FOCUS - AUGUST 2025

INDIA 4th LARGEST ECONOMY: BUT INEQAULITY PERSISTS

India which was on the 5th place in the global ranking pushed Japan to 5th place in the recent review of these ranking and is not too far from overtaking Germany which is in the 3rd place. However what is bewildering is Germany is 5th in HDI ranking of UNDP and Japan is in 23rd, in the Very High Human Development Index whereas India is languishing at 130 in the latest ranking by United Nations Development Programme (UNDP). It is true that we were in 133 and improved to 130 since last ranking.

“We are a large economy, mostly by virtue of our large population, but we are still a poor country. With a per capita income of $2880/- in dollar terms (IMF – April 2025), we rank 136th in the League of Nations. We are the poorest country among BRICS, we are the poorest in G20 and we have more poor people than any other country in the world”, wrote D. Subbarao, a former Governor of Reserve Bank of India.

India may have become a $4.4 trillion economy, but an average Indian is not part of its trickle down effect, if any. Prosperity of its people is still far away. World Inequality Lab in its report published in 2024 shows that the share of the national income owned by the wealthiest 10% of Indians has grown to 60% whereas 50% of the poor urban dwellers consume on an average of less than Rs 7000/- per month. Indeed, the economic growth has not been inclusive. However it is true that India is the most populated country in the world at 1463+ million, which RBI governor did not take into account.

“Eleven years ago, Modi inherited an economy in dire straights. Growth was slowing, inflation was high, the rupee was volatile, fiscal and current account deficit were unsustainably high and a bad loan problem was sapping investor confidence. The much dreaded stagflation seemed a distinct possibility. To-day growth is strong, inflation is low, the rupee is stable, the external sector is resilient, fiscal position is on the mend and the bad loan problem is behind us. Amid all the concerns about global growth because of tariff war, persistent inflation, rising public debt and deteriorating geopolitical tensions, India is gaining heft as an economic dynamo” D. Subbarao had added.

So the growth story is real, but for whom, is the question.

India will be ending FY 25 with a growth rate of 6.5% which is quite impressive. This is the view of economists with hard on data on their dash board. But what about individuals, the aam aadmi on the street! The RBI Consumer Confidence Survey (CCS) tells a different story. According to CCS, people feel that general economic condition is down, employment generation is down, income is down, spending on essentials has increased, spending on non-essentials decreased, inflation has increased and therefore prices have increased. However it is true that individual can be biased in his response to the RBI survey questions. For example, a higher price of bread or milk by even Rs 2 a loaf of bread or litre of milk will register as prices going up, while that of tomatoes coming down from Rs 40/- a kg to Rs 30/- a kg is not seen the same way. Similarly EPFO data indicates that more jobs have been created, but the feeling is jobs are less, since there is a large informal sector creating jobs which are not covered by EPFO. We all recognize that job creation is the main challenge for any government especially for NDA II, since Narendra Modi launched himself in national politics on creating massive job opportunites, but has not done enough to make this happen.

However, Bansuri Swaraj, a BJP Member of Parliament and daughter of late Sushma Swaraj is on record calling India a ‘Rising Nation’. Writing in THE WEEK she wrote and we quote, “In 2014, India was the 11th largest economy. To-day, she is the fourth, with her GDP standing at $4.187 trillion and growing. Her per capita income has increase by 169% in rupee terms, direct tax collection has surged by 238% and tax payer base has grown by 127%. These are not just economic indicators, but markers of national transformation under the stable leadership of Prime Minister Narendra Modi.”

No doubt digital payments revolution has been nothing short of transformative. In May 2025, UPI processed 18.68 billion transactions valued at Rs 25.14 lakh crore, reportedly marking a 33% year on year increase. This surge is backed by over 50 crore Jan Dhan Bank a/cs with mobile connectivity. India’s infrastructure journey has been exceptional in recent years. The railway bridge on Chenab river on the line from Udhampur to Baramulla via Srinagar in J&K and the Deep Sea Port at Vizhinjam in Kerala, India’s first deepwater transshipment capable of docking the world’s largest container ship, have been the high water mark in transformative infrastructure. Expansion of national Highways, addition of new airports, expanded railway connectivity, growth of metro network have been exemplary. Make-in-India ecosystem seem to be making its presence felt with growing reliance on indigenous defense production clearly witnessed in Operation Sindoor with Indian made drones, loitering ammunitions, anti-air systems and battlefield intelligence platforms performing to perfection.

If the above represent the India shining dimension there is a large section which is not shining.

Coming to road connectivity, while highways have grown longer and better there are any number of villages without roads and bridges on streams and rivulets. We still hear of mishaps on rickety bamboo contraceptions called bridges. Coming to railways, the priority given to bullet train between Ahmedabad and Mumbai is entirely misplaced. Vande Bharat trains are being pushed, but coastal railway in Konkan is still having single track on Konkan Railway route of over 770 kms, operational since early 1993, covering Karnataka, Goa and Maharashtra. This major anomaly needs to be fixed as early as possible since this sector from Kerala in the South to Maharashtra in the north, through Mangalooru/Madgoan has very high passenger density used by masses.

There are two inter related maladies – jobs and income inequality – affecting the India growth story which have not been addressed with all seriousness it deserved, despite these two dimension of socio-economic evolution are of paramount importance. Like a report puts it “Contrary to the promise made by candidate Modi in 2014 election campaign that jobs will be his top priority, the unemployment rate has barely budged in the last 10 years. Official data on unemployment mask the deeper issue of a large segment of the workforce engaged in low-wage, informal or part time jobs that do not fully utilize their skills or provide adequate income. Deepening inequality in the country is a corollary to rising unemployment and under-employment. According to World Inequality Lab report. ‘income inequality in India is currently at its highest level since 1922, surpassing even the British colonial era,” which if true is a sad commentary for a country that prides itself as “4th largest economy”.

A belated effort by Union govt, “ELI or Employment Linked Incenture Scheme of some Rs 1 lakh crore”, is a latest attempt at job creation. Reportedly Union Cabinet recently approved this scheme with an outlay of Rs 1.07 lakh crore to create 3.5 crore jobs over the next 2 years through social security schemes run by the retirement fund body EPFO. According to report in the media, the ELI scheme to support job generation, enhance employability and social security across all sectors, with special focus on manufacturing sector was approved by the Union Cabinet. The scheme will provide incentives to employees as well employers to boost job creation. Under the scheme employees will get one month wage (upto Rs: 15000/-), employers will be given incentives for a period of 2 years for generating additional employment with extended benefits for another two years for manufacturing sector. The scheme was reportedly announced in the Union Budget 2024-25. Details in the public space is still sketchy and not very clear. Hope the government will come forward with greater clarity in coming days for the information of general public. The initiative clearly appears to be a positive development which has not come too early. Hope when the scheme is implemented on the ground, it has its desired effects of generating 3.5 crore jobs over the extended period of two years.

Coming to the HDI or Human Development Index, India’s position was 133 in 2022, however the 2025 UNDP (United Nations Development Programme) Report has ranked India at 130 out of 193 countries, marking a rise in India’s position indicating a climb in HDI.

According to the above report, India’s HDI value increased from 0.676 in 2022 to 0.685 in 2025. However the report also pointed out that inequality reduces India’s HDI by 30.7%, one of the highest losses in the region.

The report further notes that health and education inequality have improved, income and gender inequality remained significant. Female labour force participation and political representation lag, though recent steps such as the constitutional amendment reserving one third of legislative seats for women offer promise for transformative change, the report added.

In India, the report said life expectancy increased slightly from 71.7 years to 72.0 years, marking the highest level recorded for the country, while expected years of schooling remained unchanged at 12.95, mean years of schooling saw a notable increase from 6.57 to 6.88 years. The report lauded India’s progress in school education, especially from 1990 and credited initiatives like the Right to Education Act, Samagra Shiksha Abhiyan and National Education Policy 2020. However quality and learning outcomes remain areas for continued focus, it said. Additionally India’s Gross National Income per capita, rose from $8475.68 in 2021 to $9046.76 in 2025, reflecting ongoing economic growth.

The Resident Representative of UNDP in India Angela Lusigi has congratulated “India on its notable progress in the HDI. This advancement reflects sustained improvements in key dimensions of human development, particularly in mean years of schooling and per capita national income.”

Reportedly Angela Lusigi further remarked that “India’s life expectancy reaching its highest level since the inception of the index is a testament to the country’s robust recovery from pandemic and its investment and commitment to long-term human well being. Here it is pertinent to note that India’s HDI value has increased by 53% since 1990 growing faster than the global and South Asian averages. National Health Programmes by successive government, such as the National Rural Health Mission, Ayushman Bharat, Janani Suraksha Yojana and Poshan Abhiyan have contributed significantly to this achievement.

Of course UNDP representative in India is only doing her job. But the fact of India being at 130 among 193 countries still rankles, since there is scope for improvement in income inequality where development fruits appear to be going mostly to haves of the society. The per capita GDP, which divides national income by population, India lags at 141st, behind even Bangladesh. India must adopt inclusive, economic, social and political strategies that ensure nobody is left behind. There has to be concerted efforts at equitable redistribution of national wealth. The journey of developed nation, if it has to be achieved in 2047 there is lot to be done in the next 22 years. We have to put more money in hands of labourer working for NREGA (Mahatma Gandhi National Rural Employment Guarantee Scheme) which creates durable rural assets, which also add to productivity and public welfare besides acting as indirect vehicle for womens empowerment.

While we are about it, it is pertinent to write about the observations of faculty and students of TISS (Tala Institute of Social Sciences). They have made some serious and relevant remarks on the 2025-26 Union Budget presented to the Parliament by the Union Finance Minister Nirmala Sitaraman. According to them the budget has let down economically poor students of India, who constitue a huge chunk in the educational sphere in India. No doubt successive governments at the centre has only given lip service to improve education among masses. This time too the budget allocation was only 2% or 0.5% of the GDP. Here we need to recognize that one of the success story of far eastern countries is that the governments there were genuinely concerned about the growth of human potential by spending more on education and health. Indian governments including NaMo led NDA have failed to learn lessons with it's high flying boast of India being Vishwa Guru. According to sources in TISS, the PM-Poshan Scheme which includes mid-day meals has recieved a nominal 0.2% increase from the Rs: 12,467.39 crore to Rs: 12,500/- crore translating to just 5 paise per child. This according to TISS sources comes despite government data from June 2024 showing 17% children underweight, 36% stunted and 6% wasted. Besides Shaksham Anganwadi funding has also been reduced reflecting lack of seriousness in tackling malnutrition. There have been short funding of both school education and higher education, thus the government is systematically excluding disadvantaged students by under funding public institutions, allege TISS sources and educationists. They point out a glaring inequity in the allocation of Rs: 20,000/- crores to private sector led research initiatives as against only Rs: 27 crores for public institutions for research. "Knowledge is being shaped for corporate interest rather than public welfare," a sociology student a TISS had reacted. Budget provisions for World Class Institutions Scheme was cut by 73% from Rs 1,800/- crores to Rs 475.12 crores while Indian knowledge system funding jumped 400% from Rs: 10 crores to Rs: 50 crores is one more point TISS sources make. All in all, it was a poor certificate to NDA. The oft repeated observation that in India, rich have always become richer and poor remained poor, or stagnated at best, still holds. Can Viksith Bharat happen under such condition? Indeed as TISS sources say - NaMo needs to walk the talk.

A report published by Institute of Competitiveness informs “88% of India’s workforce trapped in low competency jobs”, underscoring a deep mismatch between educational attainments and job opportunities. This is despite greater access to higher education. A poor reflection on the emerging economic power at India being the 4th largest global economy! At the top we have likes of Sundar Pichai and Satya Nadella and others, a miniscule section and at the bottom the vast majority, like the video going round in social media. A journalist walks to the gate of a premier college in Delhi and decides to ask questions on 26th Jan 2025 Republic day to the - boys and girls students of the college. Wish he had mentioned the name of the college, which would have exposed the quality of teaching the college imparts. There were some 15 students, - girls and boys - except one none could tell that the 1st Republic day was observed on 26th Jan 1950. One of them even said it was in 1943. None of them, except one, could tell what signifies Republic Day. One of them said "because it's Republic Day", when asked "why the day is called Republic Day"? When asked who is the Prime Minister of India, one even said Manmohan Singh. Another said PM Modi but didn't know his first name. "What do you do on Republic Day?" was the question, the answer was "It's a holiday and we get up late". Answers from graduate students of this college couldn't have been more dumb. This is the demographic dividend that India will never be able to cash.

Clearly somebody has failed these students, who? Teachers? Parents? or the system itself? If this is the standard of students from top college who are former students of some of the best schools of Delhi, what can we expect of students from Government Schools?! Oh, poor mother India!

However, we will fail to portray a better picture if we do not mention the Word Bank (WB) report on- INDIA POVERTY and Equity Brief: April 2025.

WB report claims that India has almost eradicated extreme poverty. In terms of Gini co-efficient, it has placed India among top four least unequal countries, although there are critics who argue that the WB has underestimated the inequality. It may be a valid critique as Household Consumption Expenditure Survey (HCES) data does not capture consumption by the rich, since WB claim is based on HCES. However HCES data shows that country’s consumption basket is healthier to-day than ever before. HCES informs that between 2012 and 2023, the per capita availability of milk and eggs has increased by 45% and 63% respectively. The availability of fruits, vegetables and protein products has increased. Thus, the consumption data of 2023-24 irrefutably demonstrates that extreme poverty has been almost eradicated, tells HCES. Based on the International Poverty Line of $3 between 2011 and 2023, India has pulled out some 27 crore people from extreme poverty. That’s a significant achievement. So also, “among the poorest 20%, more than 40% own vehicle today compared to just 6% in 2011-12, so also increase in ownership rates of pucca houses” writes Ram Singh, Director, Delhi School of Economics. However he acknowledges that the high national income share of the top 1% is a matter of concern. According to him global estimates are based on pre-tax income levels, which should be based on post-tax, post subsidy income which matters to people. He admits that ‘India must travel a long way before we can claim to be an egalitarian society. Inequality in accessing quality health and education is a serious concern.’

Thus at the end of the day, the true celebration of India being the 4th largest economy will begin when every Indian enjoys the fruits of this growth and economic might translates into human dignity, opportunity and well being, period.