http://www.ft.com/cms/s/81e1a90e-0d36-11dc-937a-000b5df10621,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html
Inequality fears sting Indian business By Jo Johnson in New Delhi Published: May 28 2007 18:21 | Last updated: May 28 2007 18:21 Indian industrialists on Monday promised to appoint an ombudsman to monitor their social inclusiveness after a warning from the prime minister that conspicuous consumption and excessive boardroom pay risked fuelling unrest. The move is a defensive one amid renewed concerns among business groups that the government is contemplating populist legislation to cap salaries and impose caste-based job quotas on the corporate sector. In a hard-hitting speech to the Confederation of Indian Industry (CII), Manmohan Singh, prime minister, last week urged businesses to resist "excessive" remuneration and adopt a more responsible attitude to those yet to benefit from the country's growth. "In a country with extreme poverty, industry needs to be moderate in the emoluments [salary] levels it adopts," he said. "Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest." Senior Congress party leaders are worried that the United Progressive Alliance government, which has lost a series of state elections in recent months and suffered from a backlash against its promotion of special economic zones, has neglected the aam admi (common man) in its pursuit of Chinese-style economic growth. According to the United Nations Development Programme's 2006 Human Development Report, the richest 10 per cent in India accounted for 28.5 per cent of total expenditure in 1999/2000, compared with 3.9 per cent for the poorest decile. In China, the top 10 per cent in 2001 accounted for 33 per cent of expenditure and the poorest decile just 1.8 per cent. On the Gini index, where 0 represents perfect equality and 100 absolute inequality, India measures 32.5 and China 44.7. Sunil Bharti Mittal, president of the CII and Bharti Airtel, founder, on Monday acknowledged that "in-your-face kind of spending" could be offensive. "Ostentatiousness will never be supported by the CII," he said. Government ministers have in recent weeks ramped up their criticism of India's growth process, saying that its benefits had failed to percolate down to the villages and forests of rural India, home to two-thirds of the country's 1.1bn population. Mani Shankar Aiyar, a minister from the increasingly influential left wing of the Congress party, warned this month that the UPA government would lose the support of the aam admi if it did not rapidly correct its course. He said: "If you look at the 700m Indians who are either not in the market or barely in the market, then the impact of the economic reforms process, which is so lauded by the CII, makes virtually no difference to their lives." Mr Aiyar added: "0.2 per cent of our people are growing at 9.92 per cent per annum. But there is a very large number, I don't know how many, whose growth rate is perhaps down to 0.2 per cent." As India emerges as one of the world's largest consumer markets, class warriors in the government are uneasy at the profound changes that have taken place in the country's attitude to money. The prime minister called on businesses to allocate advertising to media groups that were socially sensitive, saying he was concerned at the way television beamed vulgar displays of wealth into villages and slums. He said he was greatly concerned at "ostentatious expenditure" on weddings. "Such vulgarity insults the poverty of the less privileged, it is socially wasteful and it plants seeds of resentment in the minds of the have-nots."
