – such as agriculture or mining, but by nurturing industries that can become more productive long-term. Typically manufacturing and technology sectors lead to greater innovation and economic resilience.

Reinert provides numerous examples, like South Korea’s emerging growth in steel and its automotive industries, and Ireland’s rise in information technology where specific protections and support for young industries has led to long-term prosperity.

India’s rural transformation cannot rely on New Delhi alone. State governments along with business people must take the lead by identifying sectors that have the potential to foster high growth and employment. Helping to create local value chains, investing in infrastructure, training, and market access will build resilience in these communities. By encouraging small-scale manufacturing and leveraging regional strengths, the country’s rural areas can become engines of economic growth.

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India’s Speculative Real Estate Bubble and Values: Part One

by with No Comment AMT MarketsAssetsFeatured Highlights

India’s Speculative Real Estate Bubble and Values: Part One

India’s Real Estate Sector is a Well Known Affair to its own Citizens and to Global Asset Management Companies

India’s major cities like Mumbai, the financial capital of India, Gurgaon, Delhi, Bengaluru and Hyderabad, the tech hub of the nation, serve as major attractions for local players and international corporate giants who want to participate in the real estate sector. While transparency still remains a challenge that needs to be addressed in Tier 2 and Tier 3 cities of India, underlying demand continues to expand throughout the nation. The Real Estate Regulatory Authority, passed a bill known as the RERA Act, by the serving government in March of 2016, to create transparency and fairness between buyers and sellers in the residential real estate market, however these measures do not always help circumstances as hoped.

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Well known companies like Blackstone which is based in New York, and Brookfield Asset Management of Toronto have vast operations in the commercial real estate sector of India. Their estimated investments are significant. Amounts spent are believed respectively to be nearly 50 billion USD by Blackstone, and the Brookfield figure is likely around 22 billion USD. The companies concentrate money for real estate, and infrastructure like telecommunications, roads and other spheres crucial to create value.

The reason why private equity giants allocate massive investments into India commercial real estate is due to the remarkable advantages of the locations available for property, and the capability to turn a profit. The land purchased and developed is usually situated close to burgeoning information technology companies. It is easily understood these IT companies have expansive needs to function properly which include plenty of area for employees to work. This is relevant in the north of India where Brookfield has invested in places like Mumbai and Gurgaon. Apart from the commercial demand for property, the employees who work in these type of companies also drive residential apartment sales in these cities.

The real estate market in Gurgaon has seen remarkable growth in the recent years where prices have experienced double digit appreciation. Readers need to understand that Gurgaon, is a city near India’s capital of New Delhi in northern

India. It’s known as a financial and technology hub. The rise of e-commerce players like Amazon and the Walmart owned Flipkart are important. Walmart spent around 16 USD billion to buy about 77% of Flipkart in 2018 and their vast operations also have sparked demand for huge amounts of property, including warehouses. This activity has certainly attracted the attention and desire of global players to invest in commercial real estate operations.

The residential real estate market has grown fast, and continues to achieve huge growth even after the coronavirus pandemic. An extremely rapid pace is fueled because low interest rates have appealed to new home buyers to initiate purchases of apartments and condominiums in metropolitan cities like Chennai, Mumbai, Hyderabad, and Bengaluru. Many affluent families in India from these major cities continue to own and rent residential homes in the areas, taking advantage of demand. According to a survey conducted by the global property consultancy firm Savills, now 70% of families in the metropolitan cities mentioned previously from the north and south of India have answered positively when asked if they would like to buy a second home in the next couple of years.

Residential real estate sales have been rising after the pandemic, especially for double bedroom apartments averaging 1200 square feet of housing, usually within a category that is priced in a range above 5,000,000 Rupees (around 60,000 USD). India’s benchmark mortgage rate is in the 8.7% to 9.7% range as of this writing, this is higher than it was one year ago. But Indian home buyers haven’t yet stepped back from buying, this because interest rates in India have not increased too much in percentage terms. The average time to pay a loan for residential mortgages ranges from 10 to 20 years in India. This allowable time frame makes it affordable for employees to pay via Monthly EMI, Equated Monthly Installments. The mortgages come with a floating rate meaning the buyers can reset their rates when the local interest rate falls. Yes, floating rates certainly do contain dangers if interest rates climb too high.

A Speculative Roulette Game: The Least Known and Unequal Affair

But there is another reality and a very different story in certain areas of India where data misses critical elements of the real estate business. Speculative participation in property is done by the most affluent who are the dominant buyers and sellers; speculative buying and selling is too expensive for most citizens. Real estate has frequently been used as a tool to hide wealth and avoid taxes by many within certain segments of India. The real estate speculative bubble creates vast distortions in the costs of rents, and affects employment opportunities for the masses. Government offices may sometimes turn a blind eye to these circumstances, because as long as cities and regions can collect money from the speculative frenzy there is little reason to turn off the revenue streams.

Frequently there is someone who is capable of bidding higher for lands in most of the Tier 2 and Tier 3 cities discussed, compared to those who actually need the property to live there and function properly. It is important to mention Tier 2 and Tier 3 cities and what is taking place in these areas, because these locations frequently lack substantial income generation opportunities for people and don’t have massive infrastructure or enough office space to employ people where wages have stagnated for many years. Take for example the Tamil Nadu, a state in southern India where I live, the average price of a double bedroom 1200 sq’ft residential apartment in the capital city of Chennai is around 6,000,000 Rupees (around $73,000 USD).

Readers need to note that the Indian ‘middle class’ prefers to have 2 bedroom 1200 sq’ft residential houses and apartments on average, thus builders construct houses and units based on land availability. Market prices for the property equals the costs of building materials and labor along with the speculative factors worked into the total value.

A look at the town of Madurai where the same apartment is available at a comparable price tag like Chennai is important to critique. Because wages in Madurai are a quarter, and sometimes less than half of what one could earn in Chennai, the disparities in the income distribution and the property prices in India become evident and need to be recognized.

In some rural towns where wages have not grown more than 5% per year,

India has seen real estate prices doubling every 4 years. For example, the rural town called Ponnamaravathy near to Madurai, which is my hometown, speculation in the real estate sector has seen frenzied pricing in an unprecedented manner for land and newly built houses. There is a great divergence between real per capita income versus the escalating real estate prices and rents in the interiors of India in towns such as Ponnamaravathy.

According to real estate analysts, most land parcels and their inventory of projects within metropolitan cities that are under construction has been bought by speculators. When units in new projects are sold to speculators, these generally change hands multiple times during the construction period, which generally lasts three to four years. Such heavy ‘churning’ means fast price increases. Also, the builders who market their own projects as investments raise list prices frequently to keep existing investors happy with notional gains, so they can point to the ‘attractiveness’ of potential speculation.

While it may not matter to some citizens in the larger cities, the problem of speculative influences do matter in the small towns where community wages have not grown properly. Inflation and speculative investments in these towns do not create sufficient job growth either. Surplus cash profits earned by many businesses, and foreign remittances, which were close to 108 billion USD in 2022, goes back into real estate speculation causing higher rents and forcing lower income households to struggle.

Rural Wages Haven’t Grown but Prices are Increasing for Homes

According to economists data, Average Nominal Wages in rural India is approximately 15,000 Rupees per month for men and 8,000 Rupees per month for women.There is an ample real estate supply in the rural market, but speculative demand has created steep pricing, typically initiated by large ‘investors’ willing to pay top money for any asset irrespective of its location, affordability or current market price based on the assumption values will continue to increase.

The difference between rural wages and costs for homes creates heavy disparities and inequalities for households living within the lower thresholds of society. For example, a double bedroom 1200 sq’ft residential apartment in Ponnamaravathy can be selling at a whopping 7,000,000 Rupees (approximately 85,365 USD). This is 20% more than what we have seen before on average in Chennai, and Madurai, a Tier 2 city, in Tamil Nadu state. The wages in the rural town of Ponnamaravathy are just 10% compared to what one could earn in Chennai annually, making the purchase of a residence priced at these higher values difficult for most residents and making many people renters for life.