Indian Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) unveiled its election manifesto on 14 April, just four days before the country’s 970 million voters go to the polls in the world’s biggest and longest election.
Critics say the document says “surprisingly little” about what economic policies the BJP will pursue if it wins another term in power as expected, apart from a promise to make India the world’s third largest economy with an annual gross domestic product of $3.7 trillion.
To achieve this, India would have to overtake Japan, with a GDP of $4.2 trillion, and Germany, with $4.5 trillion. But economists say this may not be too difficult a target, given that India has overtaken the UK, France, Italy and Brazil in recent years. However, the BJP manifesto gives no details of how Modi will achieve this, or how he will ensure that the country meets its target of making India a developed nation by 2047.
India’s economy grew 8.4% in the October-December quarter and 7.6% in the full fiscal year to March. This is an impressive growth rate by any standard.
The BJP manifesto, while highlighting the success of the Modi government in bringing India from the brink of economic fragility to global prominence, states that the next cabinet will stick to the path of fiscal consolidation, which should be reassuring to investors.
But while the document paints a rosy picture of the Modi government’s economic achievements to date, it is short on details of how the next cabinet will tackle the dangerous macroeconomic challenges facing the economy. These include worsening youth unemployment, sticky inflation, widening income and wealth inequality, and the squeeze on informal enterprises, which employ more than four-fifths of the country’s workforce.
Despite falling fertility rates and one of the lowest labour force participation rates in the world, youth unemployment continues to rise steadily. Even among young people with at least a secondary education, almost one in five is unemployed. At the same time, educated youth account for two-thirds of all unemployed youth, according to research by the International Labour Organization and the Indian Institute of Human Development.
Experts say that expanding production will not be enough to solve the problem. The sector, which accounted for between 12% and 14% of employment in the last 10 years of Modi’s rule, has grown very little despite increased import barriers and generous subsidies to select large companies to expand local production.
Household consumption is estimated to have grown by around 3% in the last financial year, which if true would be the smallest increase since 2002 outside the COVID pandemic.
The BJP manifesto is silent on how the party will address stagnant demand. Without faster demand growth, there will be no pick-up in private capital investment, which in turn will limit GDP growth.
Some local media expected the BJP to unveil plans for major reforms of archaic land and labour regulations. But infrastructure projects were announced, including the promise of more high-speed rail lines.
The document therefore does not appear to set out the BJP’s plan to address India’s long-term economic challenges.
Opposition campaigned ‘for the poor’
The Indian National Congress, the main opposition party, campaigned on a ‘pro-poor’ platform, promising to give 100,000 rupees ($1,200) a year to the country’s poorest households and extend crop price guarantees to farmers.
Congress is also proposing to conduct surveys to prepare for wealth redistribution measures.
According to the World Inequality Lab, the top 1% of Indians receive about 23% of the country’s annual national income and own 40% of the country’s wealth. Critics of the government, such as former Reserve Bank of India governor Duvvuri Subbarao, say India will remain a poor country even as it becomes the world’s third largest economy.
In terms of per capita income, India ranks 143rd in the world. This underscores the reality of growing inequality and shows that simply wanting to increase GDP further will not be enough to ensure the country’s economic health.
Similarly, spending more on repairing and upgrading basic infrastructure means spending less on improving and expanding health care and public education. The lack of adequate public services pushes all Indian households into expensive private sector options. As a result, many have little money left to spend on discretionary goods and services.
Despite this, the ruling party remains popular with voters and, judging by the polls, there seems little doubt that Modi will win support for a third term. However, experts are concerned that the Modi government, which is expected to be re-elected, lacks a coherent economic strategy to tackle the country’s key macroeconomic problems.
