India’s macroeconomic indicators—such as GDP growth, forex reserves, stock market performance, and inflation control—are often cited as positive signs of the country's economic health. Yet, for many Indians, these improvements have not translated into a palpable increase in living standards or financial well-being. Why does this dissonance exist between the country's encouraging macro parameters and the way many citizens feel about their economic reality?
1. Economic Growth Is Unevenly Distributed
While India’s GDP growth remains robust (7.2% in FY 2023), a large portion of the population has not benefited from it. A major reason is the unequal distribution of wealth and income. According to the World Inequality Report, the top 1% of India’s population holds more than 40% of the total national wealth, while the bottom 50% owns less than 13%. This growing inequality means that while the macro numbers look good, they primarily reflect the success of the affluent class, leaving a significant part of the population feeling left behind.
2. Jobless Growth and Unemployment
India's economy is growing, but this growth has not been accompanied by an equivalent increase in employment opportunities. The term "jobless growth" has been used to describe India's situation, where sectors like technology, finance, and manufacturing see productivity gains without creating new jobs at scale. According to the Periodic Labour Force Survey (PLFS) 2021-2022, the unemployment rate stands at around 4.1%, but youth unemployment is much higher at around 12-13%.
With insufficient job creation, particularly in industries that can absorb the large influx of labor from rural areas, many Indians are underemployed, working in informal or low-paying jobs, which do not provide enough financial security to improve their quality of life.
3. High Inflation and Cost of Living
While inflation may be under control at a macro level (the Consumer Price Index inflation rate averaged 6.83% in 2023), the cost of living for ordinary people has skyrocketed, especially in urban areas. Essential goods like food, healthcare, and education have become more expensive, reducing disposable incomes and increasing financial stress for middle- and lower-income families.
The cost of housing in metropolitan cities like Mumbai, Delhi, and Bengaluru has also become prohibitively high, with property prices rising significantly faster than wage growth. Despite India’s inflation rates being relatively stable, the perception of being “poor” persists due to higher day-to-day living costs.
4. Underdeveloped Social Infrastructure
India ranks low on the Human Development Index (132 out of 191 countries in 2022), indicating that basic amenities like healthcare, education, and social security are still lacking. Despite economic growth, public spending on health and education remains limited, with healthcare spending hovering around 2.1% of GDP.
For the average citizen, this means out-of-pocket expenses for essential services like private healthcare and education are high, further adding to the sense of economic hardship. According to the National Health Accounts data, 58% of healthcare costs are borne by households, pushing millions into poverty each year.
5. Agricultural Distress and Rural-Urban Divide
India’s agricultural sector, which employs over 40% of the workforce, has been in distress for decades. Low productivity, inadequate infrastructure, and the lack of modern techniques contribute to poor income growth for farmers. The National Sample Survey Office (NSSO) report shows that the average monthly income of a farm household is just around ₹10,000. This low income, coupled with rising debts, leads to financial instability for millions of rural families, despite the country’s overall GDP growth.
In contrast, urban India is booming with industries like IT, e-commerce, and finance experiencing rapid growth. This rural-urban divide exacerbates the perception of being poor for those in rural areas who witness urban affluence but see little change in their own economic condition.
6. Growing Informal Economy
A significant portion of India’s workforce—nearly 90%—is engaged in the informal sector. These workers lack job security, social benefits, and stable incomes. The informal economy includes street vendors, contract laborers, and gig workers, whose livelihoods are vulnerable to disruptions such as inflation spikes or market downturns.
Although India is witnessing impressive growth in sectors like technology, many of these jobs are inaccessible to people without formal education or training. The transition from informal to formal employment has been slow, leaving a large section of the population economically insecure.
7. Debt and Financial Vulnerability
Personal debt has surged as more households rely on credit for essential expenditures. According to the Reserve Bank of India, household debt as a percentage of GDP rose from 33.8% in 2020 to 39.1% in 2023. Many families borrow to fund healthcare, education, and even daily consumption, making them vulnerable to financial shocks like job loss or a health crisis.
Moreover, while access to formal financial services has improved due to government initiatives like the Pradhan Mantri Jan Dhan Yojana, financial literacy remains low. Many Indians still struggle with managing personal finances, leading to cycles of debt and economic insecurity.
8. Lack of Robust Social Safety Nets
India's social safety nets, including pensions, unemployment benefits, and other forms of welfare, are inadequate. The unorganized sector, which comprises a vast portion of the workforce, lacks access to these benefits. While the government has introduced programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), these initiatives often fall short due to underfunding or inefficient implementation.
Without a strong safety net, economic shocks, whether personal (like illness) or systemic (like inflation or job loss), are difficult to absorb, leading to a sense of economic vulnerability.
Bridging the Gap Between Macro Indicators and Lived Reality
India’s macroeconomic parameters present an optimistic picture, but they often fail to reflect the on-ground realities faced by millions of Indians. The country’s wealth is concentrated among a small fraction of the population, while a majority still grapples with high costs of living, insufficient job opportunities, and inadequate social services. Bridging this gap requires targeted policy interventions, such as improving access to quality education and healthcare, fostering job creation in labor-intensive sectors, and providing stronger social safety nets.
Without addressing these underlying issues, the sense of economic hardship will persist for many Indians, regardless of how impressive the macro numbers may appear.
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