The Indian economy requires 25 million-plus jobs to be generated over the next five years in order to employ all those who are presently unemployed in this nation.
The Narendra Modi government has claimed that the Indian economy, judged by GDP, grew at an impressively rapid pace of 8% last year. But even if that claim is true, it has not created an adequate number of appropriate jobs going by the current unemployment in India.
Using the latest official statistics, the unemployment rate for people aged 15 years or above may have dipped from 4.2% in 2021 to 3.1% in 2023, but this is not commensurate with the rapid GDP growth rate of 8%.
As seen in the results of the 2024 general election, it is clear that the Bharatiya Janata Party has paid the price for the setback, thus losing its majority in Parliament. It has had to form a coalition government with parties that follow a contrary economic ideology.
Inequality gap is widening
The gap between the haves and have-nots has widened in the last two decades. Moreover, throughout the past decade under BJP central rule, official statistics reveal a sharp rise in wealth inequality. About 1% of India’s population now owns 40% of the country’s wealth. This is terrible for any democratic population and state, if not for the stability of the nation.
This is what is graphically called “K-shaped” inequality in the economy, i.e., consumption/income for a few is rising, while for a large proportion of the less well-to-do population, it is sliding, i.e., it is decreasing ‘K’-wise. In public meetings, Prime Minister Modi has claimed that because of GDP growth in the last nine years of his tenure, the economy has lifted 25 crore people out of poverty (by investing heavily in capital expenditure) Government economists also claim that the Modi government has succeeded in establishing sustained and fast-paced economic growth, making people happy. This remains to be seen in the next three years.
In fact, the electoral outcome has raised questions about this claim which experts of the government vide news media had touted — that India is the “fastest-growing large economy in the world”.
On the contrary, there are few takers for this claim in the electorate. This is now confirmed by the sharp fall in the bench strength of the BJP’s Members of Parliament in the Lok Sabha. The decline has in fact been shattering for the party, which now has to rely on two — one State each — “regional” parties.
The BJP government’s economic management needs to be overhauled. However, the recent announcement of the appointments of the cabinet Ministers dashes these hopes.
Growth could slip
The Modi government frequently claims that the 2023-24 GDP growth of 8.2% has come on top of the strong 7% growth in 2022-23. How this was calculated has not been disclosed.
India’s growth in the last two years has been pushed via a significantly large Budget deficit for funding the government’s massive capital expenditure. But this has not been done by structural investments in the industrial, agricultural, and service sectors. It may be recalled that the GDP growth rate in the fourth quarter of 2019-20, fell from 8% to 3.8%. GDP growth rate in 2015-16, i.e., April 1, 2015 to March 31, 2016 when compared to April 1, 2014 to March 31, 2015, was about 8%. Each financial year has four quarters, namely, April 1-June 30, July 1-September 30, October 1-December 31, and January 1-March 31. In the pre-COVID-19 quarter, January 1, 2020 to March 31, 2020, when compared to January 1, 2019-March 31, 2019, GDP growth declined to a 3.4% annual equivalent year.
Hence, the 8.2% growth registered in 2023-24 by the Finance Ministry appears to be a flash in the pan. It is doubtful if it can be maintained in 2024-25. Indeed, those who study serious quantitative economics expect growth to slip further.
Need for a new strategy
During the last decade, this government’s economists have frequently called for the “next generation of reforms” to accelerate national economic growth. It remains to be seen if this is possible as the BJP has lost its majority in Parliament and its allies do not have the same economic perspective as the BJP.
Moreover, in agriculture, 92% of the jobs are in the unorganised sector. In industry and services, 73% of the jobs created are in the small- and medium-informal sections. The government and formal private sector account for a mere 27% of jobs. Thus, India now needs a new long-term economic strategy — a tall order as the BJP lacks a cohesive majority in Parliament and has no economist to speak frankly to the relevant Ministers.
Subramanian Swamy is a former Union Minister of Commerce and Law and Justice
