Government spokesmen claim that India is the fastest growing major economy of the world. However, most people know that their standard of living is not improving. The incomes of many working people have not even kept up with the rising prices of essential consumption articles. It is necessary to probe beneath the figures of GDP growth to figure out what is really happening.
The Indian economy is said to be doing well because the Central Statistical Organisation has estimated 7.2 percent growth in the Gross Domestic Product (GDP) during 2022-23.
The aggregate measure called GDP consists of various components, including the value added by agriculture, mining, manufacturing industry and various services. An examination of how these components have fared shows that economic growth has been extremely uneven. Its composition has been extremely skewed.
Agriculture and allied activities such as forestry and fishing, which are the source of livelihood for the largest number of people of the country, is estimated to have grown by 4 percent in 2022-23, much slower than the total GDP.
In spite of all the talk about “Make in India” and all the monetary incentives offered to various industries, the output of manufacturing industry as a whole has grown by only 1.3 percent.
What explains the overall growth rate exceeding 7 percent, when both agriculture and industry have grown much more slowly? It is explained entirely by the growth in services, which make up more than half of GDP. The production group called “trade, hotels and transport services” has grown by 14 percent in 2022-23. This includes the rapid growth in home delivery services.
One of the striking features of the composition of economic growth is the difference between production for the domestic market and production for export markets. Production for the domestic market has grown at 5.4 percent whereas exports have grown at a double-digit rate. Most of the increase in exports have been due to the export of services, which have grown by 27 percent, to reach US $323 billion in 2022-23 as compared to US $254 billion in the previous year.
The skewed composition of economic growth has not led to any growth in employment. The number of regular jobs has declined. The quality of jobs has become worse. Only the worst quality jobs, such as for delivery boys, has grown.
Incomes of the working people have not grown. Many workers and peasants have grown poorer. According to the data published by the Labour Bureau in March 2023, real wages of rural casual workers in agricultural occupations have increased at only 0.5 percent per year during the last five years. For workers in non-agricultural occupations, real wages have declined at 0.7 percent per year in this period. (See Box on the Meaning of Real Wage)
Doubling farmers’ income was one of the promises of the present government. According to estimates of Niti Aayog, the average real income of farmers has fallen since 2015-16.
While workers and peasants have remained poor, with many of them growing poorer, the richest capitalists have grown enormously richer. While the total sales of all companies listed in the stock exchange was 42 percent higher in 2022-23 than in 2018-19, their net profit was 189 percent higher. This is the result of repeated cuts in corporate tax rates and in the interest rates on bank loans to big capitalist companies.
While their profits have grown rapidly, the super-rich capitalists of our country have not been investing much in expanding the capacity for producing goods and services which our people need. The reason lies in the falling capacity of workers and peasants to buy goods and services. Falling sales of mass consumption goods such as soap, detergent and toothpaste reflects the deep distress among workers and peasants. Sale of two-wheelers (scooters, motorcycles and mopeds) has fallen by more than 25 percent during the past four years.
Conclusion
The condition of the Indian economy is not a cause for celebration. It is a cause for serious concern.
At one pole, the Tatas, Birlas, Ambanis, Adanis and other monopoly capitalists are expanding their wealth at a very rapid rate. At the other pole, rising prices of essential goods and services are squeezing the real wages of workers and real incomes of peasants.
The widening gap between a small number of super-rich capitalists and the crores of workers and peasants is the result of the capitalist system. It is the result of social production being oriented to maximise the private profits of the capitalist class.
Prosperity for all will remain an empty slogan as long as the economic system is oriented towards fulfilling the greed of capitalists for maximum profits. Prosperity for all will become a reality if and only if the workers and peasants become the rulers of the country and reorient the system of production towards fulfilling the people’s needs.
| What is the Meaning of Real Wage?
The rate of growth in the wage received by a worker does not correspond to growth in his or her standard of living. This is due to the rise in the cost of living. In order to measure the change in the standard of living of a worker, it is necessary to derive the change in the real wage, as measured by the amount of goods and services that could be purchased with that wage if consumer prices had remained constant
By the end of March 2023, with CPI rising by another 1.3 percent, the real wage declined further to Rs. 15,392. Another adjustment on 1st April, which raised the minimum wage to Rs. 17,234, still did not make up for the rise in the cost of living. At the prices of April 2022, the wage in April 2023 was worth only Rs. 16,398, which is less than what it was worth a year ago. The worker was poorer than a year ago and had lost over Rs. 10,000 of purchasing power over the year. |
Let us look at the case of an unskilled worker in Delhi who is earning the legal minimum wage. He or she would have earned Rs. 16,506 per month in April, 2022. The minimum wage was raised to Rs. 16,792 with effect from 1st October, 2022. However, the average price of consumer goods and services, as measured by the Consumer Price Index (CPI) for industrial workers, went up by 3.8 percent between April and October 2022. The minimum wage of Rs. 16,506 at end of September 2022 just before the new minimum wage was declared, could have only bought goods and services worth Rs. 15,908 in April 2022 because of increase in consumer prices; hence the worker became poorer by 3.8 percent before the October wage adjustment. After the minimum wage was increased on 1st October to Rs. 16,792, this new wage would have only bought goods and services worth Rs. 16,177 in April 2022. Even though the money wage was raised by 1.7 percent on 1st October, worker’s real wage had declined by 2 percent (from Rs. 16,506 to Rs. 16,177 if we take into account the purchasing power of the Rupee in April 2022).