India’s Finance Minister, Pranab Mukherjee, will embark on a four-day official visit to the United States starting April 18

During his visit, Mukherjee will attend the Spring meetings of the World Bank and the International Monetary Fund (IMF). According to Business Line, he will also hold bilateral meetings with his counterparts from the US, South Korea, Iran and the UK while he is in the DC area. No official meetings with President Obama or Secretary Clinton are currently planned.

What this means:

The visit is not at all about US-India relations but about interacting with Finance related issues and the World Bank happens to be based in Washington.

There is lies, damned lies and statistics.  For American marketers, the image below from the new book  ”The Haves and the Have-Nots,” by World Bank economist Branko Milanovic can fall into the last of those categories. Milanovic sliced the income of national popultions into five percentile slices (“ventiles”), adjusted for purchasing power parity and compared various countries.

Inequality by country and income class. Milanovic in the NY Times

The blog on the New York Times concludes, looking at the data, “America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants. India’s poorest ventile corresponds with the 4th poorest percentile worldwide. And its richest? The 68th percentile. Yes, that’s right: America’s poorest are, as a group, about as rich as India’s richest.” 

Shocking, eh?

So the poorest 5 percent of Americans, the population full of the homeless, the recently release from prison (we have the largest prison population in the the developed world), the welfare moms, the food stamp crowd  are doing as well as the richest Indians. The ones you see sipping  Rs 45 lattes at Cafe Coffee Day, or boasting about their vacations in Phuket, or working at IBM and Reliance.  Even a casual visitor to India can tell that this can’t possibly be real.

Yes, there are 800 million destitute in India. But the consumption patterns of the top 100 million in India match American middle class patterns.  Sales of homes, luxury cars, airline travellers, and other indicators clearly point to a  group of consumers that are living the good life. So where is the mismatch?

Income: Fatherhood, Consumption: Motherhood

It’s likely to be between “income” and “consumption”.  While a few Americans may mis-report their income, by and large very reliable income numbers are available in the United States and Western countries.  On the other hand, you cannot gather accurate income information in India for a number of reasons.  In surveys, middle and upper class Indians will habitually under-report their income: partly out of humility and partly because they do not want to to attract the attention of the income tax department or dozens of sundry inspectors and bureacrats who want a piece of that income.   For top government employees, much of their “income” is in non-cash form, such as subsidized housing, paid vacation travel, theability to use some official cars for personal use, and so on.  In my view,  you are not comparing apples to apples when looking at income in the USA and comparing with India.  As they say, in India income is like fatherhood, you can not easily be sure who is the father of newborn.  On the other hand, consumption, that’s a fact, there is no denying who’s the mother of a new born.  So Dr. Milanovic, let’s do a version that measures consumption.

In the meantime, my clients at Amritt’s Market Entry and Growth Practice are making money hand over fist, regardless of what the economists say!

According to the World Bank’s latest data people of Indian origin living overseas sent in more money back home than people from any other country, for the fourth year in a row.  Indians sent home $55 billion in “remittances” which is equivalent to 3.9 percent of its GDP.  China used to lead the world in this stat, until 2006 but in 2010, the Bank estimates that overseas Chinese sent home $51 billion.

The country that comes third in the rankings in Mexico at $22.5 billion. Americans living overseas sent back just $3 billion ranking them at #37 worldwide. For some smaller economies, foreign remittances make up a huge proportion of foreign exchange earnings; Tajikistan, Tonga, Lesotho, Moldova, Nepal,Lebanon and Samoa get over 20 percent of the GDP equivalent from countrymen living overseas.

The Worlds Bank’s annual Global Economic Prospects 2010 Report says that India “is expected to grow at 7.5-8 % in 2010-11 and 2011-12, respectively, well above the 6.4 % average posted during 1995-2005″.

India’s own central bank, the Reserve Bank of India had already estimated growth in India at 7.5% for 2009-10. Foreign direct investment inflows to the country are expected to increase in 2010 as well.

The author of the report, Hans Timmer, who is the director of the World Bank Prospects Group said “India weathered the global crisis relatively well, in part due to the government’s quick response in easing monetary policy and counter-cyclical fiscal policy measures that supported domestic demand”.