Showing posts with label Modi. Show all posts
Showing posts with label Modi. Show all posts

Friday 1 March 2024

India's Growth Story: A Tale of Contradictions and Missed Opportunities

India’s much-touted 8.4% GDP growth paints a deceptive picture of economic progress. Beneath the surface lies a deeply troubling reality: a government whose urban-centric policies are pushing India's vast rural population further into poverty, exacerbating inequality, and fuelling dangerous social polarisation.

A Tale of Two Indias

The government's focus on urban development and manufacturing is evident in its latest budget. Food subsidies have been slashed by 3.3%, fertiliser subsidies have seen reductions, and capital expenditure remains essentially unchanged. This approach, framed as fiscal prudence, represents a dangerous gamble. It sacrifices the well-being of rural communities in the hope that manufacturing gains will somehow offset the pain.

This gamble is based on flawed logic. As former Planning Commission member Pronab Sen argues, investment alone cannot sustain growth. Healthy consumption is vital, yet India's consumption growth rate languishes around 3.5%. This starkly contrasts with the expected three-fold return for every rupee invested, calling into question the long-term sustainability of the current economic trajectory.

The Price of Progress

The government's relentless focus on urban development and manufacturing comes at a steep cost. Slashed food and fertiliser subsidies are a direct attack on the livelihoods of millions of farmers and agricultural workers. These cuts, coupled with stagnant capital expenditure, reveal a disturbing disregard for the backbone of the Indian economy – its rural sector. This misguided approach ignores the fundamental principle that healthy consumption is the lifeblood of sustainable growth. India's anaemic consumption growth rate underscores this failure. The divergence between GDP and GVA figures, driven by increased taxes and withdrawn subsidies, suggests the government is artificially inflating growth numbers to mask the economic hardship faced by ordinary Indians.

When Numbers Don't Add UpAdditional warning signs lie in the divergence between GDP and Gross Value Added (GVA) figures. The latter is a better indicator of the economy's productive capacity. This divergence, driven by increased taxes and withdrawn subsidies, suggests that growth may be artificially propped up, masking a grim reality for average citizens. The elephant in the room is India's obscene level of economic inequality.

The most glaring consequence of these policies is the obscene level of economic inequality. Recent reports indicate that India's top 10% hold over 57% of the country's total wealth, a shocking figure highlighting the chasm between the haves and have-nots. This concentration of wealth perpetuates a cycle where the rich get richer, and those at the bottom struggle to survive. Such disparity breeds resentment, instability, and increasingly, a dangerous trend of polarisation and racism within Indian society.

The Talent Exodus

The government's failure to create sufficient, well-paying jobs is driving India's most talented and skilled workers to seek opportunities abroad. According to the Ministry of External Affairs, over 13.6 million Indians reside outside the country. While precise state-level data is hard to come by, the overall trend is clear. India suffers from a significant "brain drain," with skilled professionals opting for better prospects in countries that value their contributions. This exodus represents a tremendous loss of human capital. It robs India of potential innovators, entrepreneurs, and leaders who could play a crucial role in building a truly inclusive and prosperous future.

The Need for a New Approach

Government spending has fuelled some growth, but the upcoming push to reduce the fiscal deficit will likely slam the brakes on this avenue. Private consumption needs to compensate, yet it's hamstrung by income inequality and a lack of opportunity for the majority. Job creation is the key – good jobs that generate decent incomes, boosting spending power and fuelling a virtuous cycle.


The current government seems to lack a coherent strategy to capitalise on India's greatest asset: its massive, hardworking population. Instead of empowering domestic industries like textiles, where jobs could be plentiful, we see India losing ground to smaller competitors like Vietnam.


Time for a Reckoning

India's economic model is fundamentally broken. Instead of fostering broad-based development, the government seems intent on benefiting a privileged minority at the expense of the majority. This approach is not only morally reprehensible but also economically unsustainable.

India has the potential to be an economic powerhouse, but only if it harnesses the potential of its entire population. This requires a dramatic course correction:

  • Prioritise Rural Development: Invest in agriculture, rural infrastructure, and programs that empower communities and create opportunities at the local level.
  • Foster Inclusive Growth: Implement policies that promote equitable wealth distribution, progressive taxation, and robust social safety nets.
  • Stem the Brain Drain: Create an environment where skilled workers see a future for themselves in India. This means competitive salaries, opportunities for advancement, and a focus on innovation.
  • Combat Polarisation: Promote a culture of tolerance, inclusion, and respect for India's diverse communities. Hold accountable those who spread hatred and division.

India's impressive GDP growth is a hollow victory when vast numbers of its citizens are left behind. True progress will only be achieved when all Indians, regardless of background or origin, have a genuine chance to prosper.