The Great Growth Mirage

India is expected to become the fourth-largest economy in the world, surpassing Japan’s estimated GDP of 2025. According to the NITI Aayog CEO, BVR Subrahmanyam, this is based on projections for 2025-26 made by the International Monetary Fund (IMF) in its World Economic Outlook, which says that India’s nominal GDP is projected to rise to USD 4,187.017 billion, surpassing Japan’s estimated USD 4,186.431 billion. Notwithstanding India’s rank in per capita income at 136th globally in nominal terms and 119th in terms of purchasing power parity (PPP), this is a remarkable achievement for a country which has gone through three major shocks since 2016 when demonetisation was announced, followed by the introduction of Goods and Services Tax (GST) in 2017, the NBFC crisis in 2018 and a sudden lockdown in 2020. All these shocks had jolted the very backbone of the Indian economy—the huge unorganised sector, which contributes around 45 per cent to India’s GDP and employs around 90 per cent of the workforce. However, noted economist Arun Kumar has raised serious doubts on the above projections as, according to him, the current methodology of official data collection is faulty, which hinders accurate assessments of economic health, particularly regarding the unorganised sector.

Problematic Methodology

It is observed that there was a sharp upward revision of the rate of growth of GDP in 2023-24 when the provisional figures released earlier were compared with the final figures provided by the Indian government. The rate of growth of GDP for 2023-24 got revised from 8.2 per cent (provisional estimate) to 9.2 per cent (final figure)—a big jump. The revision in GDP data was due to the change in sources of data. Significantly, most of the sources listed are from the organised sector. So, the final figures also reflect the growth of the organised sector and not the growth of the unorganised sector.

This is important since alternative data indicates a divergence between the two. Kumar rightly argues that the organised sector cannot be a proxy for the unorganised sector. The organised sector’s growth is boosted by the shift in demand towards it from the unorganised sector due to three major shocks—demonetisation, introduction of GST, and sudden lockdown. If this decline is independently captured, the actual growth rate would be far less than the official GDP growth figures. Furthermore, if the revised higher growth in the organised sector is at the expense of the unorganised sector, the revision in GDP data will not mean that the actual GDP growth rate has increased. As the IMF and the World Bank have no other source of collecting data, they blindly trust the inflated statistics provided by the Indian government. In an interview with Karan Thapar, WIRE, on June 1, Kumar alleged that due to methodological error, India’s GDP may be overestimated by 42 per cent. India’s actual GDP may be around USD 2.5 trillion which is closer to Italy than Japan.

A Lost Decade

The Indian Prime Minister Narendra Modi used the term ‘lost decade’ in the parliament to characterise the 2004-14 years. This is a term often used in development literature in the context of 1980-2000 when both Sub-Saharan African and Latin American economies experienced almost no per capita income (PCI) growth. On February 8, 2023, while replying to the debate on the Motion of Thanks on the President’s Address, he said, ‘2004-14 was a lost decade, the current one will be known as India’s decade’. What he said was partially correct.

Though data reveal that the economy grew 8 per cent per year in 2004-14, PCI grew 6.7 per cent per annum on an average over those 10 years, and despite a global economic crisis in 2008, during 2004-5 and 2011-12, the economy was creating 7.5 million new non-agricultural jobs every year (52 million new jobs over seven years). According to the London-based Legatum Institute’s report titled “The 2012 Legatum Prosperity Index”, which assesses ‘Prosperity’ using 89 variables grouped into 8 sub-indices, taking into account both economic growth and citizens’ quality of life, India had experienced a drop in prosperity since 2009. The rankings of India for the years 2009, 2010, and 2011 were 78, 88, and 91 out of 110 countries, respectively. In 2012, India was placed at 101st position in the ranking of prosperity of 142 countries. According to the report, India’s ranking had declined since 2009 in part due to decline in the Governance sub-index which included parameters like confidence in the government, confidence in the judiciary, and government effectiveness. Significantly, in 2023, India’s rank, as Table 1 reveals, had come down to 103. Table 2 reveals that in two parameters—personal freedom and social capital—India’s scores were less than 50.

In addition to the issues related to the GDP calculation which appears to be highly inflated because of the shocks encountered by the unorganised sector, few other evils during the Modi decade (2015-25), say, rising farmers’ suicide, crime against women and religious minorities, poor technological advancement, poverty and economic disparities, political unrest in border states and escalating conflicts with neighbouring countries, need urgent attention of the concerned citizens. Here we shall focus only on three issues.

Farmers’ suicide: As per NCRB data, a total of 8,007 farmers committed suicides during 2015—an increase from 5,650 in 2014. According to the data, however, 11,379 farmers committed suicide in 2016. In 2022, 11,290 farmers and farm labourers were reported to have taken their own lives. At least 1,12,000 people working in the agricultural sector have committed suicide during 2012-22. These figures are widely thought to be low estimates. According to the NCRB, the states with the highest incidence of farmer suicide in 2022 were Maharashtra (4,248), Karnataka (2,392), Andhra Pradesh (917), and Tamil Nadu (728) and Madhya Pradesh (641). In the first three months of 2025, Maharashtra recorded 767 cases of farmer suicides.

In one recent study, a link was made between the climate crisis and farmer suicides, showing how these deaths increase in years of rainfall deficit when yields can be harmed, leading to mounting pressures from economic distress. Debt is another major factor, as the costs of goods such as fertilisers, pesticides, and electricity rise and workers are forced to borrow. In 2018, over 50 per cent of agricultural households in the country were in debt, a survey conducted by the National Statistical Office (NSO) revealed. A study by Andrew Paul Gutierrez et al (2020) reveals that the low-yield hybrid cotton system of India contributes thousands of farmer suicides. It is reported that the US government has been putting pressure on India during the ongoing trade negotiation to open the Indian market for genetically modified (GM) crops produced by the US farmers.

Poverty: Though official data, based on the USD 3-per-day global benchmark (adjusted for purchasing power parity or PPP) shows that only 5 per cent of Indians now live in extreme poverty, which marks a steep drop from 27 per cent in 2011, the World Bank says one in four Indians are still below minimum standard of living. The USD 3/day threshold is no longer appropriate for India’s stage of development. “USD 3/day PPP is not the appropriate threshold for India,” the spokesperson said. “The relevant international poverty line for India today is the lower-middle-income (LMI) threshold of USD 4.20 per person per day. That benchmark is already used to assess poverty in countries like Sri Lanka, Nepal, and Bangladesh. It is considered a more realistic threshold for what it takes to live with basic dignity in a growing economy. By this standard, over 35 crore still fall short of meeting essential needs, reports India Today. India has not updated its official national poverty line since 2011–12.

The gap between rich and poor remains wide. India’s Gini Index, used to track income inequality, improved only modestly from 28.8 in 2011 to 25.5 in 2022. The top 1 per cent of Indians now control over 40 per cent of national wealth, while the bottom 50 per cent own just 6.4 per cent.

Poor technological advancement: Data suggests that in 2014, less than 30 per cent of the cell phones India used were assembled in the country. By 2024, domestic assembling rose to 99 per cent of the phones used in India. But nearly 90 per cent of the components are sourced from China, Korea and Taiwan.

Prime Minister Narendra Modi’s 2014 ‘Make in India’ initiative has failed to achieve its desired objective to boost the manufacturing sector. But the manufacturing sector’s share in gross domestic product (GDP) declined to 13 per cent in FY 2024 as against 15 per cent in FY2014.

The major problem in India is the absence of a research and development eco-system among the private manufacturers. Though the gross expenditure on research & development has more than doubled to Rs 1.27 lakh crore (nearly USD 15 billion) in the decade ending March 2021, this is just 0.64 per cent of the gross domestic product (GDP) compared to a global average of 2.6 per cent. India has doubled its gross expenditure on research and development but nearly half of it is funded by the central government. While everyone in India clamours for incentives, the share of the country’s private sector in the amount spent on R&D is abysmally low compared to a whole host of major nations, from Australia to China, and Mexico to Russia. According to the Economic Survey 2025, in countries like China, Japan, South Korea, and the USA, this share exceeds 70 per cent. In the US, the private sector leads, with companies like Google and Amazon accounting for about 70 per cent of R&D spending.

Compared to India’s USD 15 billion R&D spending, in 2021, China’s R&D spending grew more than fivefold, rising from USD 136 billion in 2007 to USD 781 billion in 2023, overtaking the EU and Japan. The United States remains the global leader, with R&D spending reaching USD 823 billion in 2023, up from USD 461 billion in 2007. Europe’s R&D spending grew modestly, from USD 336 billion in 2007 to USD 504 billion in 2023. But Japan’s R&D investment has plateaued, hovering around USD 170 billion–USD 190 billion between 2007 and 2023. Without the backing of cutting-edge technology, which needs proper planning and adequate funding for research, Indian firms will find it increasingly difficult to compete with the technology leaders. The huge fund spent towards PMLI (production-linked manufacturing incentive) should have been utilised for sector-specific research and technological innovations. Till then Indian manufacturers will have to rely on ‘screwdriver technology’ for assembling imported components.

Observations

Slow growth in bank credit, low consumption demand, stagnant private investment, declining production, along with rising crime rate and domestic unrest due to economic, social, and religious conflicts among the citizens have pushed the Indian economy into a disastrous situation. During 2022 -24, around 17,000 high net worth individuals (HNI) have left India for greener pastures. The government must shift its focus away from the organised sector to the unorganised sector, which includes millions of farmers and micro, small and medium enterprises. Social contradictions must be addressed instead of abetting them.

India, with a population of 1.4 billion and a miserably low per capita income, is at the crossroads of geo-strategic realignment taking place between the Old and the New World, led by China and the USA, respectively. Unfortunately, due to its faulty foreign policy, India has developed an unfriendly relationship with its next-door neighbours. Now, India is important to both the USA and China, primarily as a market for the excess genetically modified (GM) grains produced by the US farmers and a dumping ground for the low-priced consumer products of China. Though India is emerging as a supplier of cheap unskilled and semi-skilled labour to a few developed nations, it has lost its political and economic relevance to the developing nations of the global south.

The writer is a professor of Business Administration who primarily writes on political economy, global trade, and sustainable development.
Views expressed are personal