Modi govt gloating over GDP growth, but its policies have failed to generate jobs, widened inequality further

The income levels of 90% of the population have fallen while the upper 10% might accrue benefits from the growth process, but mostly, the real beneficiaries will be 2 % of the population

Bad economic measures have rendered millions unemployed over the last few years
Bad economic measures have rendered millions unemployed over the last few years
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Nitya Chakraborty

Two recent reports – one by the World Economic Outlook (WEO) released by the International Monetary Fund (IMF) and the other on employment status study by the Centre for Monitoring Indian Economy (CMIE) – have once again shown how the economic policies of the Narendra Modi government, including its ‘packages’ during the pandemic period, have failed to address even the very basic issue of job generation which is closely related to the economic growth of a developing country like India.

Both the studies make the point that the latest shape of recovery in economy may lead to a much higher GDP growth in 2021-22 compared to the low base of pandemic hit 2020-21, but this growth is failing to have any positive impact on the employment level as a whole and the present recovery process will further widen inequality in the Indian society.

The income levels of 90 per cent of the population have fallen while the upper 10 per cent might accrue benefits from the growth process, but mostly, the real beneficiaries will be 2 per cent of the population.

The WEO report has taken note of the recovery process as also the constraints faced by the economies of both developed and the developing world, the type of challenges varying from country to country, but the central message was that the global economic recovery momentum had weakened largely due to the pandemic-induced supply disruptions.

But more than just the marginal global growth, it is the increasing inequality among nations that is a cause for serious concern. In rich countries, the inequality has also increased but its dimension is different due to the social security protection.

But in the developing and the poor countries, the situation is completely different as in most of these countries, the marginalized and those who have fallen below the general poverty line due to pandemic-related constraints lack social security protection in most cases.

For India, that is a big concern and to this, the efforts so far of the Modi Government have been abysmal.


The WEO report notes that the dangerous divergence in economic prospects across countries remains a major concern. Aggregate output for the advanced economy group is expected to regain its pre-pandemic trend path in 2022 and exceed it by 0.9 per cent in 2024.

By contrast, aggregate output for the emerging market and developing economy group (excluding China) is expected to remain at 5.5 per cent below the pre-pandemic forecast in 2024, resulting in a larger setback to improvements in their living standards.

As the IMF sees it, within this overall theme, what is particularly worrisome is that this gap between recovery in output and employment is likely to be larger in emerging markets and developing economies than in advanced economies.

Further, young and low-skilled workers are likely to be worse off than prime-age and high-skilled workers, respectively. This is more than vindicated in respect of India as per CMIE studies, which show that women and low-skilled workers have been most adversely affected as a result of both the slowdown and the pandemic.

Indian finance ministry officials are gloating about the ‘V-shaped recovery’ and this week even finance minister Nirmala Sitharaman gave a big picture of Indian economy in her meetings in Washington based on expected high GDP growth in 2021-2, but what the IMF has projected on employment — that the recovery in unemployment is lagging the recovery in output (or GDP) — matters immensely for India.

CMIE data amply justifies the IMF contention in respect of India relating to employment not picking up despite increased GDP. CMIE data shows the total number of employed people in Indian economy as of May-August 2021 was 394 million as against 405 million in the same period in 2020, the period of lockdown in India.

This means that even after one year and the easing of lockdown in most parts of the country resulting in higher GDP growth in economy, the employment position declined, rather than improving. Thus, the recovery process in 2021-22 has not been accompanied by commensurate employment.

The ground reality is that the pandemic-related job losses continued in industrial units even after recovery started and the units started making profits in their operations. The reality is that the industry owners took advantage of the pandemic in streamlining their operations with less people and the employees were the victims of the greed of the employers, which the government’s policies allowed.

There are some special factors in Indian economy which are leading to the present growth, surge in stock market leading to a sectoral boom in tech sector including e-commerce and pharma while the labour intensive sectors, which provide the maximum number of jobs, including the informal sectors, lie unattended by the government.

A large number of corporates earned high profits in the first and second quarter of 2021-22 by reducing the workforce. These corporates have become richer while the workers with pay cuts and job losses have become poorer. That is the duality of the trajectory of growth in 2021-22.

Then, there is the issue of current problems with the unorganized sector which comprises 86.8 of the workforce in India. Out of this, the informal sector consists of 84.5 per cent of labour and the formal 1.3 per cent.

This sector needs special assistance but in reality, this sector, which is the bulwark of the Indian economy and contributes more than 50 per cent of the GDP of the country, is languishing following the pandemic and slowdown.

This has to change. As long as the Modi government does not reorient its priorities and takes concrete steps to rejuvenate the informal sector with more funds and marketing assistance, the employment position will not improve and the inequality will go on increasing.

(IPA Service)

Views are personal

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