Indian economic prospects may require a more realistic analysis
demonetization, contracted by 7% as a result of a poorly executed pandemic lockdown, making it one of the world’s worst-performing economies. As a result, from 2020 to 2023, India’s average annual growth turned out to be less than 4%, which is not bad for a phase of global economic turmoil, but far less impressive than recent figures suggests, let alone slogans and headlines. Furthermore, the benefits of this growth are going almost entirely to the rich.
Young people are struggling to earn a decent income, and youth unemployment exceeded 23% last year. That is worse than 120 of the 176 countries for which the World Bank provides data. Jobs in the Indian manufacturing sector are disappearing, leaving the country’s agricultural sector employing a growing share of the workforce.
Small businesses are struggling. High food-price inflation is further squeezing the middle and lower-middle classes. And private investment, as measured by gross fixed capital formation by the private sector, has declined significantly, from consistently more than 25% of GDP in 2005-13 to less than 20% in 2020-21.
Confidence of the future is clearly waning. But India’s biggest cause for concern is its deteriorating political environment: an erosion of democracy, a rise of cronyism, and a heightened sense of insecurity among minority groups. These trends fly in the face of the values and principles on which Independent India was founded and globally admired.
While the country did occasionally slip up, its commitment to inclusion and democracy had few parallels in the developing world. Cronyism, in particular, is self-reinforcing. In countries where it is rampant, international actors realize that they can cut some of their best deals (from their
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