There’s been a lot of chatter recently about India possibly becoming the third-largest global economy within this decade. A report titled ‘Global Credit Outlook 2024’ by S&P Global suggests that not only will India achieve this feat by 2030 but it is also likely to be the fastest-growing major economy over the next three years.
- In its World Economic Outlook released in October 2022, the IMF had predicted a similar trajectory for India’s economy.
- India’s Goal of $5 Trillion: The IMF went a step further and predicted that in terms of nominal GDP, India will become a $5 trillion economy by 2026.
- Comparing India with Germany and Japan: While Germany and Japan have been grappling with economic crises, India has been experiencing rapid growth. In the past few years, India has consistently been among the fastest-growing major economies.
- Economic Crises in Germany and Japan: Between 2018 and 2022, Germany’s economy has barely grown and is forecasted to shrink in 2023. Japan, on the other hand, has been experiencing a contraction for the past five years and only anticipates a modest 2% GDP growth in 2023.
Does GDP Reflect The Real Economic Progress?
While the focus has been on India’s GDP to highlight its rise as the third-largest economy, these figures can also be used to present a contrasting narrative.
India is projected to become the world’s third-largest economy by 2027. However, despite this growth, the World Bank Group’s classification will still categorise India as a lower middle-income country.
- The Reality of Per Capita Income: Even with this potential rise in economic status, India’s per capita income is expected to barely surpass $3,600. Surprisingly, it trails behind neighbouring countries Bhutan and Bangladesh, assuming current rates persist.
- Economic Well-being of Citizens: India’s rise to the third-largest economy might not significantly improve the economic conditions of its ordinary citizens. The progress in economic ranking does not necessarily translate into enhanced living standards for everyone.
The Need For Addressing Development Deficits
True change will only be realised when development deficits are tackled adequately. Addressing these deficits will lead to an increase in earnings, particularly for those whose future prospects currently look grim.
- Government’s Claims on Doubling Farm Income by 2022: The government confidently stated that by 2022, farm policies would lead to a two-fold increase in farmers’ income. In early 2023, they shared with Parliament a report card of their success in agriculture. This report detailed a number of initiatives, reforms, and programs aimed at reducing the cost of farming, boosting production, and increasing farmers’ income.
- Major Accomplishments in Agriculture: Among the key achievements were a 4.5 times increase in budget allocation for agriculture, fisheries, animal husbandry, and dairying from 2013-2014 to 2022-2023. The government also provided income support to farmers through the PM KISAN program. Additionally, the implementation of the Pradhan Mantri Fasal Bima Yojana (PMFBY) was initiated.
- Other Efforts by the Government: Other efforts included the setting of the minimum support price at one-and-a-half times the cost of production, an increase in institutional credit for the agriculture sector, and the promotion of farmer producer organisations. Despite declaring these successes, the government has yet to share concrete evidence of these policies’ impact on farm income.
- Available Data on Farm Income: The Situation Assessment Survey of Agricultural Households, conducted by the National Sample Survey Office (NSSO), provides some insight into farm income trends. The 77th round of this survey (January-December 2019) estimated the average monthly income per agricultural household to be ₹10,218. This is a significant increase from ₹6,426 during the 70th round (2012-2013). In simple terms, farm income saw a 59 percent rise until 2019, but this is only in nominal terms.
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The Alarming Rate Of Undernourishment In India
Despite being one of the world’s fastest-growing economies, high rates of undernourishment remain a concerning issue in India. Recognizing this, the current government has taken proactive measures. They have provided free rations to 800 million citizens living in poverty. Recently, the government extended this free ration programme for an additional five years, beyond December 2023.
According to the Food and Agriculture Organization (FAO), undernourishment has seen a rise in recent years. The data shows an increase in undernourishment from 14.4 per cent in 2013-2015 to 16.6 per cent in 2020-2022. This increase translates to a jump from 188 million to 234 million undernourished people.
Affordability Of a Healthy Diet In India
Another striking issue is the high percentage of the population that can’t afford a healthy diet. In 2021, over 74.4 per cent of the population couldn’t afford a nutritious diet, only a slight decrease from 78.8 per cent in 2017. Astonishingly, the number of people unable to afford a healthy diet has remained over 1 billion, as per FAO’s reports.
The Need For Quality Jobs In India
While the government’s efforts to assist the undernourished are commendable, the rising trends suggest that more needs to be done. An important aspect of addressing this issue is the creation of decent jobs. The lack of job creation over the past eight decades is arguably the largest failure of the Indian economy, eclipsing all its achievements.
Source: A soon-to-be third-largest economy with high development deficits (Deccan Herald, January 3, 2024)