The 0.01 trap: India's GDP must not remain aloof from its people

We face a structural crisis in the collapse of formal job elasticity. Rapid economic growth must spell better lives for everyone

- EJAZ GHANI

(HT)

India is currently the world’s fastest-growing major economy, a headline that invites optimism as we sprint past the $4 trillion milestone. But for most of the 1.4 billion-plus people who live in the country, headline GDP has become a mere dashboard metric—high on transactional velocity but low on household dignity. We are witnessing a historic rupture: the link between economic growth and job creation, once the singular pulse of development, has been functionally severed.

A forensic audit of India’s structural shift from 1991 to 2026 reveals a catastrophic decline in the job efficiency of our growth. During the 1990s, every percentage point of GDP growth yielded roughly 0.41% growth in formal employment.

By early 2026, that employment elasticity had plummeted to 0.01. In plain terms: economic growth is no longer a labour sponge. Labour substitution is the order of the day. This is the ‘0.01 trap'—a state where the economy can double in size while people's economic well-being does not improve.

The anatomy of productivity apartheid: We are enduring a sharp split in productivity. At the apex of our economy—the ‘penthouse’—we have capital-intensive national champions and global capability centres (GCCs). These entities generate immense macroeconomic ‘heat’ in the form of record tax collections and surging equity indices. Yet, they produce almost zero economic mobility for the youth on the whole. The use of AI and advanced robotics lets these firms decouple revenue growth from headcount, a rational profit goal to pursue. In the penthouse, labour is increasingly viewed as a frictional cost to be minimized or automated out of existence.