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India is now the world’s fourth-largest economy. It produced $9.4 trillion in goods and services in 2017. But it has a long way to go to beat the top three, that is, China, with a production worth $23.1 trillion, the European Union with $19.9 trillion, and the United States with $17.4 trillion.

The government that was sworn in under the leadership of Narendra Modi on May 16, 2014, had promised a host of economic reforms that would integrate the Indian economy even more with the global economy. Boosting trade with foreign economies was a priority sector. As the country stands on the threshold of yet another general election, many economists are left wondering as to the actual extent of the ground that has been covered.  

Jobless growth

Former Prime Minister, Dr. Manmohan Singh while addressing the convocation ceremony of the Delhi School of Management blamed the implementation of the Goods and Services Tax (GST) for damaging the vibrant small and unorganised sector in India. He stated, “The domestic challenges of our economy are daunting in their complexity and devastating in their impact on society. The grave agrarian crisis, the declining employment opportunities, the pervasive environmental degradation and above all the divisive forces at work are obvious.”

Without naming the Narendra Modi government, he said the country’s jobless growth was fast slipping into ‘job-loss growth’ and together with rural indebtedness and urban chaos, the situation was spinning out of control. He stated, “The attempts to create additional jobs in the industrial sector have failed as industrial growth is not picking up fast enough. The small and unorganised sectors, which were vibrant and contributing significantly to generation of wealth and employment opportunities, have suffered in the wake of disastrous demonetisation and slipshod introduction and implementation of the GST.”

According to a report published in Business Line on February 19, 2019, the government should explain constant variations in GDP figures. “The (revised GDP) numbers are the result of a hatchet job,” tweeted former Finance Minister, P Chidambaram after the Modi-government published the back-series GDP data late November. Ahmed Patel, his colleague in the Congress party, added his bit, “In its desperate attempt to re-write GDP data, the government resembles a student who cannot pass an exam without cheating.”

The revised estimates lowered the average GDP growth during the UPA regime from 7.75% to 6.82%, making it lower than the 7.35% growth averaged during the Modi government.

However, the issue appears to be more than just politics. Researchers at the Reserve Bank of India have also pointed out that multiple revisions of the GDP growth estimates are confusing and fail to reveal the true state of the economy. They were proved right when the government, late in January, revised the growth data for the years 2015-16, 2016-17 and 2017-18. This raised more questions as the revision saw growth during 2016-17 (the demonetisation year) jumping to 8.2% from the earlier 7.2%, making it the fastest growth under the new series.

Around the same time, came reports of the government trying to suppress the National Sample Survey Organisation (NSSO) report on unemployment. The report which was eventually leaked to the media, showed unemployment at a 45-year high of 6.1% in 2017-18 as against 2.2% in 2011-12.

Domestic investment in India

The Government of India has taken significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world. Rise in domestic investments has been one of the biggest contributors to the India growth story and the public and private sector have both enabled and sustained these investments but have curiously not translated into employment generation.

Market Activity

India’s Gross Fixed Capital Formation at constant price was Rs. 40.88 lakh crore ($ 561.44 billion) in 2017-18. The Government of India forecasts capital expenditure to increase by 30% from Rs. 3 lakh crore ($ 41.2 billion) in 2017-18 to Rs. 3.9 lakh crore ($53.6 billion) in 2019-20. Investments by Domestic institutional investors reached Rs. 97,739.02 crore ($ 14.00 billion) in 2018. The total number of investment accounts with 41 mutual fund houses rose to a record 79.03 million at the end of October in 2018 as against 71.35 million in March 2018, according to the data from the Association of Mutual Funds in India (AMFI).

Foreign Direct Investment (FDI) in India increased by $ 3675million in January 2019. Foreign Direct Investment in India averaged $ 1341.88 million from 1995 to 2019, reaching an all-time high of $ 8579 million in August of 2017 and a record low of $ 1336 million in November of 2017. 

Future

The World Bank Prospects Group Director, Ayhan Kose, told the PTI, “India’s growth outlook is still robust.

India is still the fastest growing major economy.” He continued “With investment picking up and consumption remaining strong, we expect to grow 7.3% in the fiscal year 2018-2019 and average 7.5% in 2019 and 2020. India registered quite a bit of pick up in the doing business ranking. The growth momentum is there (in India).”

According to Jayanti Das, an Economics teacher at New Barrackpore Colony Boy’s High School, “In the election year, if investments are made in private schemes, then it may generate jobs on contractual basis but that is not a solution to the unemployment problem as the jobs are not permanent. So, there are no far-reaching impacts of these investments.” She continued, “However, if the government provides other facilities along with investments in the small and medium industries, such as facilitating customer and market research, providing free advice, simplifying tax laws, helping in creating a new market for products of the small industry, then the small industries after a certain time can become a lot more independent and these industries can generate jobs in future.”