How Inequality, Unemployment, and Slow Growth Hold India Back

Featured & Cover Modi’s Middling Economy

On June 4, after counting roughly 650 million votes, the Election Commission of India is scheduled to announce the winner of the 2024 parliamentary elections. Polls suggest it will be the Bharatiya Janata Party, led by Prime Minister Narendra Modi. If the BJP is voted back to power after a ten-year tenure, it would be a remarkable feat, driven largely by the prime minister’s personal popularity. According to an April poll by Morning Consult, 76 percent of Indians approve of him.

There are multiple theories for why Modi is so popular. Some attribute it to the fact that he has advanced the “Hindutva” agenda, which views India from a Hindu-first lens. Despite the periodic dog whistles against Muslims during the elections by Modi and his lieutenants, this agenda is a primary electoral concern for only a small fraction of India’s voters. In the 2019 elections, BJP’s vote share nationally was less than 38 percent, and obviously, an even smaller share are committed to the othering of religious minorities.

Another explanation is that Modi has managed the economy well, with India recently overtaking the United Kingdom to become the fifth-largest economy in the world, and soon surpassing stagnant Germany and Japan to become the third largest. His economic stewardship, some experts argue, is setting up the country and its 1.4 billion people to succeed in the future.

But India’s economic growth, although seemingly high compared with other countries, has not been large enough, or taken place in the right sectors, to create enough good jobs. India is still a young country, and over ten million youth start looking for work every year. When China and Korea were similarly young and poor, they employed their growing labor force and consequently grew faster than India is today. India, by contrast, risks squandering its population dividend. The joblessness, especially among the middle class and lower-middle class, contributes to another problem: a growing gulf between the prosperity of the rich and the rest.

The Modi administration has, of course, taken India forward in important ways, including building out physical infrastructure (so that transportation is quicker) and expanding digital infrastructure (so that payments are easier). Welfare benefits, such as free food grains and gas cylinders, now reach beneficiaries directly and without corruption. Startups abound, and Indian scientists and engineers have scored notable successes, such as sending a satellite to Mars and landing a rover on the moon’s south pole. Taken together, however, the last decade has been decidedly a mixed economic bag for the average Indian.

Some of the challenges India faces have been long in the making, but the administration’s policies have also contributed in important ways. The government’s 2016 ban on high-value currency notes hurt small and midsized businesses, which were further damaged by Modi’s mismanagement of the pandemic. Perhaps most concerning is the government’s attempt to kick-start manufacturing through a mix of subsidies and tariffs—a growth strategy modeled on China—while neglecting other development paths that would play to India’s strengths. The Modi administration has, in particular, underinvested in improving the capabilities of the country’s enormous population: the critical asset India needs to navigate its future.

In the ongoing election, the opposition has strived to highlight Indians’ economic anxiety. But Modi is a charismatic and savvy politician, and he has established a strong connection with ordinary Indians—in part by persuading them that his administration has made India into a respected global power. Many Indians will vote for him on the hope that he will eventually deliver progress, even if they have not seen much improvement in the last decade. Others will vote for him because of the government’s genuine success at efficiently delivering more benefits. Still more will vote BJP because the mainstream media, largely co-opted by the government, trumpets the government’s successes without scrutinizing its failures.

India needs to change economic course. That is less likely if the BJP wins with an overwhelming majority because the party will see victory as an affirmation of its policies. What is more worrying is that subsequent, growing authoritarianism—which shrinks the space for protest and criticism—may continue to grow, and further diminish the likelihood of a course correction. Conversely, if the election produces a strong opposition, no matter its identity, India has a fighting chance of securing the economic future its people desperately want.

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