FROM POVERTY LINE TO DIGNITY LINE

For India to grow at full potential, we must transform the bottom 50 per cent of our income distribution from passive beneficiaries of welfare schemes to active contributors to personal and national growth

- Karthik Muralidharan

The best way for India to become a global power is to sustain annual economic growth rates of above 8 per cent. High growth is also the best way to eliminate poverty, improve citizens’ lives and generate the tax revenues needed to fund an effective social safety system that can support those who fall into poverty and help them bounce back. How can we achieve these high and sustained growth rates?

A simple summary of the Indian economy is that the top 10 per cent of the income distribution create firms or secure well-paid jobs. The next 30-40 per cent find employment of varying quality serving the demand created by the top 10 per cent, and the bottom 50-60 per cent (mainly in rural areas) are largely excluded from India’s growth story. They rely on welfare programmes to achieve basic living standards and to obtain at least some of the gains of economic growth.

This model has served us reasonably well, delivering growth rates of around 6 per cent. At 140 million people, even 10 per cent of India’s population is large enough to drive innovation, start-ups, and skilled-service exports including staffing large global capability centres. However, to achieve sustained growth rates of 8-10 per cent, we will need to fire on all cylinders. This will require us to transform the bottom 50 per cent of India’s income distribution from passive “beneficiaries” of welfare schemes to active contributors to their personal and national growth. This is also what people want. One consistent message from the 2024 election is that voters appreciate reliable delivery of free foodgrains, but would rather have a good job.

The job conundrum: How do we create more good jobs? Since most Indians cannot afford to be unemployed, our unemployment rate is actually low. Rather, the real challenge is to improve job