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The real reason why India has a high-cost economy

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02.10.2019

Brookfield Place in Manhattan, New York, is a trendy office building-cum-mall situated right across the road from the World Trade Centre. During a recent visit, I would take a ferry every morning across the Hudson River from Jersey City to have my first cup of coffee there. It cost $1.75 for a cup of aromatic coffee.

Back home in Greater Noida, a suburb of New Delhi, our local Café Coffee Day has just hiked prices: a cup of regular coffee now costs about Rs 150, which is a little over $2. More expensive than Manhattan! And here I overlook a run-down commercial complex with haphazard parking and garbage and rubble piled up at every corner.

The guy who mans the counter complains that business is bad and the outlet is losing money despite the price hike. People have cut back on spending, especially the local property brokers who would splurge earlier. Now with realty in the dumps, big spending is a thing of the past. Sales have halved. Most customers are not willing to pay Rs 150 for a cup of coffee.

Something clearly is very wrong with prices in general around where I live. Taxis, clothes, restaurants, liquor and most consumer goods are extremely high in relation to income levels.

The average per capita income in Delhi, according to the latest state economic survey, is Rs 3.65 lakhs, or about Rs 30,000 a month. In comparison, in New York it is about $4,000 per month. Apart from rents (which are astronomical), most items are cheaper in New York than in New Delhi, if one compares prices to income. A Rs 150 cup of coffee is 0.5 per cent of an average Delhiite’s income, whereas a $2 coffee is only 0.05 per cent of a New Yorker’s........

© The Asian Age