India’s economy is booming, but uneven growth clouds ascent
But over the last decade, they have given way to centers where white-collar staff perform a variety of tasks, from IT and data analytics to innovation and design, allowing companies to benefit from top talent and technology.
Today these hubs are the brightest parts of India’s red-hot economy, but not everyone was able to enjoy the boom times as opportunities remained unequal.
Amazon’s largest office in the world is currently located in South India, and leading financiers like JPMorgan have nearly 20 percent of their workforce spread across Indian cities.
The government says the country is now home to about a fifth of the world’s chip design engineers, and these engineers are recruited from companies such as Qualcomm and MediaTek.
This has boosted the growth of the services sector and helped India become the fastest-growing major economy, which it has maintained tightly since 2021.
Alouk Kumar, head of an Indian consultancy that helps global giants set up offshore business centres, says his phone has been ringing non-stop in recent weeks: “The demand and interest has been crazy… The number of calls I’ve been getting from European companies has skyrocketed,” he said. “The way it increases, the next 10 years will belong to India.”
The surge in growth prompted Prime Minister Narendra Modi’s government to declare India in December as the world’s fourth-largest economy, surpassing Japan.
But last month’s figures suggest the announcement was premature and the transition is unlikely to happen for at least another year.
Still, economists say the eventual change would represent a landmark achievement; Less than three decades ago, Japan was the world’s second largest economy and India was still struggling to dismantle its quasi-socialist economic system.
Market reforms in the 1990s paved the way for a $283 billion software services industry, while the credit boom in the 2000s helped the country’s largest conglomerates expand globally.
And since 2014, a massive infrastructure push such as new highways, airports and ports has underpinned rapid growth.
“India’s success cannot be trivialized,” said Dhiraj Nim, an economist at ANZ Research.
He noted that many countries “failed to take advantage” of similar opportunities or “squandered them in the face of global shocks and imprudent policies.”
This world-beating growth (the size of India’s economy roughly doubles every decade compared to Japan’s, which remains essentially flat) has helped transform the country.
For example, poverty has decreased.
The World Bank estimates that the share of Indians living on $4.20 a day or less has fallen from 57.7 percent in 2011-12 to 23.9 percent in 2022-23.
Slowly rising incomes have also led to the emergence of a middle class estimated at over 300 million.
Illusion
But experts warn that gains from rapid expansion remain highly uneven.
“There are still many young people left behind by the progress of our economy,” said Amit Saxena of Ambe International.
The company sends thousands of blue-collar workers abroad every year to find regular, better-paying work.
Almost half of India’s population continues to earn their living from agriculture.
This keeps GDP per capita well below other major economies; It is 12 times smaller than Japan’s and 20 times smaller than Germany’s.
“India’s economic growth is driven largely by the demand of the top 100 million people,” said Bhaskar Chakravorti, dean of Global Business at the Fletcher School at Tufts University.
He added that “a significant portion of India’s workforce remains in relatively low-productivity and informal sectors.”
Chakravorti traces the gaping gap in wages in India’s services-led growth, which supports a “narrower slice” of the population, as opposed to China’s manufacturing-led growth.
Most economists say India needs sustainable growth of eight percent annually for two decades to become a high-income country.
But they warn that the priority in the near term is to create quality jobs for the millions entering the workforce each year.
Analysts at Morgan Stanley believe that India will need an average GDP growth rate of 12.2 percent to truly tackle underemployment.
Shifting workers from farms to factories is central to this goal.
While India has attracted companies like Apple to assemble iPhones, it is far from becoming a manufacturing hub.
In rural parts of the state of Maharashtra, the gap between national headlines and reality is stark.
Nitin Gaikwad, 32, supplements his meager farm income by building roads under a government jobs scheme aimed at providing guaranteed employment at stable wages.
“I don’t see any improvement anywhere. If they’re saying this, it’s only in cities where there are subways and flights,” he said.
“The illusion that the country is progressing. The villages remain untouched.”
