📘 RC Passage: The Puzzle of India’s Growth Paradox

Despite being one of the fastest-growing major economies in the world, India presents a paradox that continues to confound economists. On paper, its GDP growth figures have been impressive, averaging around 6–7% annually over the past two decades. However, this growth has not translated proportionally into job creation, poverty eradication, or structural transformation. The phenomenon often referred to as "jobless growth" is particularly striking in India, where a large and youthful workforce is entering the labor market each year with limited opportunities for formal employment.

A critical factor behind this paradox is the nature of India’s economic growth, which has been heavily service-sector led. While sectors like information technology, finance, and telecommunications have boomed, they are capital-intensive and tend to employ only a fraction of the labor force. Agriculture, though employing over 40% of the population, contributes less than 15% to GDP, indicating a significant productivity gap. Manufacturing, traditionally the engine of mass employment in developing economies, has underperformed in India due to infrastructural bottlenecks, regulatory rigidities, and a fragmented land and labor market.

Moreover, there is a disconcerting trend of "premature deindustrialization" — where economies deindustrialize at much lower levels of income than seen historically in developed nations. India’s manufacturing share in GDP peaked relatively early, without absorbing a significant portion of the labor force. This suggests that India might be skipping a crucial phase of development, potentially leading to long-term structural weaknesses.

The government has launched initiatives like “Make in India” and Production-Linked Incentives (PLI) to reinvigorate manufacturing. However, their success hinges not just on investment inflows but also on complementary reforms in education, labor flexibility, and infrastructure. Without addressing these foundational issues, India risks entrenching dualisms—an advanced digital economy coexisting with a vast informal and low-productivity sector.

As India aspires to become a $5 trillion economy, the key question remains: can it engineer a more inclusive growth path that not only boosts GDP but also ensures broad-based development and employment?