India’s growth trajectory is lop-sided and disconcerting

GDP is expected to contract by ~8 per cent YoY in FY21 and could grow by ~10 per cent YoY in FY22. It will amount to a combined GDP growth 0f ~1 per cent for the block of two financial years together.

But the aggregate PAT of BSE-500 companies is expected to grow by ~9 per cent and 33 per cent YoY in FY21 and FY22, respectively. This would amount to a combined PAT growth of BSE-500 companies of ~45 per cent for the block of two financial years together.

This break-up broadly provides the contours of India's growth trajectory for the block of two years of 21 and 22. The country's gross income as a whole is expected to grow by a mere 1% for the block of two years, but the top 500 companies' profit will grow by a whopping 45%. Which in turn means, the incomes of common citizens, small entities and informal sector is likely to fall by a substantial percent in order to accommodate for 45% profit growth for the big corporates within the pie of 1% GDP growth.

Any caring person would find the India's growth trajectory as lop-sided and disconcerting. Former RBI Governor Rahguram Rajan is one such person who recently said “This pandemic has a much greater effect on the informal sector, the small and medium enterprises, the ones that don’t have deep resources…Certainly when you look at formal employment, it’s down significantly. But informal employment is probably down much more and guesstimates are, you know, maybe 18 million people are unemployed right now, relative to what they were before the pandemic hit”.

Stock market's ace investors who have doubled their wealth during the upward journey of Sensex from March '20 low of 25,638 to 50,000 mark in January'21 find everything rosy in the Indian economy. One such ace investor criticised that Raghuram Rajan ‘only sees darkness and no light’.

Stock market investors cannot see the wood for the trees. Any discerning economist would express genuine concerns similar to what Rajan has expressed. A flourishing corporate sector or flourishing stock markets do not necessarily mean that the broader economy is doing well. All sectors of the economy and all sections of the country should be doing well in order to find a rosy picture of the economy.

According to the recent ‘Mood of the Nation’ poll, 66 per cent of the respondents reported salary cuts. As many as 19 per cent said that they lost their jobs or businesses. The economic fallout of the COVID-19 pandemic was particularly devastating for those in the informal sector who found themselves on the streets. Almost 90% of workers in India work in the informal economy.

"The economic crisis of the proportion of contraction of more than 20% in the second quarter and potential livelihood losses leading to approximately 400 million people sliding back into poverty according to ILO warrants a radically new model if we are sincere about ensuring a minimum floor of dignity for every citizen of the country," said Oxfam India CEO Amitabh Behar.

According to Oxfam India’s Behar, the pandemic-led crisis has accentuated the "inherent obscene inequality of our economic model" and there is need to recognise this and reboot a fundamentally different economic model to ensure a just and green future.

If the fruits of economy are shared in such a way that some people get roses and others get thorns - obviously those who have got the roses find everything rosy in the economy. Only discerning economists like Rajan can feel the pain of people hurt by the thorns.

“The measurement of economic plans and economic growth cannot be done with those who have risen above on the economic ladder but of those who are at the bottom,” Pandit Deen Dayal Upadhyay is quoted as having said. ‘Antyodaya’ means the “rise of the last person” and it was one of the concepts emphasised by Upadhyay.

Those who profess his philosophy should celebrate ‘Antyodaya’ and not 'top-odaya'.

(V Venkateswara Rao is an alumnus of IIM, Ahmedabad and a retired corporate professional)