A sizzling economy remakes India: shopping

malls, technology, and Western-style

consumerism are transforming the nation of
Gandhi
Tarun Narula, a 25-year-old computer instructor, celebrated Mohandas K. Gandhi's birthday on
October 2 by going to the Metropolitan Mall. So did so many thousands of others that the
parking lot was full, as were those of the other two malls across and down the street. Indian-
made sport-utility vehicles, cars, and motorcycles fought for space, choking the roads of
Gurgaon, a city south of India's capital, New Delhi.

Inside the malls, young people in Reeboks sipped coffee at Barista Coffee, the Starbucks of
India. They wandered through Indian department stores and stopped for snacks at McDonald's
and Subway. Moviegoers chose between Boom, a Bollywood (India's Hollywood) film with a
decidedly Western touch of vulgarity, and 2 Fast 2 Furious

This is no longer the India of Gandhi, who helped his nation (and Pakistan) win independence
from Britain in 1947 and was famous for his simplicity and austerity. The change in values,
habits, and options in India--not just from Gandhi's day, but from a decade ago--is undeniable,
and so is the sense of optimism about India's economic prospects.

Much of India is still mired in poverty, but just over a decade after liberalizing its economy and
opening to foreign trade and investment, India is booming. The surge is based on the strength of
its industrial and agricultural sectors, rising Indian and foreign investment, and American-style
consumer spending by a growing middle class, including those under age 25, who now make up
half the country's population. After growing 4.3 percent in 2002, India's economy was expected
to show close to 7 percent growth in 2003. Only China has been growing faster.

10,000 MOTORCYCLES A DAY

The growth of the past decade has put more money in the pockets of an expanding middle class,
250 million to 300 million strong in a country of 1 billion. India is now the world's fastest
growing telecom market, with more than a million new mobile phone subscriptions sold each
month, indians are buying about 10,000 motorcycles a day, and the Bombay Stock Exchange
recently hit a three-year high.

The potential for even more growth is enormous: In 2001, according to census figures, only 31.6
percent of India's 192 million households had a television, and only 2.5 percent a car, jeep, or
van.
After huffing and puffing in place for eight or nine years, "the train has left the station." says C.
K. Prahalad, a professor at the University of Michigan Business School, speaking of the Indian
economy.

For decades after independence from Britain, the Indian government kept the economy on a tight
leash; most industries were state owned, private investment was strictly regulated, and the
government set prices on goods and commodities such as grain and cotton.

In 1991, things started to change. India began opening its economy by reducing red tape, lifting
restrictions on foreign investment, and reforming its financial sector, including loosening the grip
of state control. The changes are starting to show substantial results. India is making a name for
itself not just for its software engineers and customer-service call centers, but also as an exporter
of autos, auto parts, and motorcycles.

In some places, the economic transformation is startling. Look at prosperous cities like Gurgaon
or Bangalore (where U.S. search engine Google plans to open a research facility this year), and
you see an India that many Indians would not recognize. They are places where a young fashion
designer like Swati Bhargava, 27, who works for a company that exports clothes to American
and French retail chains, can buy stylish Indian clothes, eat at Pizza Hut, and contemplate the
country mutating around her. "The culture is changing," she says. "People are becoming more
broad-minded."

SHOPPING MALLS AND POVERTY

One sign of change is the proliferation of malls. India's first opened in 1999, and its second in
2000, according to Harminder Sahni, 35, a management consultant in New Delhi. By the end of
2004, the country will have almost 150.

Of course, India's problems have not disappeared. The deficits in basic services, particularly
electric power and education, are staggering. Twenty-six percent of Indians still live in poverty,
and data suggest inequality is widening even as the poverty rate falls.

The heavy dependence on agriculture, which still accounts for 25 percent of gross domestic
product and 70 percent of employment, means that a bad monsoon--the seasonal wind that blows
from the northern Indian Ocean--can hobble the economy if it brings too much rain, or not
enough. Moreover, not everyone embraces change. Many bemoan the aping of Western culture
at the expense of a much older Indian one.

YOUTH-DRIVEN CONSUMERISM

Still, an acceleration of the transformation seems inevitable, in part because the young are the
ones driving the booming consumer culture. Yogesh Samat, the chief executive of Barista, which
was founded five years ago and now has 125 coffee bars across the country, says that before
economic liberalization began in 1991, "there was a great deal of guilt associated with spending
of any kind." But today's youth--those born in the 1980s--never experienced the shortages or
constraints of a state-run economy, he says. "Consumerism as a term is no longer seen as a bad
word," Samat observes, "and the acquisition of material things is no longer seen as going against
Indian traits

The young people at the Gurgaon malls would agree. Most of those interviewed there are
employed, a change from the past, when jobs for college-age students were few. Most of them
work in service industries, like hotels or advertising, that now constitute about half the economy.
They tend to live at home with their parents, following indian tradition, so almost all of their
income is disposable.

Narula, the computer instructor, earns $2,173 a year, more than four times India's per capita
income of about $480. Sahni, the management consultant, marvels how varied life is for young
Indians today. "When I was a young person, nothing was happening--every day, life was the
same," he says.

A RACE WITH CHINA

No longer. A year ago, India was in a funk over China's having surged ahead economically.
Now, there is a cautious sense that over time, India could prove the turtle to China's hare, thanks
to its entrepreneurial spirit, its strong higher-education system, and its democracy.

Ratul Puri, the executive director of Moser Baer India, now the world's third-largest producer of
recordable media like DVDs and CDs, says his company recently built the world's largest factory
for those products in Noida, another New Delhi satellite city, in less than seven months.

"Pre-1991, it would have been impossible," Puri says. "We would have spent six and a half
months trying to get the license for construction."

WORLD'S MOST POPULOUS COUNTRIES

China 1.29 billion

India 1.07 billion
U.S. 292 million
Indonesia 220 million
Brazil 176 million