Gross Domestic Problems In India

On May 25, India바카라�s NITI Ayog declared that the country has surpassed Japan to become the world바카라�s fourth-largest economy. Ministers hailed it as proof of India바카라�s unstoppable rise. They also said that India is poised to displace Germany from the third rank in the next two-and-a-half to three years. News channels ran marathon debates, infographics blazed on social media, and bhakts flooded timelines with hashtags proclaiming economic victory. Some YouTubers and portals indulged in refuting it, saying not yet.

I often wonder why they have to go stepwise and not declare that India has surpassed even the United States and has become the top economy in the world. There is a faithful janta that would believe it anyway. It does not have to know what Gross Domestic Product (GDP) means and what it does. It is just a matter of swelling one바카라�s chest with pride that under the infallible Modi, India is winning the world, becoming the vishwaguru. Tomorrow, if for some reason, they had to say that they would take more than three years to surpass Germany, the faithful would never question it either.

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The GDP Game

GDP is widely regarded as the foremost indicator of a nation바카라�s economic health, representing the total monetary value of all goods and services produced within its borders. Economists primarily compute GDP through two approaches: the production approach, which sums up the value added at each stage of economic activity across sectors like agriculture, industry and services; and the expenditure approach, which aggregates total spending on final goods and services; including household consumption, investments, government spending and net exports. While both methods are valid and often reconciled with each other, India uses a cocktail of both: primarily the production approach, supplemented by expenditure-side estimates through the Central Statistics Office (CSO) and periodic supply-use tables.

India바카라�s GDP data has attracted considerable scrutiny in recent years. The 2015 revision of GDP calculations adopted 2011-12 as the base year from 2004-05 and aligned with international norms. This shift was not unusual in itself. Base years are periodically updated to better reflect structural changes in the economy, consumption patterns and price indices. However, this revision also incorporated new data sources and methodologies, fuelling controversies. It moved from the factor cost method to the Gross Value Added (GVA) at basic prices and market prices approach. It used the MCA-21 database (from the Ministry of Corporate Affairs), bringing more corporate sector data into the fold. Its impact has the controversial revision of past growth figures upward, fuelling criticism about opacity and credibility. The GDP growth in 2013-14 (the last year of the UPA government) was revised to 6.9 per cent from 4.7 per cent and that under Modi바카라�s first year (2014-15) was raised to 7.4 per cent from the projected 7.2 per cent. It gave the Modi government a statistical tailwind: boosting the narrative of 바카라�Achche Din바카라� and economic turnaround; and delegitimised the UPA-era economic performance (it started flaunting higher growth rate for the Modi years, lowering the growth figures for the Congress years). It also helped to deflect criticism after demonetisation and the Goods and Services Tax (GST). Post-demonetisation (2016) and the hasty GST rollout (2017), there was widespread concern about economic slowdown. But the GDP figures still showed high growth (6.8 per cent in 2016-17), allowing the government to claim that these were short-term disruptions in an otherwise thriving economy. Critics argued that this masked real pain in the informal sector, which wasn바카라�t adequately captured in the new methodology. It created an illusion of high-growth, jobless prosperity: India바카라�s GDP appeared to grow faster, even as unemployment hit a 45-year high in 2017-18.

Large parts of the Indian economy바카라�especially the informal sector바카라�remain beyond the reach of reliable data capture. Proxy indicators such as electricity usage or cement production are often used to estimate output in sectors lacking granular data. This, combined with the alleged politicisation of statistical institutions and inconsistencies in high-frequency indicators, has created widespread concern that India바카라�s GDP growth may at times be overstated or poorly representative of on-the-ground realities.

Was the revision justified? Some economists like Arvind Subramanian, Modi바카라�s former Chief Economic Advisor, later argued that India바카라�s GDP growth may have been overstated by 2-2.5 percentage points during 2011-17 due to flaws in the new methodology (Brookings paper, 2019). Other economists like Rathin Roy and Jayati Ghosh have pointed out that the GDP numbers were increasingly delinked from ground realities, especially indicators like bank credit, export performance and wage growth. The Statistical Commission바카라�s credibility was damaged when two independent members resigned in protest over data suppression (such as employment reports).

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Why Aren바카라�t We the Number One?

The above methodology of computing GDP itself would show that the size of the population, and its distribution into age segments, plays a big role in GDP simply because this provides it a consumer base and the workforce. India during the Modi years turned into the most populous country with one of the youngest populations, boasting the world바카라�s largest working-age population (over 67 per cent). This is the 바카라�바카라�demographic dividend바카라�, which when properly leveraged, has historically been the cornerstone of rapid industrialisation and economic ascent in other countries, most notably China.

However, India바카라�s economic trajectory has failed to fulfil its demographic promise. Far from becoming the world바카라�s leading economy, India continues to underperform relative to its population potential. The core issue lies in deep structural and institutional failures. A vast proportion of India바카라�s youth remains underemployed, trapped in low-productivity or informal work. Unlike China, which leveraged a manufacturing-led strategy to absorb its labour surplus, India prematurely leapfrogged to a services-based economy without first building a robust industrial base or investing in public goods. The result is a hollowed-out growth model, resting on shaky foundations. Modi바카라�s disdain for education and public health바카라�masked by flashy schemes and token expansions바카라�has further eroded already fragile infrastructure. Chronic underinvestment in education, skill development, and healthcare has corroded the quality of human capital, turning what could have been a demographic dividend into a mounting liability.

Demographic advantage accrues to every country in a cyclical manner, which needs to be leveraged to build economic infrastructure such that when it recedes and turns into disadvantage due to ageing of the population, it continued to sustain the standard of living of its population. Several countries across different regions and periods have successfully leveraged their demographic advantage바카라�a large working-age population relative to dependents바카라�to fuel economic growth. Several examples can be cited.

After World War II, Japan experienced a rapid economic recovery and industrial boom in the 1950s-70s during what is known as the 바카라�Japanese economic miracle.바카라� A large, disciplined, and well-educated workforce entered the productive age just as the country was rebuilding and industrialising. Japan invested heavily in education, technology, and infrastructure, and promoted export-oriented manufacturing. By the 1970s, Japan became the world바카라�s second-largest economy.

South Korea transformed from a war-ravaged agrarian society into a high-tech industrial power during the 1960s-90s. A post-war baby boom created a large working-age population. There were massive investments in universal education, health and infrastructure, combined with government-led industrial policy and export-led growth. The GDP per capita soared, and South Korea became a member of the Organisa­tion for Economic Co-operation and Development (OECD) in 1996.

Following economic reforms under Deng Xiaoping, China unleashed its labour potential in manufacturing and global trade during the 1980s-2010s. A young and growing workforce, combined with the one-child policy limiting dependency ratios, created a favourable demographic window. The state built massive infrastructure, attracted foreign direct investment (FDI), and turned China into the 바카라�world바카라�s factory바카라�. Hundreds of millions were lifted out of poverty; China became the world바카라�s second-largest economy.

The 바카라�바카라�Celtic Tiger바카라�바카라�, Ireland, experienced rapid economic growth driven by technology, finance and the education sectors in the 1990s-2000s. A young, English-speaking, highly educated workforce coincided with European Union (EU) integration and FDI inflows. There was strategic use of EU funds, investment in higher education and tax incentives for multinationals. Ireland became one of the fastest-growing economies in Europe before the 2008 crisis hit.

Vietnam (1990s-present) is currently in the midst of a demographic dividend phase. A youthful, increasingly urban workforce is entering the productive age. There is export-driven manufacturing, education reforms and integration into global value chains. Vietnam has rapid GDP growth, rising incomes and a burgeoning middle class.

India, in contrast, may be an example of 바카라�Missed Oppor­tu­nity바카라�. It has squandered its historical demographic dividend at the altar of politics. The country has the largest youth population in the world, but lacks the institutional capacity바카라�particularly in education, skilling, health and labour market flexibility바카라�to absorb this workforce into productive sectors. Just by virtue of this population, India should have been the biggest economy in the world, but instead of feeling a sense of shame, it is taking pride in becoming the fourth largest economy.

If the janta had been in its senses, it would have asked the rulers: why aren바카라�t we the number one economy in the world?

Who Benefits from the Boom?

GDP growth matters바카라�but only if it translates into better lives. The more meaningful measure is per capita GDP, which adjusts for population size. India may soon overtake Japan in total GDP, but it still lags dramatically in per capita terms: around $2,800 versus Japan바카라�s $33,000 (International Monetary Fund, 2024). Purchasing Power Parity only dulls this disparity. On the Human Development Index, India ranks 132nd, far below Japan바카라�s 19th.

To compare India바카라�s scale with Japan바카라�s sophistication is misleading. Despite ageing demographics and near-zero growth, Japan offers universal healthcare, quality education, efficient infrastructure and social security. India, with a young population and faster growth, trails on every front: high child mortality, failing schools, decaying public transport and mass malnutrition. Over 230 million Indians still live in multi-dimensional poverty.

Worse, India is now among the world바카라�s most unequal countries. The top 10 per cent holds 57 per cent of income; the bottom 50 per cent, just 13 per cent (World Inequality Lab, 2023). In wealth terms, the top one per cent owns 40.6 per cent, while the bottom half owns only three per cent (Credit Suisse, 2023). Since 2020, billionaire wealth surged by 35 per cent (Oxfam, 2024), while inflation ate into the poor바카라�s survival.

And this GDP mania has already cost us felling of forests, poisoning of rivers, displacement of villages, suffocation of cities, farmers바카라� despair, gutting of public services, ruining of democracy, and genocide of Adivasis. This is not development바카라�it is dispossession in disguise, with GDP as the fig leaf.

(Views expressed are personal)

Anand Teltumbde is an Indian scholar, writer and human rights activist

This article appears in Outlook Magazine바카라�s June 21, 2025 issue, Innings/Outings, which captures a turning point in Indian cricket 바카라�from retiring legends to small-town stars reshaping the game바카라�s power map. It appeared in print as Gross Domestic Problems.