Employment, Competitiveness And Shared Prosperity: The Indian Conundrum

INDIA REFORMED ON THE BACK of a crisis in 1991 and over the last 25 years has made considerable progress.

- Ajay Chhibber

Today the GDP of Maharashtra is higher than what India’s GDP was in 1991. Life expectancy has increased by ten years. Poverty (both relative and absolute) has declined.

(The latest data from the multi-dimensional poverty index, MPI, shows that decline in poverty levels has been fastest in the lowest income regions, among the SC/ST groups and Muslim communities, where poverty rates were the highest.) But India is not meeting its full potential and its demographic dividend risks becoming a disaster. There are also worrying signs of rising protectionism on the international trade front.

Is India on the verge of another 25 years of rapid growth or are we overly preoccupied with headline growth numbers of our GDP, while our underlying fundamentals remain weak? Inadequate spending on education, health, high levels of corruption, and a weakened financial system and institutions threaten the future. India’s rankings on global competitiveness indices and the World Bank’s Ease of Doing Business index have improved, but India’s external deficits have risen to dangerous levels again. Exports have been tepid and imports have surged. India has reacted by increasing import tariffs on a range of commodities to contain the deficit – but this may produce short-term gains at the cost of long-term competitiveness.