What is the benefit of rapid GDP growth if it doesn't translate to a dignified life?

Indian Express

5 days ago

Written by Ejaz Ayoub
'The welfare of a nation can scarcely be inferred from a measure of national income.'
— Simon Kuznets, chief architect of the GDP metric
India, according to the International Monetary Fund, is expected to be the fourth-largest economy in the world with a GDP of USD 4.19 trillion in 2025, ahead of Japan. This achievement, while seemingly a moment of national pride, warrants a closer examination. Beneath the impressive headline lies a complex reality of structural challenges that, if unaddressed, could impede India's path to sustainable and inclusive growth.
There is no denying the fact that India's economic ascent from the 10th position a decade ago to fifth today and fourth eventually deserves to be applauded. However, GDP in absolute terms can be a deceptive metric when isolated from its context. A nation's economic strength is not solely determined by its size but by the tangible benefits it delivers to its populace.
Consider the stark contrast with Japan. Despite being 10 times smaller in population (124 million compared to India's 1.4 billion) and geography (377,000 sq km versus 3.29 million sq km), Japan generates nearly the same economic output as India. More tellingly, Japan ranks 23rd on the Human Development Index, while India lags far behind at 130th. This disparity highlights that economic efficiency and human development, not just scale, are what truly define progress.
That a country with a fraction of India's human and natural resources achieves comparable GDP should prompt introspection rather than mere celebration. The question isn't just about scale, but policy and efficiency: Why isn't our immense demographic and territorial advantage translating into proportionate economic value? The root of the problem lies in the persistent inefficiencies of India's economic and institutional structures, an overreliance on low-value services, and a failure to industrialise and innovate at scale.
Per Capita Income: The real picture
India's per capita income reveals a more sobering truth. According to the IMF, at $2800, India ranks 140th globally in per capita income, the lowest even among the peer BRICS nations with Brazil at $10,296, Russia at $14,953, China at $12,969, and South Africa at $6,377. While overall GDP has surged, the wealth generated remains thinly distributed. The benefits of growth are disproportionately captured by the top 1 per cent of the population, who now own over 40 per cent of the total wealth (2023 Oxfam inequality report). If we exclude the top 5 per cent, the per capita income drops to a meagre $1,130, which is even below the lowest-income African countries.
This economic pyramid is not only top-heavy but also widening. A growing concentration of income and wealth is leaving the bottom 50 per cent and even the middle 40 per cent struggling to keep pace. This is not merely a statistical concern; it carries profound implications for social cohesion, political stability, and long-term economic sustainability. Recent reports by Oxfam indicate that the concentration of economic power in India is at an all-time high. A few conglomerates dominate critical sectors — telecom, infrastructure, digital payments, retail — raising concerns about monopolistic behaviour, regulatory capture, and democratic erosion. The widening gulf between the luxurious elite and the struggling masses endangers both economic stability and democratic integrity.
While some argue that inequality is a global phenomenon, with even China and Brazil facing similar disparities, the context differs. Unlike China, where state control allows for redistribution through public investments, or Brazil, where redistributive politics are fiercely contested, India's current political economy shows a limited appetite for directly addressing inequality.
The work of Daron Acemoglu and James Robinson in Why Nations Fail is particularly insightful here. Their central argument posits that inclusive economic institutions — not just market-friendly ones — are crucial for long-term prosperity. India must reflect on whether its institutions and policies are evolving to be more inclusive or if they risk becoming concentrated in ways that primarily benefit a narrow segment of society.
Human development lags behind
India's latest Human Development Index (HDI) ranking of 0.685 in 2023, placing it 130th globally, underscores significant developmental gaps. In contrast, fellow BRICS members like China (0.797), Brazil (0.786), Russia (0.832), and even South Africa (0.741) fare better across key human development indicators. These nations have not only achieved economic growth but have also made substantial investments in education, healthcare, and social protection.
This comparison is instructive: India is now the second-largest economy among BRICS in absolute terms, yet it lags in converting economic size into human development gains. This raises a fundamental question: What is the benefit of rapid GDP growth if it doesn't translate into dignified livelihood, improved health, increased life expectancy, higher literacy, or more equitable access to basic services?
Moreover, within India, inter-state disparities are stark. Southern and western states usually report better HDI scores and per capita incomes, while large populations in central and eastern regions continue to experience developmental backlogs. This unevenness within the country mirrors the broader challenge of making growth inclusive, not just across classes but also across all regions.
India is the world's most populous country, with a median age of under 30. This demographic bulge presents an enormous asset, but only if matched by commensurate investments in education, skilling, and employment generation. Unfortunately, the gap between aspiration and opportunity is widening. According to the Periodic Labour Force Survey (May 15, 2025), labour force participation, especially among women, remains dismally low. Millions of young people enter the workforce each year, but the formal sector is failing to generate adequate employment. Real wages for the poor have stagnated since 2014–15 despite consistent GDP growth. This disconnect between economic expansion and labour market outcomes is alarming. Without structural reforms in education, labour laws, and job creation, the demographic dividend risks becoming a demographic disaster.
India's economy rests on an increasingly fragile foundation. Growth is lopsided — geographically, socially, and sectorally. While urban India prospers, rural distress persists. While high-tech services shine, manufacturing stagnates. While stock markets soar, informal workers remain in precarity. Growth without inclusiveness can deepen divides. Growth without productivity can exhaust resources, and growth without sustainability can be short-lived.
India must shift its focus from mere GDP milestones to what that GDP delivers for its citizens. This necessitates investing in job creation, public health, quality education, and a robust social safety net. It means ensuring that credit flows not just to unicorns but also to MSMEs. All of this requires courage: Courage to reform institutions, rethink priorities, and resist the temptation of headline economics.
The writer is a research scholar in the field of Economics at the Department of Humanities, Social Sciences and Management, National Institute of Technology-Srinagar