The largest democratic elections in human history are being held in India: almost a billion people have the right to vote in parliamentary elections. The elections last six weeks and there are a million polling stations, from the Himalayas to the Indian Ocean.

The current Prime Minister, Narendra Modi, wants to govern for five more years and aspires for a third term. He is particularly optimistic about one issue: the economy.

He and his Hindu nationalist party, BJP, often talk about Viksit Bharat 2047, which means something like “Developed India 2047.” A promise to voters to make India a fully developed economy, on the centenary of independence. But how has the economy really developed under Modi? There are different points of view on this.

India on track to become world's third largest economy

Japan and Germany remain the world's third and fourth largest economies, behind the United States and China. But a lot of data suggests that India could take third place in 2026 or 2027, Arvind Panagariya told DW. The Columbia University economist in New York was recently named by Modi as chairman of India's influential Finance Commission.

Shumita Deveshwar, chief India economist at GlobalData TS Lombard, is also optimistic: “Given the global environment, India is one of the fastest growing economies in the world,” he tells DW.

When it comes to growth, India is currently an outlier among major economies. In the last three months of 2023, GDP increased by 8.4 percent compared to the previous year. This puts the country well ahead of the world's other ten largest economies.

High unemployment among young people

But not all is well economically: unemployment is a particularly persistent problem. It is currently ten percent and is particularly high among young people. This is a major problem given the country's huge and growing population.

Sushant Singh of the Indian Policy Research Center says there is “no plan” to solve the problem. “The demographic dividend has become a demographic catastrophe,” Singh told DW.

Other local issues facing Modi include weak data on manufacturing and foreign direct investment, Singh said. According to leading bank HSBC, net direct investment in India is lower today than when Modi took office ten years ago. “This needs to be taken seriously,” says Singh, “because it means people are not investing in manufacturing, industry or business.”

Although Modi has pushed a national manufacturing agenda called Make in India, manufacturing still accounts for only about 12 percent of jobs in the country. “We basically went from an agricultural state to a service economy, and manufacturing just stopped,” says economist Deveshwar.

Economy on the path to reform

Economist Arvind Panagariya says Modi has tackled important reforms. For example, in the areas of taxes, bankruptcy law and real estate. That would have made “a big difference” for the economy.

Economist Deveshwar, on the other hand, criticizes the balance of the reforms. In his opinion, more structural reforms are needed to achieve the objectives announced by Modi. For example, Modi's ruling National Democratic Alliance, in which his BJP is the largest party, missed annual targets for privatizing state-owned enterprises. He also points to three controversial farm laws that the Modi government introduced before repealing them in 2021 following massive protests.

Poverty and inequality

However, Deveshwar believes Modi is so popular also because he can sense the mood on economic issues, such as the repeal of the farm laws. “It is to his credit that he really has his finger on the pulse of the nation. And if he feels something is not right in India, he can take it back,” he says.

And there is another reason for Modi's appeal: India remains, in many ways, an extremely poor country. However, World Bank data shows that the proportion of Indians living in extreme poverty has continued to fall during Modi's term.

Panagariya says the government has been particularly active in economic programs in rural India. The country's large agricultural and rural population is seen as crucial for Modi as he heads to the next term.

“Especially in rural areas, everyone gets something from the central government,” says Panagariya. She points to rural housing programs, toilet construction initiatives, cash transfers, food security laws and the widespread distribution of LPG for cooking. All of this is evidence that Modi is trying to distribute resources to the poorest areas of the country.

But opinions vary widely about how India's poorest people have actually fared under Modi's government. Sushant Singh of the Center for Policy Research says inequality has increased over the past decade, citing data from a recent report by the World Inequality Lab. “Both income inequality and wealth inequality have increased under Modi,” and He adds: “In per capita terms, India is the poorest country in the G20.”

Modi's infrastructure investments

However, economic successes are particularly visible in one area: infrastructure. In the pre-election budget for 2024, Modi promised to increase investment spending on roads, railways and airports by eleven percent to the equivalent of about 125 billion euros.

During his tenure, Modi invested heavily in infrastructure, both physical and digital. Panagariya believes the investments are justified and essential if India is to achieve the economic goals the Prime Minister talks about.

Deveshwar agrees. “You can't really call it populist,” he says. “It is very necessary. One of the main problems that India has had for decades is its aging infrastructure. And the current political direction is very positive.”

This area is especially accessible to everyone. Infrastructure expansion could therefore serve as a visible measure of the direction in which India's economy is developing. For economists like Panagariya, infrastructure development is also one of the reasons why Modi's election is already considered a fact.

But even if Modi's third term is likely, his ambitious goals like Viksit Bharat 2047 do not seem realistic, but rather an election campaign.

The article was adapted from English.

Author: Arthur Sullivan