By Krishna Jha
It was a masterpiece of self-deception, meant to let thousands believe a myth. On May 24 this year, NITI Aayog’s chief executive officer BVR Subrahmanyam declared: “We are the fourth-largest economy as I speak, and we are a four trillion Dollar economy, though the data, supplied by the IMF, remains confusing has been supplied by IMF.” He then added: “It is only US, China, Germany, that are larger than India and if we stick to what is being planned and what is being thought through, in 2.5-3 years, we will be the third largest economy.”
Shortly afterwards, Prime Minister Narendra Modi was there to follow the suit. In a public meeting at Gandhinagar on May 27, he claimed, “On May 26, 2014, I took the oath as the Prime Minister for the first time. At that time, India’s economy was at the 11th position in the world. Today, India has become the world’s fourth-largest economy. It is a matter of pride for all of us that we have now surpassed Japan. I still remember the excitement across the country when we moved from sixth to fifth place, especially among the youth. The reason was that India had overtaken the United Kingdom, the very nation that ruled over us for 250 years.”
Despite the claim, facts stood just in contrast. The truth remained totally different. After thoroughly studying the IMF figures, the fact-checking site, Alt News, found that the claim made by the CEO of NITI Aayog and repeated by the prime minister himself was without any grain of truth. India has not yet surpassed Japan in terms of gross domestic product. “To sum up, NITI Aayog CEO BVR Subrahmanyam’s claim that India is currently the fourth-largest and a 4-trillion dollar economy, citing IMF data, is misleading,” Alt News said, adding: “India is currently the fifth-largest in terms of GDP.”
In fact, any hubris which is based merely on the GDP figures is meaningless. Time and again, experts have warned against reading too much into it or using the GDP data as the marker of a country’s progress. That is because an increasing GDP does not guarantee an overall high per capita income, nor does it take a holistic view of income inequalities and unemployment prevalent in the economy. It is merely the sum total of the value of goods and services produced by a country annually and is, therefore, often used to refer to the size of an economy.
It is important to note that Japan is a country of 123 million people, with a high per capita income of 33,900 dollars. This reflects a highly developed economy with a significant economic output per person. In contrast, India is a country of 1.46 billion people with a per capita income of 2,880 dollars. Even if India’s GDP jumps up two more spots, and surpasses not just Japan (presently 4.19 trillion dollars GDP) but also Germany (presently 4.74 trillion dollars GDP), the per capita income of Indians would hardly resemble that of the other largest economies.
What the per-capita figures can tell us the GDP can’t. In terms of per capita income, we are nowhere even close to countries Narendra Modi and the NITI Aayog claim India is competing with. In 2021, India overtook the United Kingdom in terms of aggregate nominal GDP. However, in that year, India’s nominal per-capita income was 2,250 dollar and the UK’s was 46,115 dollar. Since then, India’s overall nominal GDP has been higher than that of the UK every year. But by the end of 2025, UK’s nominal per-capita income is expected to be 54,949 dollars and India’s 2,879 dollars.
In other words, there is a marked difference in the rates of growth of the per-capita income in UK and India irrespective of the status of the aggregate nominal GDP of the two countries. Thus, between 2021 and 2025, the UK’s per-capita income has grown by over 8,000 dollar, India’s per-capita income could rise a mere 600 dollar.
It is well known that the GDP growth without shared prosperity has no meaning for the masses. Even if India becomes the fourth largest economy, what would that mean for its people? How would that elevate their standard of living? Would that translate into boosting domestic consumption? What difference would that make to people’s lives?
These are more important questions, and their answers would lead us to the state of economy India has been turned into. As per the World Inequality Report of 2022, the top one per cent of India’s population holds more than 40 per cent of the nation’s wealth, while the bottom 50 per cent its population owns just three per cent of its wealth. Similarly, the top 10 per cent of India’s population earns over 57 per cent of national income. The concentration of wealth of this nature means that majority of masses are left out of any metric of calculation that talks only of GDP. That is why if you remove top one per cent of India’s population that holds more than 40 per cent of the nation’s wealth or top 10 per cent that earns over 57 per cent of national income, the GDP number would drop dramatically.
The fundamental reason why the GDP growth rates have not translated into mass upliftment is there is a significant mismatch between the sectors driving the GDP expansion and those that actually employ the majority of population. For example, nearly 50 per cent Indians are employed in agrarian sector which contributes only about 18 per cent to the GDP. Similar is the case with the entire informal sector that employs a large number of population. In these sectors workers have no social security and their wages have been stagnant for years. A significant section of Indians are unemployed or underemployed. The middle class is at the risk of sliding downwards. At the same time the billionaires keep thriving. (IPA Service)
