India at a crossroads: while the world's biggest democracy is still a developing nation, the economy is booming and millions are entering the middle class.

• Author: Smith, Patricia
• Position: INTERNATIONAL

On his barefoot trudge to school in the 1960s, a young Ashok Khade passed inescapable reminders of his low status: the well from which he was not allowed to drink; the temple where he was not permitted to worship.

At school, he took his place on the floor in a part of the classroom built a step lower than the rest. Untouchables like Khade, considered spiritually and physically unclean, could not be permitted to pollute their upper-caste classmates and neighbors.

But when Rhade returned recently to his childhood village in the southern state of Maharashtra--in a silver chauffeur-driven BMW--he had a very different experience. Village leaders rushed to greet him, and he paid his respects at the temple, which he had paid to rebuild.

The untouchable boy had become golden, thanks to the newest god in the Indian pantheon: money.

As the founder of a successful offshore oil-rig engineering company, Khade is part of India's growing class of millionaires. But he's also a member of the Dalit caste, the 200 million so-called untouchables who occupy the very lowest rung in Hinduism's social hierarchy. "I've gone from village to palace," he says.

Rising Global Powerhouse

Khade's journey from son of an illiterate cobbler to wealthy businessman reflects India's journey from a desperately poor country just a few decades ago to a rising global powerhouse. In the last 20 years, India's economy has boomed, growing for much of the last decade at about 9 percent a year and pulling millions out of poverty.

But at the same time, millions of people remain stuck in the old India: a place that is largely agricultural, uneducated, and very poor. A third of the population lives on less than $1.25 per day and almost 70 percent make only $2 a day, according to the World Bank.

"You have striking growth and progress and terrible poverty and lack of progress in the same country," says Isobel Coleman of the Council on Foreign Relations.

Modern India was born in 1947, when it gained independence from its longtime colonial ruler, Great Britain. (The British partitioned the country into Hindu-majority India and the Muslim country of Pakistan.)

For more than four decades after independence, India's economy was heavily controlled by its socialist government, and little progress was made in tackling the country's crippling poverty.

But in 1991, the government began turning away from socialism, loosening regulations, opening India to foreign investment, and adopting other free-market practices. The economy took off, and in the two decades since, the ranks of the middle class have more than doubled.

With a population of 1.2 billion, India is the world's second-largest country (after China) and the world's largest democracy. Indeed, India is now seen by many as the other rising global power--along with China--that the United States will have to compete with in the decades ahead. India hasn't risen as quickly as China, but it's...