This elephant in the Indian economy’s room needs attention: Inequality

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Subscribe to enjoy similar stories. The first half of 2024-25 is done, the Centre’s report card for the Indian economy over the first five months ended August is out, and, beneath its optimistic timbre, its underlying tone betrays a suppressed sense of apprehension about lingering structural fault-lines.

The report, based on provisional GDP data for the April-June quarter and indications from the next two months, projects India’s GDP growth for the full year at a likely 6.5-7%, broadly aligned with earlier predictions. The upbeat outlook emanates from a couple of sources.

First, the monsoon seems to have delivered good rains, making healthy kharif and rabi harvests likely. This will not only have a dampening effect on elevated food inflation, stabilizing prices and reducing inflationary expectations, but also provide a much-needed leg-up to depressed farm incomes and rural consumption.

Another source of inspiration for greater demand overall is the sustained momentum in investment, despite a dip in government capital expenditure on account of elections in the first three months. The report, to be fair, does enumerate some of the lurking risks, though it conveniently points fingers at global conditions as the likely source of a possible domestic slowdown.

This understanding comes from slower export growth during the first five months in comparison with the previous year, indicating not only weak global demand, but also structural problems with our manufacturing sector, such as uneconomic scales of production, endemic low productivity and a lack of competitive spirit. The report also views with trepidation the stock market boom globally, fearing that a correction could mean spillover effects for us, but is taciturn about