Opinion | Hype over India’s economic boom is a dangerous myth masking real problems

Some commentators foresee a new golden age for India, but the country is on a dangerous path built on a disingenuous numbers game

There is no silver bullet that will fix weak job creation, a small and uncompetitive manufacturing sector and government schemes that fatten corporate profits

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Workers carry sacks and bags of vegetables from a market in New Delhi, India, on February 26. The hype about an “Indian century” is masking a problem that has grown in the 75 years since independence: anaemic job creation. Photo: Bloomberg

Published: 4:45pm, 30 Mar 2023

Indian elites are giddy about their country’s economic prospects, and that optimism is mirrored abroad. The International Monetary Fund forecasts that India’s GDP will increase by 6.1 per cent this year and 6.8 per cent next year, making it one of the world’s fastest-growing economies.

Other international commentators have offered even more effusive forecasts, declaring the arrival of an Indian decade or even an Indian century.

In fact, India is barrelling down a perilous path. All the cheerleading is based on a disingenuous numbers game. More so than other economies, India’s yo-yoed in the three calendar years from 2020 to 2022, falling sharply twice with the emergence of Covid-19 and then bouncing back to pre-pandemic levels. Its annualised growth rate over these three years was 3.5 per cent, about the same as in the year preceding the pandemic.

Forecasts of higher future growth rates are extrapolating from the latest pandemic rebound. Yet, even with pandemic-related constraints largely in the past, the economy slowed in the second half of 2022, and that weakness has persisted this year. Describing India as a booming economy is wishful thinking clothed in bad economics.

Worse, the hype is masking a problem that has grown in the 75 years since independence: anaemic job creation. In the next decade, India will need hundreds of millions more jobs to employ those who are of working age and seeking work. This challenge is virtually insurmountable considering that the economy failed to add any net new jobs in the past decade, when 7 million to 9 million new jobseekers entered the market each year.

This demographic pressure often boils over, fuelling protests and episodic violence. In 2019, 12.5 million people applied for 35,000 job openings in the Indian railways – one job for every 357 applicants. In January 2022, railway authorities announced they were not ready to make the job offers. The applicants went on a rampage, burning train cars and vandalising railway stations.

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