The next chapter india’s gdp will keep growing but the real challenge is to make many hundred million indians prosperous

The next chapter india’s gdp will keep growing but the real challenge is to make many hundred million indians prosperous

In a development replete with both substance and symbolism, India has overtaken the UK to become the fifth largest economy. Powered by a massive young demographic waiting to burst into the middle class and a robust digital ecosystem, India is certain to grow bigger in coming years. SBI Research indicates that India could become the third largest economy before this decade ends. India has survived the Covid pandemic and the Ukraine war avoiding the surging inflation and energy crisis that’s hit countries like the UK. In hindsight, GoI has been proved right in its resolve to not run up a high fiscal deficit, despite pressure to imitate the West’s overgenerous stimulus packages.

The growth path ahead needs more such out-of-the-box thinking. The primary challenge is to prepare enough people to participate in the country’s future growth trajectory. The low GDP per capita and the continuing Covid relief package providing free foodgrains for 80 crore people are pointers to low-individual productivity, signifying that the macro represented by GDP numbers is only one part of the big picture. The success in lifting millions of people out of extreme poverty was no small feat. But the next step, of replicating East Asian countries that have relied on manufacturing to take the masses out of agriculture, awaits.

India’s GDP per capita of around $2,500 is in large part dragged down by farm households; their average annual income is just $1,500. For decades, India hasn’t focussed enough in areas like education, skilling and healthcare. Against Unesco’s Education 2030 Framework for Action’s appeal to countries to spend 4-6% of GDP on education, India’s central and state combined budgeted expenditure on education in 2021-22 was just 3% of GDP.

Such budgeting constraints make the freebies debate relevant. The state plays a crucial role in the lives of poor people. Instead of swaying them with populism, schemes that can improve human capital must be welfare priorities. To achieve this end, states spending recklessly require transparent budgeting. Centre must also reciprocate by devolving more tax revenues to states, and avoid the cess route of resource mobilisation. Ultimately, these Centre-state tangles reflect inadequate private sector job creation that increases reliance on governments. More economic reforms are needed. All parties in government must realise that every government must be in reform mode, that’s a prerequisite for mass prosperity.