The Price of Modi's Economic Incompetence
Unless the Indian economy returns to growth rates of 9% or more, the country risks creating a mass of young, poorly educated, unemployed, and angry people – the classic formula for social and political unrest. If the government’s economic incompetence continues, hopes of a demographic dividend may turn into a nightmare.
NEW DELHI – With India now in its 75th year of independence, perhaps the biggest disappointment has been the country’s failure to become an economic powerhouse. In more confident times, back in 2019, Prime Minister Narendra Modi had spoken of building a $5 trillion Indian economy by 2025. But with three years to go, and India’s GDP currently $3.1 trillion, it is difficult to find anyone who still believes he can achieve this goal.
India was supposed to benefit economically from what Modi called the country’s “3D” advantage – demographics, democracy, and demand. In particular, India would reap a “demographic dividend” owing to its youthful population: the median age in India is 28, compared to 37 in China and the United States and 49 in Japan, and more than two-thirds of its 1.4 billion people are of working age.
Instead, the economy has been stumbling, with GDP growth decelerating each year from 2017 to 2020, inflation rising, and unemployment reaching a record 23.5% in April 2020. India currently has 53 million unemployed people, and its labor force participation rate has declined from 58% in 2005 to just 40% in 2021 – one of the lowest levels in the world.