Are Indians being fooled about the state of their economy?

In all of the politicking ahead of state elections in 2018, and more importantly the 2019 Lok Sabha polls, the real state of the economy, irrespective of the failed demonetisation and the GST fiasco, thus far has been largely concealed from the people of this democracy.

The people, of course, especially the poor and middle class know that things are bad. They don’t have to read government statistics (many of which are misleading), as the rise in prices of essential commodities is increasingly obvious. But what is often ignored is the big picture.

Thomas Piketty's book, Capital in the Twenty-First Century, has become a must-read for every Indian, where the French economist has exposed the last few governments, including that of PM Narendra Modi’s.

Now, let’s take a look at some data.

According to Piketty and economist Lucas Chancel, "between 1980 and 2014, India was the country with the highest gap between the growth of the top one per cent of the population by income and growth of the full population". The well-off are 10 times richer now than in 1980. Those in the middle have not even doubled their income.

A new survey by Oxfam also gives credence to the above.

Although the poor who earn below $2 a day (at purchasing power parity, including international standards), have risen to $3, but those getting $3 have not matched other countries to increase this to earning $5, or those earning $5 a day to rise to $10 a day, unlike in other countries. Eight in 10 Indians cite inequality as a big problem, as important as corruption. Although the HSBC (bank) has claimed that nearly 300 million Indians are middle class, some of them make only $3 a day.

Other indices are also revealing and exposes the highly exaggerated estimate of the middle class. Only three per cent of Indians have ever been on an aeroplane. Only one in 45 owns a car or a lorry. So as The Economist has pointed out, “There is a hole where India’s middle class should be. That should worry the government and companies.”

Instead inequalities in India are massive. The top one per cent of Indian adults, a rich enclave of eight million inhabitants are making at least $20,000 a year, roughly equal to Hong Kong in population and average income.

The next nine per cent, are similar to central Europe, which is in the middle of the global wealth economies. The next 40 per cent of India’s population is similar to its combined South Asian poor neighbours, Bangladesh and Pakistan.

Approximately half a billion are on a par with the poorest peoples of Africa. So, contrary to government claims, Indian poverty is well over 50 per cent, made worse by the colossal failure of demonetisation.

It is important to remember that India’s mean GDP per head is just $1,700, and 80 per cent of the population makes less than that.

Piketty and Chancel concluded in their recent study that one in 10 Indians had an annual income of more than $3,150 in 2014. That leaves only 78 million making close to $10 a day. To compare this to consumer prices, the latest iPhone, which costs $1,400 in India, represents half a year’s pay for an Indian who just makes it into the top 10 per cent of earners.

The proportion of Indians making around $10 a day hardly shifted between 2010 and 2016. In other words, the middle class is stagnant, despite government and neoliberal propaganda. But to get into the top 1 per cent of earners, an Indian needs to make just over $20,000 a year. But to be able to afford goods sold at the same price across the world like Netflix subscriptions or Nike trainers, more than 99 per cent of the Indian population ate in the same league as Americans that count as below poverty line, around $25,000 for a family of four.

But what about China? Isn’t India catching up? No.

From 2002, China grew at above eight per cent for 27 quarters in a row. Only three of the past 26 quarters had India growing at about that pace. And what about socio-economic statistics? Well, 38 per cent of children get fewer than six years of schooling, and one in nine is illiterate.

Poor diets have resulted in 38 per cent of children under five years who are so underfed as to damage their physical and mental capacity irreversibly, according to the Global Nutrition Report.

This is the real Indian political economy, with statistics and horrifying facts suppressed, ignored by the ruling elite.

Also read: Why economic crisis will continue to haunt us in Modi's India