Of late, the discourse on the Indian economy has been focused — disproportionately — on the challenges arising from the decision of the president of the United States of America, Donald Trump, to impose punitive tariffs on the nation. While externally the Indian economy is rightly apprehensive of the whiplash from these tariffs, there may be cause for the powers to turn their gaze to festering domestic needs, such as providing assistance to India’s poor. In fact, India’s chief economic adviser, V. Anantha Nageswaran, has pointed out that the adversarial repercussions on account of the US tariffs are expected to last for only one or two quarters. The export sector will be affected, but India’s gross domestic product growth — the nation is set to become the third-largest economy in the world by 2030 — is not likely to be deeply impacted. Significantly, the more formidable crises, in Mr Nageswaran’s opinion, confronting the national economy lie elsewhere.
The chief economic adviser’s concerns are not off the mark. There are already signs of a slowdown in the economy. In fact, the Indian economy is expected to grow at the rate of 6.5% in the current fiscal year, a steep drop from the 8.2% growth it achieved in 2023-24. Poverty, unemployment, economic inequality as well as a dip in the growth of loans remain areas of concern. Private and public debt burdens are on the rise. Consumer spending — a significant contributor to the country’s GDP — remains sluggish. The downward trajectory in personal household savings continues unimpeded. Moreover, the rise of Artificial Intelligence, torpid demand and the paucity of critical minerals, according to a line of thought, are also impeding the generation of employment, production and other factors.
That the domestic economy requires urgent government intervention is indisputable. Hearteningly, Mr Nageswaran has stated that the government is aware of the problems and attempting to design policy interventions accordingly. The concept of a basic income as an economic succour is well-known, but making it inclusive and finding sustainable sources of finance remain difficult. Increasing the goods and services tax on luxury items has been contemplated upon as well. Significantly, India already has a long list of government welfare schemes that operate on the basis of direct cash transfers, albeit for a pre-specified purpose. The infrastructure for such targeted deliveries — such as bank accounts of recipients — is also in place. Wastages, leakages and inefficiencies are sought to be minimised through such a mechanism. There is thus an urgent case for the government to strengthen these existing welfare schemes, both in terms of finance and a revised target audience. For instance, the bottom 20% of the people, those on the margins of income distribution, could be prioritised. Conflicting political priorities should not become an obstacle in the pursuit of this noble objective. The tussle between the Centre and the Bengal government on the MGNREGA is a case in point. After all, governance, welfare and the national economy turn on the pivot of the principle of humanism. This objective should not be jettisoned in the pursuit of growth.