The totally unexpected 7.6% GDP growth of the Indian economy in the second quarter of the financial year 2023-24 was highlighted in the media and celebrated by the government and the ruling party. According to the data released recently by the National Statistical Office, the Indian economy registered a surprising growth in the Gross Domestic Product, indicating that India is the fastest-growing economy globally. This was more than the 6.5% growth rate estimated by the Reserve Bank of India. Based on the current trend of GDP growth, some economists predict that by 2028, India will overtake Japan and Germany to become the third-largest economy after China and the USA. Our Prime Minister also often speaks about India becoming the third-largest economy in the world by 2030. 

Gross Domestic Product (GDP) measures the overall size of the economy. It measures the total value of goods and services produced within the country within a given period. GDP in India is measured every quarter of a financial year. The remarkable GDP growth during the second quarter was facilitated mainly by the 13.9% growth of the manufacturing sector, consisting of goods production in factories across various industries. The other prominent sectors that are considered in the GDP calculation are agriculture, services, construction and mining. 

Our prime minister and the ruling party have projected the GDP growth as an outstanding achievement of the current government in steering the economy after the trauma caused by the pandemic Covid 19. There is no doubt that economic growth is necessary for the development of any country because, with increased economic growth, additional financial resources are made available for investing in sectors like education, health and social welfare. But can GDP alone be the measurement of the strength of an economy and the well-being of the people of a country? 

In the context of India, hunger, poverty, malnutrition, large-scale unemployment, and a widening gap between the rich and the poor coexist along with GDP growth. Annual reports like the World Inequalities Database (WID), Oxfam and Global Rich List published by Forbes and Hurun highlight the increasing economic inequality in India. According to the World Inequality Database, it is estimated that in India, the share of the national income of the bottom 50% has decreased by around 40% since 1980. In contrast, the share of the national income of the top 10% has increased by around 80%, and the share of the top 1% has increased by around 180% since 1980. (Trends in Economic Inequality in India by Maitreesh Ghatak, Ramya Raghavan and Linchuan Xu in The India Forum dated September 19, 2022) 

The Oxfam Report India 2023, under the title, “Survival of the Richest”, states that the top 30% of Indians own 90% of the wealth in the country, whereas the bottom 70% is to be satisfied with 10% of the total wealth. Those who are at the bottom of the economic pyramid “consist of the poor population, dying due to malnutrition, lack of access to healthcare and housing”. 

The UNDP (United Nations Development Programme) has estimated that 228.9 million poor people in India earn less than Rs. 1286 per person per month. It is a paradox that despite being the fastest-growing economy, India houses the highest number of poor people and children worldwide. 

According to the 2023 Global Hunger Index, India ranks 111th out of the 125 countries. With a score of 28.7, India has a level of hunger that is seriously higher than some of its neighbours. Four factors were taken into account for calculating the GHI scores: undernourishment (refers to the entire population – both children and adults); child stunting (share of children who have low height for their age); child under-5 mortality; and child wasting (children who have low weight for their height). All these indicators are components of the universally agreed UN Sustainable Development Goals (SDGs). The Government of India refused to accept Global Hunger Index 2023 for India, citing flawed methodology. The government has also refused to accept India’s Global Hunger Index for the last two years. Ironically, the Prime Minister’s recent decision to extend the 5 kg free foodgrains scheme to 80 core people of India for five years more is an implicit recognition of the fact that hunger along with malnutrition is an issue of severity in India and about 60% people of India don’t have the income to buy food materials to satiate their hunger. 

In normal circumstances, high economic growth should have resulted in increased jobs, but it did not happen in India’s current financial year. According to the Employees’ Provident Fund Organization (EPFO), new job creation decreased by 14.5 per cent to 6.01 million in the first four months of the financial year 2023-24. In the same period a year ago, 7.03 million jobs were created.

Now the question is why high economic growth is not making a dent in the three-headed monster: hunger, poverty and unemployment. The benefits of economic growth are not reaching those at the bottom of the economic pyramid. The trickle-down economic theory has yet to be effective in India. According to this theory, tax breaks and benefits from corporations and the wealthy will trickle down to everyone else in the form of increased job creation and other means. 

The Indian government cut the corporate tax rate in September 2019 from the base rate of 30% to 22% for existing firms and from 18% to 15% for new companies. According to the Oxfam Report 2023, companies in India did not reinvest their profits into their companies; instead, they used them to cover debts or add to savings. As a result, the number of billionaires in India increased during the pandemic, and millions lost their jobs. No new jobs were created because of the corporate tax cut. 

Government policies must be decisive if the benefits of economic growth in terms of GDP are to reach all sections of people, especially those at the bottom. First, the rich are to be taxed in proportion to the increase in their wealth. 

Secondly, the government must invest substantially in education and health care for everyone. The government’s current policy is a gradual withdrawal from the education and health sectors, leaving the field open to private players. As a result, the poor and the lower middle class, who constitute most of the population, cannot access good quality education and healthcare facilities. The quality of education provided by government schools and colleges is generally inferior. In the same way, the quality of health care services offered through government hospitals and health centres is often pathetic. Of course, there are certain exceptions. 

57 years ago, the Kothari Commission had recommended 6% of GDP for the education sector. Unfortunately, no political party or government has taken this recommendation seriously. According to India’s latest Economic Survey 2022-23, total education outlay, including national and state level expenditure, added up to 2.9 per cent of the country’s 2022 GDP – a proportion that has remained constant for the last four years. India’s public expenditure on health and education is the lowest among the BRICS countries. Brazil and South Africa spend about 6% of GDP on education. 

In the absence of quality education for all, the poor people who cannot access good quality education will be unable to use the better job opportunities created by the economic boom. As a result, the poor will remain poor for generations. Lakhs of children of migrant workers are deprived of education. According to a study conducted by the Children’s Foundation of Kailash Satyarthi in 2020, a significant fraction of children of migrant workers, i.e. around 40%, do not have access to education either at the destination, the place of work of migrant workers, or at the source, i.e. the native village of the worker. The quality of education imparted in many village schools is abysmally low. 

Although it is the government’s responsibility to provide safety nets to the poor through welfare schemes, distributing “freebies” like laptops, mobile phones, free bus rides, free travel to pilgrim centres, etc., wastes resources. These schemes are not going to change the life situation of the poor. The financial resources used for freebies are to be invested in education, skill training, employment opportunities, and providing better healthcare facilities. 

Finally, development is not to be measured by GDP alone. Nations have to go beyond GDP and use the Human Development Index (HDI) developed by the United Nations. It is more comprehensive as it considers life expectancy, education and per capita income. Life expectancy at birth is a statistical measure of how long an average individual is expected to live based on specific demographic factors such as birth year and current age. Education indicators are the expected and mean years of formal schooling received. The standard of living is usually measured by the Gross National Income (GNI) per capita. Per the Human Development Report released in 2023, India ranked at 132nd position out of 191 countries. 

Political leaders boasting of GDP growth have to examine whether the benefits of GDP growth are reaching all people, especially those at the bottom. They have to see that economic growth is inclusive and should lead to substantial improvement in the human development of all people.