The GDP Is Booming On Paper But Where Are The Jobs?
· Free Press Journal
The latest GDP numbers for the past quarter (April-June Q1) at 7.8 per cent look punchy and respectable. It is faster than the 6.9 per cent growth recorded in the same period last year. Prime Minister Narendra Modi called it a “Herculean feat” achieved despite global uncertainties.
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GDP, or gross domestic product, is the total value of all goods and services produced in the country. When it grows at 7.8 per cent, it means this should lead to more jobs, better wages, and improved living standards. However, GDP is an average. Just as a handful of very rich people can raise the “average income” of a neighbourhood without most residents becoming richer, a few booming sectors can lift the GDP number even if many people see little change in their daily lives.
Growth Remains Uneven
If one breaks the 7.8 per cent apart, it is narrower than it sounds. Finance, real estate, and professional services are up 12.1 per cent. While this is the biggest single chunk of the economy, it is also the hardest to physically verify. Much of it is estimated rather than counted. The next part, which is farming, is up 3.6 per cent, but slower than last year's 4.4 per cent, while mining is down 2.4 per cent. So the fastest growth is in the parts that are hardest to measure and employ the fewest. The slowdown is in the parts that are easy to measure and employ the most. More alarming, private consumption—households' spending on restaurants, gadgets, and travel—has lost momentum, growing 7.1 per cent against 7.5 per cent in the previous quarter, even as wholesale prices were close to double digits.
Government Capex Masks Weakness
While the government has stepped in as the family breadwinner and funded big-ticket spending, this is a temporary fix. The problem is that if the government slows capex, the private sector isn't ready to take over the baton. Another red flag needs attention. According to the RBI's own forecast, it expects the GDP to grow at 6.7 per cent for the full fiscal. If Q1 was pegged at 7.8 per cent, the next three will average out at 6.3 per cent. Either the RBI is expecting a sharp fall it hasn't explained, or its estimates are consistently landing too low. It has now undershot three quarters in a row.
Jobs And Incomes Remain Concern
None of this means India's growth is fake. India is very probably still the fastest-growing large economy. But growth is funded by a government absorbing a price shock it cannot absorb forever, and that is the worrying part. Therefore, it is the right time to ask this question again: While the 7.8 per cent growth sounds impressive, does this growth translate into better jobs, higher incomes, and a more affordable living? So far, the answer is no.