Richer India - Poorer Indians? Is this the reality?

 Is India Really the World’s 4th Largest Economy? A Deeper Look

Recently, the CEO of NITI Aayog stated that India is now the world’s fourth-largest economy. But the pressing question is — are we, really? It’s a projection, not a confirmed fact. While it's a source of national pride, opposition voices rightly argue that despite this claim, India’s per capita income remains among the lowest globally. That’s a far more urgent issue — and it defies a political fix. Even leading economists are struggling to find satisfying answers.

To begin with, we must acknowledge that it’s premature to declare India has surpassed Japan. According to IMF’s April projections, India’s economy is estimated at $4187.02 billion, just marginally ahead of Japan’s $4186.43 billion. Both are on track to become $4 trillion economies — but these figures are for 2025–26. As of now, India’s GDP stands around $3.9 trillion, while Japan's is closer to $4 trillion. We’ll have a clearer picture by May 30, once GDP data for the March 2025 quarter is released.

Yes, India is poised to overtake Japan soon — perhaps even inevitably — thanks to its projected 6.2% growth versus Japan’s 0.6%. But celebrating that now is premature. It’s basic arithmetic, not a landmark moment — yet.

Even if we become the fourth-largest economy, how sustainable is this position? What if the rupee weakens? Our global standing would quickly falter. Agriculture and manufacturing, two foundational sectors, contribute just 18% and 14% respectively to GDP, while services dominate with 55%. This imbalance is concerning. Exports are falling short, foreign direct investment (FDI) hasn’t met expectations despite the "Make in India" initiative, and innovation remains minimal. A transformative shift is urgently needed — particularly through investment in advanced manufacturing (e.g., semiconductors, nanotechnology) and fostering innovation.

One of the biggest problems is that India’s economic growth hasn’t translated into broad-based upliftment. The sectors driving GDP — IT, finance, e-commerce, and corporates — are capital-intensive and employ relatively few people. About half of India’s workforce is still in the informal sector, meaning they remain outside official economic statistics. Services account for over 50% of GDP but employ only 30% of the population, mostly in urban centers. In other words: the country is getting richer, but the people are not.

Consider this: Japan, with a population of 123 million, has a per capita income of $33,900. India, with 1.46 billion people, has a per capita income of just $2,880. When China crossed the $4 trillion mark, its per capita income was $3,500. A decade later, it stands above $13,000, with an economy worth $19.23 trillion. The U.S., at $30.51 trillion, boasts a per capita income of $89,000. Even if India overtakes Germany and Japan, its per capita numbers will remain far below the top-tier economies.

People often associate economic power with high-speed trains, gleaming cities, and pristine public infrastructure. India still lags far behind on these fronts. Living standards haven’t improved significantly, domestic consumption is stagnant, and the benefits of GDP growth feel distant to ordinary citizens. But metrics of progress differ, and perceptions can be misleading.

The World Inequality Report 2022 presents a sobering reality: the top 1% of Indians control more than 40% of the nation’s wealth, while the bottom 50% own just 3%. The top 10% earn over 57% of national income. So even per capita income, on average $2,880, is a deceptive metric. Remove the top 1% from the equation, and the average drops sharply.

To illustrate: if India’s GDP is $3.9 trillion and the top 1% hold 40%, they control $1.56 trillion. That leaves $2.34 trillion for the remaining 99% — roughly 1.4 billion people — resulting in a per capita GDP of just $1,670. Exclude the top 5% (who control 62% of wealth), and the per capita drops further to about $1,100 — less than ₹1 lakh a year. This is why the government provides free rations to 800 million citizens. These are uncomfortable truths we must face.

At the same time, credit is due. Over the last decade, India has reduced its poverty headcount ratio from 29% to 11%, lifting 25 crores of people out of poverty. This is commendable. All 12 indicators in the Multidimensional Poverty Index (MPI) are improving. India is on track to meet the Sustainable Development Goal (SDG) target of 1.2 well before 2030. But this momentum must be sustained — and that will only happen with increased investment in innovation, manufacturing, and agriculture.

Is India alone in facing this challenge? Certainly not. Even the United States, the world’s largest economy, contends with deep inequality. Despite a per capita income of $89,000, 38 million Americans live in poverty. Medical bankruptcies are common, and homelessness is widespread. Parts of the country suffer from crumbling infrastructure — clear signs that GDP doesn't always reflect well-being.

The lesson for India is stark: economic growth without redistribution breeds instability. This doesn’t mean a return to socialism or communism — those models have their own pitfalls. But we must confront inequality through bold reforms: progressive taxation, universal public services, formalizing informal labor, and strategic public investment.

Otherwise, our ascent in GDP rankings will remain an illusion — a windfall for the elite and a mirage for the masses. Let’s not settle for statistical triumphs. Let’s aim for real, inclusive progress.