TThe International Monetary Fund has issued a most unusual report refutation this month. His spokeswoman Julie Kozack told reporters in Washington that Executive Director Krishnamurthy Subramanians growth forecast of 8% for India does not represent the opinion of the IMF, which still maintains a projection of 6.5% for the country.
Views expressed by Subramanien at an event in New Delhi a few days earlier related to his role as India's representative at the IMF, she said. The executive director is actually one of 24 directors elected by member countries to the IMF board, which, confusingly enough, is separate from the work of IMF staff. How clear this became when Subramanian trashed IMF staff X in response, claiming that the institution's GDP forecasts for India are systematically INACCURATE.
As a former chief economic advisor to Indian Prime Minister Narendra Modi and a delegate to the IMF by the Modi government, Subramanian has good reason to take offense at any suggestion that the Indian economy may not be as robust that we thought so. The narrative of India as the new economic miracle is fundamental to both Modi's cult of personality and the legitimacy of his government at home and abroad.
Modi came to power in 2014 with a promise to fix a faltering economy. As chief minister of the western state of Gujarat, he had built a formidable reputation as an efficient and business-friendly administrator, which he successfully leveraged in his bid for the country's highest office. Achhé din, or good times, that was his promise.
Given the economic news coming out of India these days, it appears he has kept his promises. As the fastest growing major economy, India is considered the shining star of the global economy, as the chief economist of S&P Global Ratings calls it. It has already overtaken the United Kingdom to become the world's fifth largest economy and is expected to overtake Japan and Germany to become the world's largest economy. third largest in five years. The Indian stock market, now the fourth largest in the world, is at a record high.
As India heads to the polls, data points like these help Modi's narrative of transforming the country into an economic powerhouse on his watch. At home, they amplify his image as a steady hand on the tiller that takes India to ever greater heights. Abroad, they help to stifle criticism of his Hindu supremacist speeches and his systematic attacks on Indian secular democracy and its Muslim and Christian minorities.
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Certainly, the size of the Indian economy today and the scale of its development make it one of the most interesting growth stories. And big business has a lot to be grateful for Modi's rule. There is less red tape and more administrative focus and pressure on the industry. The government's policy of encouraging business through subsidies and tax breaks, and helping large local businesses become more efficient. national champions works well for them.
Yet the perception of India's so-called economic miracle is also the product of a tightly controlled information ecosystem in which data is managed in accordance with government rhetoric, ably aided by pro-regime media. The simplest statistical fact is that Modi's second term actually saw the lowest period of GDP growth since India liberalized its markets in the early 1990s. Per capita income has increased over the past 10 years half as fast like the decade under Modi's predecessor, Manmohan Singh of the opposition Congress Party, while stock market returns are lower than in the previous decade.
Many of the positive changes attributed to Modi, such as digitalization of the economy and improved tax collection, are a continuation of past trends, policies and technological advancements. And much of the hype around the overall state of the economy doesn't disappear when you crunch the numbers.
Even Modi's former economic advisers find the recent 8% growth rates announced by the government mystifying. Major discrepancies in how GDP is calculated make the data extremely problematic. One of Modi's former chief economists believes that if measured correctly, the Indian economy would actually turn out to be in poor health. deceleration.
Meanwhile, foreign direct investment is plunging. FDI Levels are now the weakest almost two decades. Even local investors are turn away to open their wallet. Private capital expenditure remains weak. Private sector investments have actually been fall as a share of GDP since 2012 and the economy is now largely driven by huge government investment.
The consumer goods market continues to be lazywith people reducing staplesemblematic of economic stress. Growth in private consumption is the slowest in 20 years, aside from the trough of the pandemic. Tractor sales, an indicator of the economic health of villages (where 70% of Indians live), have fallen sharply. Banks face the worst deposit crisis in two decades like household savings are at their lowest level in 47 years while household debt levels are at a record. That's not exactly a sign of a booming economy. During the last financial year, Indian exports of goods fell by 3% and their crude imports14%.
Unemployment is also endemic. The share of young people with secondary or higher education among young unemployed people has almost double in 20 years ; A third graduates are unemployed. Young unemployed Indians are now seeking opportunities in conflict zones Israel And Ukraine, and try to sneak into the West clandestinely. The Indians are currently the third largest group of undocumented immigrants in the United States, their numbers having grown faster than those in any other country.
Despite Modis' best efforts to boost India's manufacturing sector with his much trumpeted speech Manufacture in India campaign, the share of the manufacturing sector in GDP fell. Far from increasing manufacturing jobs, India losing them in millions. The ranks of agricultural workers, meanwhile, have increased by 60 million over the last four years. Agriculture now effectively employs a a greater share workers than five years ago, a reversal which suggests deindustrialization.
There are also concerns about data manipulation. Before the last parliamentary elections in 2019, the government had buried its own pre-election employment data because it showed unemployment rate at its highest level in 45 years, leading to resignations members of the National Statistical Commission. A key finding from a five-year consumer survey was withheld that year due to data quality issues. When it was finally released in February, it showed that poverty and inequality had fallen, and consumer spending had declined. triple in a decade. This contradicts government statements results and data found elsewhere.
According to some estimates, around 1 million people called octopus course now control 80% of the country's wealth and create an illusion of national prosperity. The last Global Inequality Report calls India a billionaire Raj where income inequality is now worse than under British rule. As the number of India's ultra-rich has increased 11 times over the past decade, the country has fallen in the global hunger index, and is now below North Korea and war-torn Sudan. Aware of the problem, the Modis government is giving free cereal to 60% of the population.
None of these facts testify to the El Dorado that Modi claims to create. India needs much more than top management and upward mobility for a small segment to fundamentally transform its economy. In addition to the heavy investment in physical infrastructurewhich Modi can be duly credited as his government is not doing much else for this transformation.
All Asian economies that have excelled over the past half-century have experienced strong synchronization between their trade, industrial and social policies. Land reforms, massive state intervention in education and health, and other redistributive policies created the foundation for domestic demand and higher productivity that boosted Asia's miracle countries . These are the reasons why Vietnam, considered the new Asian miracleexports more than India with less than a tenth of India's population. Modi has done little to suggest that he has the inclination or ability to carry out such far-reaching reforms to make India shine. A fake gold rush is all he can offer.
