Is Our Government Only Generating Wealth or Also Uplifting Lives?

Newsreel Asia Insight #106
Jan. 17, 2024

India is in the spotlight at the 54th annual meeting of  the World Economic Forum in Davos, which began on Jan. 15, with an impressive growth rate of 7.3%, which places the country as the fastest-growing major economy in the world. But is this growth benefiting the majority of India’s workers? An analysis published in Bloomberg answers the question.

This question is relevant because India’s economic structure is showing signs of resembling China’s, where investment overshadows consumption, as per the analysis, republished by Business Standard.

This means that India is increasingly focusing on investing in infrastructure and large-scale projects, rather than on goods and services for immediate use by people – similar to the approach China has taken in the past. This shift implies a greater emphasis on building physical assets, like roads, bridges, and factories, rather than encouraging consumer spending.

While India has been traditionally driven by strong consumer spending, private consumption is now growing at a mere 4.4%, the analysis points out, noting that this is one of the slowest rates we’ve seen in over 20 years, and it’s not keeping up with the overall growth of the economy.

After a brief increase in spending following the pandemic, now families  that aren’t at the top of the income pyramid are finding it tough, according to the analysis, which says they are increasingly borrowing money, with the amount of personal loans that don’t require collateral (like a house or car) growing by 30% each year. Bloomberg also highlights the fact that sales of two-wheelers, which are often used by a large number of people, are still not as high as they were before the pandemic.

Further, a heavy focus on such investment might not create enough jobs, especially in a country where 12 million potential jobseekers enter the market each year, it points out.

The disparity in income growth is another concern, according to the analysis, which says the top 20% of income earners in India are likely to see faster growth than the bottom 50%. This imbalance raises a fundamental question: What is the point of economic growth if it doesn’t improve the lives of the majority?

Goldman Sachs Group Inc. forecasts that by 2027, 100 million people in India will have annual incomes of at least $10,000, which is five times higher than the country’s average income. However, India’s resilience lies in creating a broad-based domestic market powered by quality jobs and higher purchasing power. For a country with 1.4 billion people, relying on just 100 million consumers is not sustainable.

India’s economic growth story needs to be inclusive. Growth that doesn’t improve the living standards of the majority is not just unfair; it’s unsustainable. The challenge for India is to ensure that its economic policies do not just create wealth but distribute it in a way that benefits the majority.

It’s time to move beyond the dazzle of high GDP numbers and look at the real impact on the ground. Are people’s lives getting better? Are they finding meaningful employment? Are their children getting a better education? These are the questions that matter.

The narrative of India’s economic growth must shift from mere numbers to the quality of growth, which would create a society where every Indian has the opportunity to thrive, not just survive.