Editorial 2: The next steps for change
Context
As Prime Minister Narendra Modi completes 11 years in office, it’s time for a stocktaking of his government’s achievements at the macro level, and a framing of the challenges that lie ahead.
India’s Economic Rise
- In 2014, when PM Modi assumed office, India’s nominal GDP stood at $2.04 trillion, up from $709 billion in 2004 when the UPA came to power. This was a jump of 2.8 times in 10 years.
- This year, India’s economy is likely to be $4.19 trillion – it has almost doubled in 11 years.
- India is poised to become the fourth-largest economy globally, just behind the US ($30.5 trillion), China ($19.2 trillion) and Germany ($4.74 trillion).
- Yet, the nominal GDP in US dollars tells only a part of the story. A more appropriate criterion to measure the economic welfare of people will be to look at GDP and per capita income in purchasing power parity (PPP) terms.
- In PPP terms, India’s progress has been remarkable: From $2.75 trillion in 2004 to $6.45 trillion in 2014, and soaring to $17.65 trillion in 2025.
- This positions India as the world’s third-largest economy in PPP terms, behind China and the US.
- However, national aggregates can obscure individual well-being. Evaluating people’s welfare and quality of life requires measuring per capita income in PPP terms.
- India’s per capita income (in PPP terms) rose from $2,424.2 in 2004 to $4,935.5 in 2014 and now stands at $12,131.8 in 2025.
- This improvement corresponds with India’s improved global ranking on this criteria —from 181st in 2004, to 166th in 2014, and 149th in 2025.
- However, despite this progress, India still ranks lowest among G20 countries in both per capita GDP ($2,878) and PPP terms ($12,131.8).
- Closer home, India trails even Sri Lanka ($14,970) and Bhutan ($17,735), though it remains ahead of Pakistan ($6,950.5) and Bangladesh ($10,261.1) in 2025 (IMF).
How far is this growth inclusive?
- The Gini coefficient, a measure of income inequality, has shown modest shifts over the past two decades indicating moderate inequality in India, according to the World Bank.
- For inclusive growth, the performance of agriculture — employing the largest share of the workforce (46.1 per cent in 2023–24, according to PLFS) — is crucial.
- On the welfare front, the current government has spent a lot of resources to uplift the poor and farming community.
- All this has led to a sharp reduction in extreme poverty (head count ratio) at $3 per day (2021 PPP) — from 27.1 per cent in 2011 to just 5.3 per cent in 2022.
- The 80 per cent drop marks one of the fastest and most significant fall in poverty that India has achieved in any period since 1977.
- With poverty levels now at historic lows, there may be a need to revisit some of the major policies to plug loopholes and promote efficiency and sustainability.
Food and fertiliser subsidies
- The food subsidy budget for FY26 is slated to be Rs 2.03 lakh crore. India is giving free food to more than 800 million people.
- With extreme poverty falling to just 5.3 per cent, there is a need to rationalise this food subsidy by giving beneficiaries food coupons (digital wallet) to buy nutritious food — pulses, milk, eggs — from designated stores.
- This will help plug leakages, diversify diets, promote nutrition, and diversify the production basket.
- Similar rationalisation is needed for fertiliser subsidy, which is slated to claim another Rs 1.56 lakh crore in FY26.
- This can be done by giving fertiliser coupons to farmers and deregulating the prices of fertiliser products. Farmers can use these coupons to buy chemical fertilisers or bio-fertilisers or do natural farming.
- The imbalanced use of N, P, and K can be corrected, leakages plugged and innovations in products and practices promoted, only if the government deregulates this sector.
Way forward
The government would need to identify tenant farmers. The task also requires triangulation of several sets of data, and communicating with farmers in advance and earning their trust. This is a political exercise, which must precede policy change.