NEW DELHI – On paper, India’s economy has had a banner year. Exports are at record highs. The profits of publicly traded companies have doubled. A vibrant middle class that has formed over the past few decades is now spending so much on movie tickets, cars, real estate and vacations that economists call it “revenge spending” after the pandemic.
Yet while India is projected to witness the fastest growth of any major economy this year, the headline figures do not reflect the reality for millions of Indians. Growth is still not turning into enough jobs for the waves of educated youth who enter the labor force every year. A large number of Indians live in the informal sector, and have suffered in recent months due to high inflation, especially food prices.
The disconnect is the result of India’s uneven growth, driven by forceful consumption by the country’s upper strata, but whose benefits often do not extend beyond the urban middle class. According to Oxfam, the pandemic has thrown millions of Indians into extreme poverty, while the number of Indian billionaires has increased.
The concentration of wealth is in part a product of the growth-at-value ambitions of Prime Minister Narendra Modi, who promised that when he was re-elected in 2019 to double the size of India’s economy by 2024, So lift the country up. $5 trillion or more clubbed with the United States, China, and Japan.
The government reported late last month that the economy had grown 8.7 percent last year to $3.3 trillion. But with dwindling domestic investment, and dwindling government appointments, India has turned to subsidized fuel, food and housing for the poorest to address widespread unemployment. Free food grains now reach two-thirds of the country’s more than 1.3 billion people.
By some calculations, those handouts have pushed inequality in India to its lowest level in decades. Still, critics of the Indian government say that subsidies cannot be used for insufficient job creation forever. This is especially true as millions of Indians – fresh college graduates, farmers willing to leave farms and women going to work – are expected to flood the non-farm workforce in the coming years.
“There is a historical disconnect in the Indian growth story, where growth essentially happens without growth in employment,” said Mahesh Vyas, chief executive officer of data research firm Center for Monitoring Indian Economy.
As a child, Ms. Sinha loved to pretend to be a teacher, with fake glasses and wooden sticks in front of her village classroom, much to the great amusement of fellow students.
His ambition came true years later when he got a job teaching mathematics at a private school. But the coronavirus made his dreams come true, as the Indian economy contracted by 7.3 per cent in the financial year 2020-21. Within months of starting, she and several other teachers were fired because too many students dropped out.
Ms. Sinha, 30, is once again in the job market. In November, she joined thousands of applicants vying for the much-awaited job in the government. She has also traveled all over Haryana in search of a job, but turned them down because of the low salary – less than $400 a month.
“Sometimes, during the night, I get really scared: What if I can’t find anything?” he said. “All my friends are suffering because of unemployment.”
But for Indian politicians, a high unemployment rate is “not a showstopper,” said Mr. Vyas, the economist, adding that he was far more concerned with inflation, which affects all voters.
India’s Reserve Bank and Ministry of Finance have tried to tackle inflation, which has caused many countries to suffer supply chain problems related to the pandemic and the war in Ukraine, by restricting exports of wheat and sugar, raising interest rates and over fueling. Tired of cutting taxes.
After raising lending rates in May for the first time in two years, the bank on Wednesday raised them again to 4.9 per cent. As it did so, it predicted that inflation would reach 6.7 percent in the next three quarters.
Reserve Bank officials have also employed an array of fiscal and monetary strategies to continue supporting growth, which cooled to 4.1 per cent in the first quarter of 2022. Domestic consumption, a key driver of India’s economy, has fallen over the past few months.
Bank Governor Shaktikanta Das said, “We are committed to containing inflation. “At the same time, we have to keep the development requirements in mind. This cannot be a situation where the operation is successful and the patient dies. ,
Priyanka Kishor, an analyst at Oxford Economics, said that while the Bank of England and the Federal Reserve in the United States have said their countries need to accept lower growth rates due to higher commodity prices, the Reserve Bank of India is in that camp. I am not. He said, “Development matters a lot for India. “Has a political agenda.”
The ban on food exports marks a turning point for Mr Modi. In response to Russia’s blockade on Ukraine’s ports, which has led to a global grain shortage, he said in April that Indian farmers could help feed the world. Instead, as global wheat shortages caused prices to rise, the Indian government imposed export restrictions to keep domestic prices low.
Such temporary interventions are easier than addressing the fundamental problem of mass unemployment.
“You have wheat in your godowns and you can ship it home and get instant gratification,” said Mr. Vyas, referring to the storage facilities, “while trying some policies for employment is far longer and intangible. “
Those policies could include more efforts to build up India’s underdeveloped manufacturing sector, analysts say. They also say that India should relax regulations that often make doing business difficult, as well as reduce tariffs to make it easier for manufacturers to secure components not made in India.
Exports have been a source of strength to the Indian economy, and the rupee has depreciated nearly 4 per cent against the US dollar since the beginning of the year, which will boost exports in general.
But inflation in the United States and the war in Europe have begun to affect the sale of Indian-made clothing, said Raja M., president of a trade union in Tiruppur, a textile hub in the state of Tamil Nadu. Shanmugam said.
“All input costs are rising. Earlier also this industry used to work on very low margins, but now we are working on losses. “So a situation that would normally be a pleasant situation for exporters is no longer like that.”
Economists say that the struggles of working class Indians and millions of unemployed may ultimately put pressure on development.
Zia Ullah, who drives an auto-rickshaw in Tumakuru, an industrial town in the south Indian state of Karnataka, said his income was still only a quarter of what it was before the pandemic.
The $20 he earned a day was enough to meet the household expenses for his five family members and the school fees for his three children.
“Customers are choosing to walk,” he said. “Nobody has money to buy an auto these days.”
Mr Ullah, 55, said the cost of food had gone up so much that he had to cut down on meals and take his two children out of school.
“Only one, the eldest daughter, goes to school now,” said Mr. Ullah. “The rest look around for work in the field.”
Hari Kumar contributed reporting.