Trickling Down to Viksit Bharat
A new government will take over the job of running the country shortly. There is a lot of hope among businessmen and stock market participants that a third term led by Narendra Modi will transform India into viksit Bharat (developed India). The question is: How do we measure such a transformation? The popular indicators are: growth in gross domestic product (GDP), tax revenues, stock market indices, growth in corporate profits, investment flows and so on. An improvement in these point towards increasing prosperity for the vocal, urban and prosperous minority. They dominate the chatter, so one automatically assumes these indicators will change India into a prosperous country. But will they? 
Over the past several years, all these markers have been extremely positive. But have they delivered rapidly rising per capita income which is one of the most important signs of overall prosperity? 
It pays to remember that India’s per capita income or net national income rose from Rs72,805 in FY14-15 to Rs98,374 in FY22-23, at just 3.83% compounded annual growth rate (CAGR), according to the government’s own data. Since the impact of actual inflation is underestimated, the actual rise in per capita income would be even lower. The living conditions of the average population encompassing education, health, public transport, pollution and justice system have not improved. In fact, these indicators have deteriorated. 
I know, most readers switch off when one mentions these indicators while talking of viksit Bharat, but they can’t be wished away or substituted by narrow indicators like the stock market boom, growth in corporate profits and mutual fund inflows, as measures of real prosperity. 
Most readers, including those connected to the stock market, are less interested or simply unaware of the issues facing the vast majority of India’s population that lives in rural and semi-urban areas. The general elections gave us an opportunity to sample the problems they face, when the television channels, which normally belt out screaming matches from their studios in Noida, went out and queried people about their poll choices, which spilled over to answers about their living conditions. What did these answers reveal? Captured by an otherwise pro-government media, were three themes: inflation, unemployment and income inequality – all encapsulated in two words ‘rural distress’. 
Prime minister Modi is certainly aware of the issue on income equality. After all, he allowed a question on inequality to be asked by a reporter during the dozens of interviews he gave to a grateful media as part of his poll campaign. His answer was to ask a counter question: "Should everybody be poor? Everyone should be poor, then there will be no difference. This was the case in the country earlier.”
He went on to argue: “Now you say that everybody should be rich, so it will happen gradually not overnight. Some will come, they will bring those who are below. Those who will come a little higher will pull up others. So there is a process."
This is the famous trickle-down theory which works ever so slowly, keeping generations of people poor. Interestingly, when it came to examples of the trickle-down theory working, the PM drew them from the prosperous class: 1.25 lakh start-ups, increased foreign travel and huge orders for airplanes by airline companies—examples which do little to support any change in the fate of 800mn (million) out of 1.4bn (billion) people living on 5kg rations doled by the government every month.  
To charge up economic growth after seven years of slow improvement, the Modi government has spent and will continue to spend Rs11 lakh crore every year – on railways, roads, urban transport, waterworks, energy transformation, defence production, etc, which would also create millions of jobs. This will no doubt create a corporate and stock market boom, but it should also have led to job growth. It hasn’t; or not enough to make much of a difference. 
In a report in 2023, Knight Frank, a real estate consultancy, had forecast that India’s booming housing market in its top-8 cities would propel the construction sector to contribute about one-fifth to the economy by 2030, employing 100 million workers. 
Real estate stocks have been on a tear. The Nifty Real Estate index is up 200% over the last two years. 
How much of this prosperity has trickled down? 
According to an analysis by Arindam Das and Yoshifumi Usami, between FY21-22 and FY22-23 the average daily real rural wages of construction sector workers declined, with female women workers getting a worse deal. While there is the national minimum wage for unskilled construction workers (which form about 80% of the sector's workforce) according to CEIC, a data and analysis company, 15 of the 20 states tracked didn't meet this minimum wage “signifying the extent of informal employment in the economy and weak enforcement.” 
There is another way to understand how little is trickling down. Strong trickle-down through wage growth would eventually lead to higher consumption of essential items such as basic clothing, utensils and personal care products like soaps. But the financial performance of companies selling these products is stagnant. 
Not surprisingly, CEIC data also reveals that 10-year real wage growth for construction workers in nine out of 20 states was negative and for four states was insignificant. 
Political strategist Prashant Kishor, who has travelled all over Bihar for the past two years, highlights that people are suffering acutely due to unemployment, income inequality and inflation. Unless the government addresses these issues, protests – with or without political leadership – would erupt. 
Enormous resources raised indirectly from all including the poor in the form of taxes and levies are wasted on expenditure eaten by corruption at the state and district levels. This is why we are not generating wealth fast enough and distributing the wealth fairly enough. The irony is that if the urban elite truly want viksit Bharat, they would have to part with their prosperity in some form or other, which they are loath to do. Trickle-down and viksit Bharat are incompatible ideas.
(This article first appeared in Business Standard newspaper)
1 month ago
An eye opening article.
Really glad to have journalists like you
and Sucheta mam in today's ecosystem.
Anand Nichani
Pragna Mankodi
1 month ago
Perhaps, through this article, the author is trying to suggest to raise taxes which amount can be channelised for income distribution in the rural areas. Simultaneously, the author points out that despite minimum wages prescribed for construction workers, the condition of women is the worst. Now for the plight of these women who can be blamed? The govt or the unscrupulous construction company or their subcontractors? If those who are exploiting these poor workers and accumulating benami properties or black money are raided then blame is passed on to the govt! The issue with Indian politics and its surrounding eco-system including media is that those who want to do something different are always criticized although positive measurable results may have been delivered in specific areas. We have been used to old time Congress led governance so much that perhaps we want either status quo or want dramatic changes in our conditions. All concerned need to rethink and change their mindset.
2 months ago
I don't think Modi put even as much thought in answering the interview question about inequality as you put in writing this article. He just spoke what came to his mind at that time. This is how this govt works most of the time. Do you really think he gets time from fighting elections and toppling local governments?
2 months ago
Modi will not last as PM more than a month even if he forms the govt. Prepare for another day of crash and, for the nth time, stop watching Godi Media.
2 months ago
This article gives clear insight on what needs to be done. Hope the government pays attention.
Meenal Mamdani
2 months ago
I am delighted to see the arrogant BJP cut down to size.
Replied to Meenal Mamdani comment 2 months ago
Totally agree.
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