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How Should the Indian Economy Move Beyond Producing What the Top 10% Consume?

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It may take years for social scientists across disciplines to properly understand the nuances of the Narendra Modi phenomenon, where his government’s ‘bad’ economics indifferently affected his party’s ‘good’ political outcomes in the 2019 Lok Sabha elections.

It could be that a good chunk of India simply believes that Modi is as close as you can get to a one-man answer to the country’s problems. That a political party can project itself as a solution to all existing problems if only their candidate is given an absolute power to govern.

Nevertheless, with a nearly two-thirds majority in parliament, there the elected NDA government now has an opportunity to undo some of its own wrongs, in terms of its approach to economic reforms during its first term, by addressing a few structural problems affecting India’s economic landscape.

A macro-assessment of India’s current growth scenario reflects the economy sliding in a downturn-slippage mode.

Structurally-speaking, India’s growth cycle has been driven for some time now by the aggregate consumption demand from the top 10-15% income classes. The nature of horizontal inequities – depicted from consumption and income patterns – has been on the rise since the early 1990s.

An over-emphasis on producing what the top 10% is consuming, or wants to consume, has seen a substantial composition of India’s lower middle-income groups unable to even afford basic essentials – say a house, healthcare, education, clean drinking water and sanitation facilities.

Also read: What the Elections Didn’t Say About Modi’s Management of the Economy

Politically, Modi’s Swachhta (‘Clean India’) campaign and push for rural infrastructure (roads, highways, electrification) struck a social chord amongst lower-income, rural voters for this reason. This was enough to overcome the fact that the state had done little in the way of shoring up other basic essentials, such as education and healthcare, at affordable........

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