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India election: Will strong economic growth sway voters?

Murali Krishnan in New Delhi
March 7, 2024

India's GDP grew by over 8% in the last quarter, and the surge could boost the fortunes of the incumbent BJP government in upcoming elections. But some economists say the rise of the GDP masks larger challenges.

Indian rupees being counted
India's GDP is growing fast, but are voters set to benefit? Image: Soumyabrata Roy/NurPhoto/IMAGO

The latest economic data released by India's National Statistical office last week showed GDP grew by 8.4 % in the October-December 2023 quarter, compared with 4.3% in the same period the previous year.

Prime Minister Narendra Modi quickly said the policies of his Bharatiya Janata Party (BJP) are behind the burgeoning growth. Modi and the BJP are campaigning to stay in power, with the general elections to be held between April and May.

"Robust 8.4% GDP growth in Q3 2023-24 shows the strength of Indian economy and its potential," Modi wrote on X, formerly Twitter. "Our efforts will continue to bring fast economic growth" that will help 1.4 billion Indians "lead a better life," he added.

Ahead of the election, Modi is touting an economic policy called "Viksit Bharat 2047" ("Developed India 2047"), which is his government's action plan to transform India into a developed country by 2047, exactly 100 years after gaining independence from British rule.

India's chief economic advisor V Anantha Nageswaran said strong domestic demand and private investments will continue to drive growth.

"Overall, the economy ticks many boxes in the right way ... so there is a case for international agencies to reappraise their estimate of potential GDP growth in India closer to 7% [annually], if not above," Nageshwaran told Indian media.

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Rosy numbers leave economists skeptical

However, some economists say a more nuanced approach is needed to gauge the actual strength of India's economy.

They warn that the high GDP may not reflect balanced growth, citing a decline in agriculture, uneven private consumption, and increased reliance on public capital expenditure.

Lekha Chakraborty, professor and chair at the National Institute of Public Finance and Policy, a research institute, told DW that the high GDP growth "does not ensure high human development and there is a need to investigate other human development indicators, which are crucial to fine tune public policy."

Economist Arun Kumar said that the GDP figures are based on the organized sector and use it to gauge the unorganized portion of India's economy, but the unorganized sector represents a huge chunk of the Indian labor force.

"This washes out the decline in the unorganized sector and the economy appears to be doing well," Kumar told DW.

"There is evidence of growing disparity in the economy since the unorganized sector is declining while the organized sector is growing. The recently released consumption survey data also points to this," Kumar added.

In addition, data on private consumption spending and government consumption expenditure in the third quarter was paltry. Private spending grew by 3.5% year-on-year, and government consumption spending contracted by 3.2%.

The opposition Congress party sought to tone down the latest GDP figures, claiming that the growth relies on net taxes and comes amid signs of dwindling consumption.

"Of course, this won't stop the prime minister's drumbeaters. Growth in private consumption expenditure in the financial year 2024 is now expected to be 3%, the slowest in twenty years," said Congress general secretary Jairam Ramesh.

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What are voters saying?

As elections draw near, the big question is whether a buoyant economy will translate into votes for the BJP.

Voters DW spoke to had mixed feelings about what the strong GDP numbers mean for them. A common complaint was that growth has not translated into jobs. 

"We keep saying India is one of the fastest-growing economies in the world, driven primarily by its service, industrial, and agricultural sectors. But in these sectors, jobs are hard to come by. I have not got a job for four months now despite being qualified," Amul Tandon, a recent college graduate in Delhi, told DW.

Deepak Gupta, a trader from Delhi, told DW that he supports the BJP, and expects that the benefits of economic growth will soon be felt across Indian society. 

"In the next three years, economic opportunities will increase manifold. There will be ease of doing business and infrastructure will grow rapidly," he said. 

"Just wait, in a couple of years, every citizen will be able to participate in the economy," he added. 

Manjula Sahu, a fisherwoman from Maharashtra state in India's west praised the BJP for its welfare schemes. 

"Direct social transfers are happening to the poor in India and that is why Modi wins in rural pockets in huge numbers. The welfare schemes are working," she said. 

However, Arun Manian, a businessman from Chennai in Tamil Nadu, said he is unsure whether he will vote for the BJP, despite the strong growth numbers.

"These GDP figures are creating an illusion of economic growth. The money for economic growth is going to the pockets of the rich and the condition of common people is getting worse. I have my doubts," Manian told DW.

What economic problems does India face?

Economic challenges, including unemployment and inflation, are major rallying points in the opposition's strategy in criticizing the Modi government.

The government now predicts GDP growth will reach 7.6% in the fiscal year through March, higher than an earlier projection of 7.3%, keeping India on track to remain the fastest-expanding major economy in the world.

Biswajit Dhar, professor at the Council for Social Development, said India's GDP growth masks economic challenges such as rising inflation, the slowing growth of the agriculture and allied sectors, and a drop in foreign direct investment.

"Sustainability of India's growth momentum is critical, and it hinges both on domestic demand: private final consumption expenditure, and foreign demand, namely exports. Domestic demand has been extremely sluggish over the past several years and exports are declining due to global economic slowdown," Dhar told DW. 

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Edited by: Wesley Rahn

Murali Krishnan
Murali Krishnan Journalist based in New Delhi, focusing on Indian politics, society and business@mkrish11