SAMASTIPUR – Narendra Modi swept to power a decade ago on promises to transform India’s economy, and it would be hard to argue he hasn’t made strides. As he seeks a third term as prime minister, the country’s economic growth is the envy of the world, its stock markets are booming, and new buildings and highways are popping up everywhere.
There are cracks in the facade, though, that his political challengers hope to benefit from, including high unemployment, persistent poverty and the sense that only a small portion of India’s 1.4 billion people has been able to cash in on the good fortune.
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“You have a booming economy for people higher up on the socioeconomic ladder, but people lower down are really struggling,” said Milan Vaishnav, director of the South Asia Program at the Carnegie Endowment for International Peace.
Modi and his Bharatiya Janata Party have remained popular since he was first elected prime minister in 2014 on a strident Hindu-first platform and pledges to succeed where past governments had failed by finally transforming the economy from rural to industrial.
He promised to clamp down on deeply rooted corruption and to leverage the country’s manpower advantage to turn it into a manufacturing powerhouse. While campaigning this spring — the six-week-long election concludes Saturday — Modi has vowed to make India’s economy the world's third-largest, trailing only those of the U.S. and China. Votes will be counted Tuesday.
Modi has had successes. The economy is growing by 7% and more than 500 million Indians have opened bank accounts during his tenure — a big step toward formalizing an economy where many jobs are still off the books and untaxed. His administration has also poured billions of dollars into the country’s creaky infrastructure to lure investment, and notably streamlined its vast welfare program, which serves around 60% of the population and which his party is leveraging to try to win over poor and disillusioned voters.
Despite these advances, though, Modi’s economic policies have failed to generate employment that moves people from low-paying, precarious work to secure, salaried jobs. With inequality, joblessness and underemployment soaring, they’ve become central themes of the election.
Even as India’s millionaires multiply, nearly 90% of its working-age population earns less than the country's average annual income of around $2,770, according to a World Inequality Lab study. The top 1% own more than 40% of the country’s wealth, while the bottom 50% own just above 6%, the study found.
To stem economic discontent, Modi and the BJP are hoping to win over poor and disgruntled voters with more than $400 billion in welfare subsidies and cash transfers.
At the heart of their welfare agenda is a free ration program, which serves 800 million people. It existed under the previous government and is a right under India’s National Food Security Act. But it was greatly expanded during the pandemic to provide grain for free, instead of just cheap, and then extended for another five years beginning in January.
Through roughly 300 programs, hundreds of millions have received household goods ranging from cooking gas cylinders to free toilets. Millions of homes have been built for the poor, who now have greater access to piped water, Wi-Fi and electricity. And the government has ramped up cash transfers to farmers and other key voting blocs.
When Rajesh Prajapati lost his job at a chemical factory in Prayagraj, a city in India’s largest state, Uttar Pradesh, his family of five survived on government grain.
“For almost a year, the free ration was our only solace,” he said, adding that it was the reason they voted for Modi again.
Indian parties have always used welfare to win elections. But experts say the BJP has done it better.
Benefits such as subsidies, pensions and loans are now delivered through cash transfers directly to bank accounts linked to each individual’s biometric identity card, which the government says has helped eliminate leakages and corruption by cutting out intermediaries.
These large-scale handouts provide relief, but some say they are only a temporary fix and a sign of rising economic distress. To reduce inequality, they should be accompanied by investment in health and education, which have stagnated in recent years, said Ashoka Mody, an economist at Princeton University.
Subsidies are helpful, “but they do not create the ability of people to put themselves on a trajectory where they and their children can look forward to a better future,” he said.
Tuntun Sada, a farmworker from Samastipur, a city in the eastern state of Bihar, said the 18 kilograms (40 pounds) of free grain that helps feed his family of six each month has only marginally improved their lives. He still earns less than $100 a month after working the fields of wealthier landowners.
“People like us don’t get very much,” Sada said. “Modi should walk the talk. If we don’t earn enough, how will we raise our children?”
The free rations don’t last through the month, piped water has yet to reach his community and there are no nearby schools for his four kids to attend. What he really needs, he said, is a better job.
Modi’s opposition, led by the Congress party, are betting on the jobs crisis to dent the BJP’s chances of securing a majority. Before the election, a survey by the Center for Study of Developing Societies found that more than 60% of voters were worried about unemployment and believed finding a job had become tougher. Only 12% felt like economic opportunities had increased.
Official government data, which many economists question, shows the unemployment rate declining. But a recent report from the International Labor Organization found that youth unemployment in India is higher than the global average, that more than 40% of Indians still work in agriculture, and that 90% of workers are in informal employment.
The liberalizing of India’s economy in the 1990s laid the foundation for the remarkable growth since, with millions escaping poverty and spawning a middle class. But it has also allowed for the growing disparity between rich and poor, economists say.
Rahul Gandhi, the main face of the opposition, has sought to tap into the growing resentment felt by the country’s many have-nots by promising to take on the issue of wealth distribution if his alliance gains power.
Modi, who says his government has lifted 250 million Indians out of poverty, is unapologetic. In a TV interview this month, he said wealth distribution is a gradual process and dismissed criticism of the growing inequality by asking, “Should everyone be poor?”
Both the BJP and the Congress party say they will create more employment through various sectors including construction, manufacturing and government jobs. Experts say this is crucial for reducing economic disparities, but it's also hard to do.
Mass unemployment and underemployment have always been intractable problems in India, so parties inevitably fall back on the promises of handouts, said Mody, the Princeton economist. Case in point: The Congress party has pledged to double people's free rations if voted into power.
“It’s completely the wrong focus… what we need is job creation,” Mody said. "And there is no one today who has an idea of how to solve that problem.”
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Pathi reported from New Delhi.
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