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A cursory look at the GDP (Gross Domestic Product) figures for 2021-’22 reveals much more than they hide. For instance, the Indian Economy was supposed to have grown at a blistering pace where the reading for the last Financial Year came in at more than 8%. This led credence to the oft-repeated phrase that India is the fastest-growing major economy in the world. No doubt that the Indian Economy is growing, but, there needs to be a “reality check” as to the “real” growth rates, instead of the statistical sleights of hand. To elaborate, the Indian Economy contracted by more than 6% the previous fiscal (2020-’21) and so, a “rebound” of 8% means that the actual growth was only 2% as the touted figure includes the covering of the negative growth.
So, what this means is that we need to take official statistics with a liberal dose of salt especially when there are many “puzzles and contradictions” that characterize the Indian Economy. Otherwise, why would the common person feels so screwed and why would the stock markets gain when real wages are stagnating. Moreover, why would the labour participation rate drop to an abysmal 40% meaning that Crores of Indians have either stopped looking for jobs or are unable to find one, despite their best efforts? Perhaps, our policymakers would address this Great Resignation Desi Style by fixing the Informal Economy, which is where the jobs are, and which has been hard hit by Demonetization and the subsequent rollout of GST or Goods and Services Tax.
More to the point, the Indian Economy is now on a “unique” stagflationary spiral where both Demand and Supply are being choked, the former due to job losses and the pandemic having constricted spending and the latter due to the global headwinds including the Chinese slowdown and lockdowns leading to clogged supply chains and the Ukrainian War dampening the global economy. Moreover, with high inflation and real growth of around 2%, it is more than likely that the Indian Economy is in a rut, which was first witnessed at the height of the Covid crisis. In addition, it is also clear that the overall economic mood has “darkened” which means that in all probability, the Indian Economy is going from bad to worse and it would take a “miracle” for it to recover.
Having said that, there are indeed some “bright spots” in the Indian Economy as can be seen from the humungous growth in Unicorns (startups with Billion Dollar valuations) as well as the dizzying pace of growth in the much-vaunted services sector, including IT (Information Technology) and Financial Services. Indeed, it looks like the Indian Economy is being held afloat by the “glitzy” offices of New India, a fact that was acknowledged by the former RBI or Reserve Bank Governor, Raghuram Rajan, with a backhanded compliment that the K Shaped recovery has the aforementioned bright spots as well as “dark stains”. This was not lost on the Economist magazine, which called this decade “India’s to lose”.
So, this is where we are with uneven growth and widening inequalities, which left unaddressed can throw up more of the Agnipath protests that rocked the country last week. Indeed, India’s youth need jobs and not jails, and we risk social unrest unless we address these paradoxes at the heart of the Indian Economy. Moreover, we also can lapse into anarchy much like our neighbours such as Srilanka which has proved MI5’s (British Intelligence Agency) warning that “we are four meals away from anarchy”. Even the much-hyped Unicorn bubble is bursting as the Cryptos are crashing, a Double Whammy of sorts that can derail the India Story just when it is taking off. The Davos 2022 meet too highlighted some of these concerns about the global economic environment.
If we were to go back a few decades, those of us who were engaged with the Indian Reforms and Growth narratives would recognize that the present times mirror the 1990s and also provide us clues as to why India, the Land of Million Mutinies, should perhaps focus more on the economy than on socio-religious issues. Indeed, personally, I feel as though it is 1991 again, as well as a sense that the “turbulence” in the global economy and the consensus predictions of recession by “everyone and their dog” can lead the Indian Economy to the precipice. Moreover, with a possible Fourth Wave on the Way, it is also plausible that the Indian Economy would be sent to the ICU (Intensive Care Unit) in such a case.
Last, I can also say that this is the Age of the Unexpected where anything can happen anytime and so, it is better to keep our guards up and not drop the ball. Indeed, the times are such that there is absolutely nothing that we can do or say with confidence that we have a “grip” on our lives. Same with the Indian Economy where the often paradoxical messages which emerge from analyzing it can leave us bewildered. To conclude, the next few months should be watched cautiously for any signs of macro or micro economic events that can spark a crisis and catalyze a meltdown in the Indian Economy and so, investors and common persons alike beware.
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