The rise of India

Image: Ranjeet Chauhan


If Narendra Modi wins another five-year term, the “hype” of “success” will be intensified, but so will the reductions in the right to dissent and opposition to the nationalist government

Prime Minister Narendra Modi, leader of the Hindu nationalist Bharatiya Janata Party (BJP), together with his coalition, could win a third consecutive five-year term in India's six-week election. His political party, in the beginning, was made up of members of what was basically a Hindu religious fascist party. O Rashtriya Swayamsevak Sangh (RSS), as it was called, was an organization inspired by Benito Mussolini's Black Brigades.

Narendra Modi was a long-time member of the RSS, but now he appears as a perfectly suited participant in the BJP. After gaining power in 2014, Narendra Modi consolidated his grip on power in India. Now, he is seen as a “business-friendly” man. However, the BJP is still dedicated to transforming a multi-ethnic and multi-religious India into a Hindu state.

In this Hindu State, minorities, particularly Muslims, are being turned into second-class citizens. With increasing confidence, the Narendra Modi government has suppressed any public dissent from the liberal democrats and socialists who form the opposition. Many opposition politicians were arrested on false charges and prevented from participating in the election and public debate.

How is it possible that the BJP and Narendra Modi are so popular? First, because most of the BJP's political support comes from the rural and most backward areas of this huge country, which have not benefited from the strong rise of Indian capitalism in the cities. These areas are strongholds of Hindu nationalism, fueled by fear of Muslims.

The second reason is the total failure, over the decades, of the main capitalist party and standard-bearer of Indian independence, the Congress Party, to provide better living conditions and conditions for the hundreds of millions, not only in the country, but in city slums. The Congress Party appears to millions as the party of establishment controlled by a family dynasty (the Gandhis), while the BJP appears to many as the forgotten populist party of the people.

The Narendra Modi government has created handouts for the poorest. Social welfare schemes have been expanded, such as providing free grain to 800 million of India's poorest and a monthly stipend of 1.250 rupees ($16; £12) for women from low-income families. This amount is paid to half a billion people through new bank accounts, along with free gas connections in millions of homes for the poor and more than 40 million toilets built.

But in reality, the BJP and the Modi government are fully integrated and support Indian capital, especially big capital. Prime Minister Narendra Modi has made the economy a major part of his election speech, promising at a rally last year to elevate the country's economy "to the number one position in the world" if he wins a third term. The Modi government's main policy is Viksit Bharat 2047 – a plan to make India a developed nation by 2047, 100 years after independence, something China is targeting for 2030.

The Indian media, as well as Western economists, praise the strong economic growth that India is apparently enjoying under the Modi government. According to official figures, Indian real GDP grew 8,4% per year in the last quarter of 2023 and 7,6% for the entire year, compared to 7,0% in 2022. Economists at mainstream are so ecstatic about the success of Indian capitalism under Narendra Modi that the facts about its neo-fascist past and current repressive measures are ignored. Instead, all the talk now is that India will “catch up” with China and even surpass it in terms of real GDP soon. For example, Goldman Sachs projects that India will have the second largest economy in the world by 2075.

India is forecast to grow even faster, while China's growth will slow; Soon, it is hoped, India will contribute more to global growth than China. India will take over China's leadership in manufacturing and technology and thus prove that a privatized, free-market economy can triumph over a planned state-led one that is China. According to the Bloomberg, India could become the world's No. 1 contributor to GDP growth as early as 2028, as India's economic growth will accelerate to 9% by the end of this decade, while China will slow down to 3,5%!

But this is all just fad. Look at the growth numbers. The perennial cry from Western economists when they receive growth figures for China is that they are fake. But in fact, it is India’s national statistics office that is being “economical with the truth”. GDP numbers contain dubious categories like “outliers.”

The main one refers to the difference between real GDP growth of around 7,5% per year and real internal expenditure growth of just 1,5% per year. They should be the same theoretically, but they are not – and the national statistical service ignores the latter. Part of the reason for the “discrepancy” is that India’s government statisticians are “deflating” monetary GDP into real GDP through a price deflator based on wholesale producer prices rather than consumer prices, so that the value of real GDP growth is much higher than the real increase in spending. Additionally, GDP numbers are not being “seasonally adjusted” to account for changes in the number of days in a month or quarter due to weather, etc. Seasonal adjustment would have shown India's real GDP growth well below the official figures.

A recent article shows India's staggering extreme wealth and income inequality; she additionally exposes that the official numbers are quite unrealistic. O World Inequality Lab concludes that “the current golden age of Indian billionaires has produced growing income inequality in India – now among the highest in the world and more stark than in the US, Brazil and South Africa. The gap between India's rich and poor is now so great that, by some measures, the distribution of income in India was more equitable under British colonial rule than it is now.”

The richest 10% of the Indian population now owns 77% of the total national wealth. Between 2018 and 2022, India is estimated to have produced 70 new millionaires every day. Billionaires' fortunes have increased almost 10-fold in the last decade and their total wealth is greater than India's entire national budget for the 2018-19 fiscal year.

The current total number of billionaires in India is 271, with 94 new billionaires added in 2023 alone, according to the 2024 Global Rich List. Hurun Research Institute. More new billionaires are emerging than in any country other than the US, with collective wealth reaching almost US$1 trillion – or 7% of the world's total wealth. A handful of Indian tycoons such as Mukesh Ambani, Gautam Adani and Sajjan Jindal are now mixing in the same circles as Jeff Bezos and Elon Musk, some of the richest people in the world.

The report also found that the rise in inequality has been particularly pronounced since the BJP first came to power in 2014. Over the past decade, major political and economic reforms have led to “an authoritarian government that centralizes decision-making power, along with a growing nexus between big business and government,” the report states. This, the report's authors say, will likely “facilitate disproportionate influence” on society and government.

In contrast, many ordinary Indians are unable to access the health care they need. 63 million of them are pushed into poverty by healthcare costs every year – almost two people every second. In fact, it would take 941 years for a minimum-wage worker in rural India to earn what the highest-paid executive at a major Indian apparel company earns in a year. Although the country is a top destination for “medical tourism,” poorer Indian states have higher infant mortality rates than those in sub-Saharan Africa. India is responsible for 17% of global maternal deaths and 21% of deaths among children under five.

Rural poverty, stagnation and falling agricultural incomes have led to a series of farmer protests. According to Samyukta Kisan Morcha, an umbrella of agricultural unions, more than 100.000 farmers have committed suicide in the last ten years of the Narendra Modi government. India ranks 111th out of 125 nations in the report Global Hunger Index (2023). India is home to more than a third of the world's malnourished children, which is not just a health crisis but has a broader impact on the economy. A 2023 joint report from FAO, Unicef, WHO and WFP found that 74% of the population cannot afford healthy food.

WID averaged national income growth between rich and poor. By this measure, income growth in India is nowhere near the levels displayed by real GDP growth. Average real income growth in India is about 3,6% per annum, compared to the 6-8% claimed for real GDP growth.

The idea that India is or will close the gap with China is a dream. In fact, the WID document shows the difference between the average income of China and Vietnam through a comparison with that of India. As the following graph shows, even Vietnam maintains its advantage over India.

India's $3,5 trillion economy continues to be outpaced by China's $17,8 trillion economy. It would take the entire span of a human lifetime for India to catch up with its shoddy roads, irregular education, bureaucracy and lack of skilled workers.

The Indian economy is failing to create jobs, especially those that would support a decent standard of living. In addition to public administration, the fastest income growth in the last quarter (12,1%) was in finance and real estate. But this neoliberal characteristic of Indian development, now increased by “fintechs”, generates only a handful of jobs for highly qualified Indians.

Among other growing sectors, construction (helped by the government's infrastructure push) and low-cost services (in retail, transportation and hotels) mostly create financially precarious jobs that leave workers a lifetime away from serious hardship. The labor force participation rate in India has declined over the last 15 years. Under Narendra Modi, less than half of the working adult population is employed. The following graph clearly shows that participation in the labor force is low.

Two-thirds of Indian workers are employed in small businesses with fewer than ten workers, where labor rights are ignored – in fact, most are paid informally and in rupees in cash, the so-called “informal” sector that avoids taxes and regulations . India has the largest “informal” sector among the main so-called emerging economies. India's post-Covid manufacturing performance has been particularly weak. This reflects the country's chronic inability to compete in international markets for labor-intensive products – a problem worsened by slowing global trade and weak domestic demand for manufactured goods.

Overall, government spending on health has fallen and now hovers around 1,2% of Gross Domestic Product, out-of-pocket spending on health remains extremely high, and flagship initiatives on primary health care and universal health coverage to date they were unable to provide services to those most in need. Another contentious issue is the lack of credibility of India's continued claim that only 0,48 million people have died as a result of the Covid-19 pandemic, while WHO and other estimates are six to eight times higher (including excess deaths, most of which will be due to Covid-19). India is right at rock bottom in terms of government spending. Only South Africa, which is in a serious economic situation, is inferior to India.

And there is the question of basic resources for India's 1,4 billion people. Mechanically pumped groundwater now supplies 85% of India's drinking water and is the main source of water for all uses. Northern India's groundwater is declining at one of the fastest rates in the world and many areas may already be past “peak”. The World Bank predicts that most of India's groundwater resources will reach critical status within 20 years. In the pre-COVID period in 2019, China invested around 6,5% of its GDP in infrastructure development, while India invested just 4,5%. Around 78% of indigenous people are literate – but the percentage drops to 62% for women. On the other hand, about 97% of Chinese people are literate. Around 1,6 million indigenous people are enrolled in vocational education; in China, there are around 5,6 million people.

Productivity growth has been falling for most of the years under the Modi government. Since Modi took office, India's average labor productivity growth has been 4% per year; China 6,3%.

Productivity would increase if usually underemployed peasants could move to cities and get industrial jobs in the cities. This is how China transformed its workforce, to increase productivity and wages. China did this through state planning of labor migration and the construction of enormous infrastructure. India cannot; behold, its urbanization rate is far below that achieved by China. As a result, job growth is pathetically slow. An estimated 10 to 12 million young Indians are entering the job market every year, but many are unable to find jobs due to job shortages or because they don't have the right skills.

And just compare India's GDP per capita with China's. That's everything you need to know about this elevation story (catch up)! Note that China and India had more or less the same GDP per capita in 1990. And if the post-pandemic period is anything to go by, the “China gap” is widening, not narrowing.

A good measure of a better life is the World Bank's Human Development Index (HDI). The HDI covers economic growth, life expectancy and educational level. If we look at the largest so-called emerging economies by population, including the BRICS (Brazil, Russia, India, China and South Africa), China achieved the biggest improvement in its HDI of all countries. From 0,48 in 1990, China's HDI reached 0,77 in 2021, an increase of 59%. Compare this with India, which started at roughly the same HDI as China but reached just 0,63 in 2021, a 46% increase but still much less than China.

Rather than “catch up” and overtake China, it is more realistic to expect India to remain in what the World Bank has called a “middle-income” trap, where the vast majority of the population remains in poverty while the richest 10% they live well and spend, but there is no investment or drive to provide employment, training, education and housing for the rest.

The key to Indian capitalism is the profitability of its corporate sector. The profitability of Indian capital took a big dive in the 1970s, as did global profitability. Under successive governments led by the Congress Party, neoliberal policies were adopted to increase profitability. Then came the Great Recession and the long depression that followed, and profitability and growth began to decline.

Electoral support for the Congress dried up as a result and Hindu nationalism emerged. The BJP claimed that the reason for low growth, rising inequality and stagnant living standards was “the enemy within” (Muslims) and “the big state”, represented by a corrupt Congress Party family dynasty. Narendra Modi presented himself as a new savior. But since then, Narendra Modi has only endorsed policies that are palatable to big Indian capital: privatizations, cuts in food and fuel subsidies, and a new sales tax, a tax that is the most regressive way to raise revenue as it hits the poor hardest. .

If Narendra Modi wins another five-year term, the “hyping” of “success” will be intensified, but so will reductions in the right to dissent and opposition to the nationalist government. Now, that will be “business as usual” for India’s billionaires.

*Michael Roberts is an economist. Author, among other books, of The great recession: a marxist view (Lulu Press) []

Translation: Eleutério FS Prado.

Originally published in The next recession blog.

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