Indian Economy is WORSE Than you Think

Summary

The Indian economy is projected to grow from $3.5 trillion in 2023 to $7 trillion by 2030, potentially becoming the third largest by 2027. Despite this impressive growth, significant challenges remain, including high inequality, unemployment, poor education and healthcare, and inadequate infrastructure. The top 1% of Indians earn a disproportionate share of the national income, and labor productivity is low compared to other BRICS countries. India's growth is hampered by policy uncertainty, weak private investment, and a trade imbalance, but the current global landscape offers a chance for improvement.

Takeaways

• 📈 The Indian economy is predicted to grow significantly, expanding from $3.5 trillion in 2023 to $7 trillion by the end of the decade.
• 🏆 Over the last decade, India has risen from the 11th to the 5th largest economy in the world, surpassing countries like Canada, Brazil, Italy, Russia, France, and the UK.
• 🔝 By some estimates, India is on track to overtake Germany and Japan to become the third largest economy by 2027.
• 💔 Despite economic growth, India faces high inequality, with the top 1% earning 22.6% of national income and the bottom 50% only 15%.
• 📚 The benefits of development have not reached the poorest sections of Indian society, highlighting a need for more inclusive growth.
• 📉 Historically, India was the world's biggest economy but declined significantly during the colonial period, with its global output share dropping to 4.2% by the end of British rule.
• 🚀 Post-1991 economic reforms led to an acceleration in India's economic growth, although its growth rate has consistently lagged behind China's.
• 🌐 India's demographic advantage, with a young and large population, presents both an opportunity and a challenge for its economic development.
• 📊 India's unemployment rate has risen, and the labor force participation rate has declined, indicating a need for more job creation and better employment opportunities.
• 🏢 India's education and healthcare spending are relatively low, which affects the quality of human development and labor productivity.
• 🛠️ The country's infrastructure, including roads and public services, is inadequate, impacting the accessibility of education and hindering economic growth.
• 💼 India's manufacturing and exports face challenges due to poor infrastructure, complicated regulations, and a lack of capital investments.

Q & A

What is the predicted size of the Indian economy by the end of the decade?

The Indian economy is predicted to expand to $7 trillion by the end of the decade.

How has India's economy performed in terms of global ranking over the last decade?

Over the last decade, India has surpassed Canada, Brazil, Italy, Russia, France, and the UK in size, rising from the 11th largest economy in the world to the 5th.

What challenges does India face in terms of economic inequality according to the World Inequality Database?

The benefits of development have not fully reached the poorest sections of Indian society, leading to high inequality, with 22.6% of the national income going to the top 1% and only 15% to the bottom 50%.

How did India's economy perform during the colonial period?

During the colonial period, India's economy declined significantly, and by the end of British rule, its share in global output had dwindled to just 4.2%.

What was the impact of the economic reforms implemented in 1991 on India's economic growth?

After the comprehensive economic reforms were implemented in 1991, India saw a marked acceleration in economic growth, although its growth rate remained lower than China's.

What is the current unemployment rate in India according to the Centre for Monitoring Indian Economy?

India's unemployment rate has increased to about 7 to 8% from around 5% in 2018.

How does India's female labor-force participation rate compare to its Asian neighbors?

India's female labor-force participation rate is well below some of its Asian neighbors, indicating a significant gender disparity in the workforce.

What percentage of India's GDP is spent on education, and how does this compare to other countries?

India spends just 2.9% of its GDP on education, which is much lower than countries like Brazil and South Africa.

How does India's labor productivity compare to other BRICS countries?

When comparing the GDP per hour worked of BRICS countries, India has the lowest level of productivity.

What is the current state of India's infrastructure and how does it affect economic growth?

India's infrastructure, including roads, electricity, and public services, is inadequate, which hinders economic growth and the creation of productive jobs.

What policy has India focused on to improve its current-account balance and why?

India has focused on the 'Make in India' policy to increase manufacturing, which has improved its current-account balance to 1.6% of GDP in 2023 from a 4.8% deficit in 2012.

Outlines

00:00

📈 India's Economic Growth and Challenges

India's economy is experiencing significant growth, predicted to expand from $3.5 trillion in 2023 to $7 trillion by the end of the decade. Despite surpassing several major economies in size, India's per capita income and inequality levels indicate a long journey to becoming an economic superpower. The benefits of development have not reached the poorest, with a high concentration of national income among the top 1% and 10%, while the bottom 50% receives a mere 15%. The country faces issues such as high unemployment rates, low labor force participation, and a lack of job creation, despite its 'World-Beating Growth' narrative. Additionally, India's education system and job training are under scrutiny, with only 20% of the population aged 25 to 34 having tertiary education, due to low expenditure on education and healthcare. The country's labor productivity is the lowest among BRICS nations, which is a critical factor for improving living standards.

05:03

🏭 Infrastructure and Exports: Key to India's Economic Future

India's economic growth is hindered by inadequate infrastructure, including roads, electricity, and public services, which affects access to education and productive work, especially in rural areas. The country's fixed capital formation has declined since 2007 due to policy uncertainty and other economic challenges. Exports are a crucial area for advancement, with the 'Make in India' policy improving the current-account balance. However, India still faces a trade deficit with most of its top trading partners and struggles with manufacturing for global markets due to various systemic issues. The international landscape and domestic factors present opportunities for India to catch up in industrialization, which could be a game-changer for its economic trajectory.

Keywords

💡Economic Growth

Economic growth refers to the increase in a country's production of goods and services over time. In the video, India's economic growth is highlighted by its predicted expansion from $3.5 trillion in 2023 to $7 trillion by the end of the decade. This growth is compared to other countries, showing India's rise from the 11th to the 5th largest economy globally.

💡Per Capita Income

Per capita income is the average income earned per person in a given area. The video contrasts India's overall economic growth with its low per capita income, emphasizing that despite the nation's booming economy, the wealth distribution remains unequal, with significant portions of the population still living in poverty.

💡Inequality

Inequality refers to the unequal distribution of wealth and resources among a population. The video points out that despite India's economic growth, inequality remains a major issue, with the top 1% of the population earning a significant portion of the national income, while the bottom 50% earn much less. This high level of inequality is seen as a barrier to India becoming an economic superpower.

💡Infrastructure

Infrastructure includes the physical and organizational structures needed for the operation of a society, such as transportation, electricity, and water supply. The video discusses India's inadequate infrastructure, highlighting that poor roads, unreliable power supply, and insufficient public services hinder economic growth and development.

💡Labour Force Participation Rate

The labour force participation rate is the percentage of the working-age population that is either employed or actively seeking employment. The video notes that India's labour force participation rate has dropped in recent years, and female participation is particularly low. This decline is seen as a significant challenge for the country's economic growth.

💡Manufacturing

Manufacturing refers to the production of goods in large quantities, usually in factories. The video explains that India's manufacturing sector faces several challenges, including poor infrastructure, complicated laws, and bureaucratic hurdles. These issues prevent India from becoming a significant player in global manufacturing despite policies like 'Make in India.'

💡Education System

The education system encompasses all institutions and processes that provide education to the population. The video criticizes India's education system for its poor quality and lack of job training, resulting in degrees that are often considered worthless by employers. This inadequacy contributes to high unemployment rates and low labour productivity.

💡Health Expenditure

Health expenditure is the amount of resources a country allocates to healthcare services. The video highlights that India spends only 2.1% of its GDP on public healthcare, one of the lowest rates globally. This underinvestment results in poor health outcomes and is a significant barrier to improving labour productivity and overall economic growth.

💡Current Account Balance

The current account balance is a measure of a country's trade in goods and services, as well as its earnings on overseas investments. The video mentions that India's current account balance has improved but still shows a deficit with most of its top trading partners. This persistent trade imbalance is seen as a hindrance to sustainable economic growth.

💡Unemployment Rate

The unemployment rate is the percentage of the labor force that is jobless and actively seeking employment. The video indicates that India's unemployment rate has increased to around 7-8%, a rise from previous years. High unemployment, especially among the youth, is identified as a major issue that needs addressing to support India's economic aspirations.

Highlights

The Indian economy is predicted to expand from $3.5 trillion in 2023 to $7 trillion by the end of the decade.

India has risen to become the 5th largest economy in the world, surpassing Canada, Brazil, Italy, Russia, France, and the UK.

Estimates suggest India could become the third largest economy by 2027, overtaking Germany and Japan.

Despite economic growth, India faces high inequality with 22.6% of national income going to the top 1% and the bottom 50% earning only 15%.

India's growth story is hindered by limitations including a poor education system and job training, leading to low labor productivity.

India's unemployment rate has increased to 7-8% and the labor force participation rate has dropped to around 40%.

India's female labor-force participation rate is significantly lower than some of its Asian neighbors.

IMF suggests that equalizing women’s workforce participation with men could boost India’s GDP by 27%.

India's expenditure on education is only 2.9% of its GDP, much lower than other countries like Brazil and South Africa.

India spends only 2.1% of its GDP on public healthcare, which is one of the lowest globally.

India's GDP per hour worked is the lowest among BRICS countries, indicating low labor productivity.

India's growth in fixed capital formation has declined from 36% to 29% since 2007 due to policy uncertainty and other factors.

India's current-account balance has improved to 1.6% of GDP in 2023, from a 4.8% deficit in 2012.

India is still in deficit with nine of its top 10 trading partners in 2023 and faces a sustained trade imbalance.

India's struggle with manufacturing for global markets is due to poor infrastructure and complicated labor and land laws.

The current international landscape and domestic factors offer India a chance to catch up in industrialization.

Transcripts

The Indian economy is booming! and it is predicted  to expand from roughly $3.5 trillion in 2023,  

to $7 trillion by the end of the decade. Over  the last decade, it has surpassed Canada, Brazil,  

Italy, Russia, France, and the UK in size, rising  from number 11 in the world, to number 5. And by  

some estimates, India will overtake Germany, and  Japan to become the third largest economy by 2027. 

This is an impressive growth; however,  when we compare the per capita income of  

the BRICS economies, India is a long way from  becoming an economic superpower. According to  

the World Inequality Database, the benefits  of development have not fully reached the  

poorest sections of society, leading to  a hundred-year high inequality. In 2022,  

22.6% of the national income went to the  top 1% of Indians, about 58% to Top 10%,  

and the bottom 50% earned a mere 15%. Not just this, the Indian growth story  

is plagued with bigger problems that could hold  them back from realizing the dream of being an  

economic powerhouse. “India” is a giant Poised for  Greatness, yet, chained by its own limitations.

At the beginning of the Common Era, India was  the world’s biggest economy, producing about  

a third of the world’s goods and services. This  economic dominance lasted for around 1700 years,  

with a massive inter-regional trade across Europe  and Asia. However, during the colonial period,  

India’s economy declined, and by the  end of British rule, their share in  

global output dwindled to just 4.2%. After comprehensive economic reforms  

were implemented in 1991, India saw a marked  acceleration in economic growth. However,  

India’s growth rate remained lower than China’s.  According to World Bank figures, in 1980, India’s  

GDP was 64% of China’s. By 2001, it had dropped  to 28%; and by 2021, India’s economy had fallen  

further behind, and equalled only 17% of the  Chinese economy. If India had kept pace with China  

over the past 40 years, it would currently have  a GDP of $10 trillion instead of $3.47 trillion. 

According to UN estimates, India is now the  world’s most populous country; and with an average  

age of 29, it is one of the youngest too. India  has more than 50% of its population below the age  

of 25 and more than 65% below the age of 35. It is  the country's Strength, as well as its weakness. 

According to the Centre for Monitoring  Indian Economy, India's unemployment rate  

has increased to about 7 to 8% from around  5% in 2018. Additionally, the labour force  

participation rate— which includes persons  who are employed or seeking employment—has  

dropped to around 40% from 46% six years ago. India's female labour-force participation rate  

is also well below some of its Asian neighbours.  In 2018, IMF pointed out that by raising women’s  

participation in the workforce to that of men will  boost India’s GDP by 27%. The problem however is,  

the lack of employment opportunities.  India’s supposed ‘World-Beating Growth’  

isn’t creating enough jobs. A big part of the problem is  

India’s poor education system and job  training, meaning local degrees are  

often deemed worthless by employers. Statistics  indicate that merely 20% of individuals aged 25  

to 34 are equipped with Tertiary education. This is because the country’s expenditure on  

education is just 2.9% of its GDP, much lower  than countries like Brazil and South Africa.  

Additionally, it only spends 2.1% of its GDP on  public healthcare, one of the lowest globally. 

India is failing to provide two key components  of human development: education and health,  

resulting in a drop in labour productivity, the  most important factor for improving the living  

standards of people. As labour productivity  grows, it produces more goods and services,  

making it possible for consumption at  increasingly reasonable prices. If we compare  

the GDP per hour worked of BRICS countries,  India has the lowest level of productivity. 

Before we continue, please Hit the like  button to make the Youtube algo happy,  

and support our channel to make more  videos like these. Now, back to the topic. 

Another factor hindering India's growth  is inadequate infrastructure like roads,  

electricity, and public services, such as  education and drinking water. India boasts some  

of the top educational institutes in the world,  yet most children in rural areas lack access  

to education needed to find productive work. The Indian economy's growth in fixed capital  

formation, including land improvements,  plant, machinery, equipment purchases,  

construction of roads, and buildings has  dropped from 36% to 29% since 2007. This  

decline is attributed to policy uncertainty,  financing problems, weaker private investment,  

fall in FDI, and a banking sector slowdown. Another crucial area to push forward is exports.  

India's current-account balance—the broadest  measure of a country’s overseas trade—has  

improved to 1.6% of GDP in 2023, from a  4.8% deficit in 2012; largely on the back  

of increased focus on manufacturing through the  'Make in India' policy. Despite this progress,  

India is still in deficit with nine of its top  10 trading partners in 2023. If you compare India  

with Top 10 Largest Economies, India stands 7th  in Current Account balance as percentage of GDP. 

The country is facing a sustained trade  imbalance and rising costs for imports,  

which is leading to a widening gap between  inflows and outflows. Additionally,  

capital investments and manufacturing are crucial  as they significantly enhance economic growth. 

India has struggled with manufacturing for  global markets due to poor infrastructure,  

costly and unreliable power supply,  complicated labour and land laws,  

and a frustrating bureaucracy, preventing  India from joining previous waves of  

industrialization in Asia, in which  Japan, South Korea, Taiwan, Singapore,  

Vietnam, and China, all outperformed India. However, the current international landscape  

coupled with domestic factors is offering  India a chance to catch up. As manufacturers