India is one of the fastest growing economies in the world according to various credible reports, including by the World Bank. So, isn’t it paradoxical to say that India is a shrinking economy? Yes, it is a normative assertion. But, to understand, one needs to look at the economy through a different prism. Normal economic growth is associated with prosperity, full employment, high savings, affordable housing, education and healthcare. A shrinking economy is beset with poverty, high unemployment, decreased savings, expensive housing, unaffordable education and inaccessible healthcare. If India is really the 5th largest economy after the US, China, Japan and Germany, then why is our per capita GDP (136th by nominal GDP and 119th by purchasing power parity (PPP) GDP in 2025) so low? Can GDP growth and economic distress coexist? When we talk about the state of our economy, it is not prudent to hide the real lived experience of the vast majority of the country’s citizens behind numbers that obscure the situation on ‘ground zero’. Unfortunately, growth on spreadsheets and contraction in lived reality appears to become the new normal. Probably that is the reason someone said, “there are lies, damned lies and statistics”.
GDP versus RLE
It’s time to move from being obsessed with GDP (Gross Domestic Product) to a more practical parameter like RLE (Real Lived Experience). GDP is a technical economic term that is the monetary measure of the total market value of all of the final goods and services which are produced and rendered during a specific period of time by a country or countries. Thus, GDP measures output not distribution.
What if I tell you that there is a family of 10, parents and their 8 children. The father produces goods valued at $100,000 annually. However, he keeps almost all his earnings to himself. His wife and children get “peanuts” or “leftovers”. What if this phenomenon exists in exactly the same manner in all the 100 families in the village? Even though the GDP of the village would be $10 million, that wealth is serving only a 100 people. The rest 900 are “scraping the bottom of the barrel” and leading miserable lives. This is the problem of only looking at economic achievement through the lens of GDP.
One of the pioneers who steered the world away from the façade of GDP was the international developmental theorist, Mahbub ul-Haq who designed the Human Development Index (HDI). According to the UNDP, “The explicit purpose (of HDI was) “to shift the focus of development economics from national income accounting to people-centred policies”. Mahbub ul-Haq believed that a simple composite measure of human development was needed to convince the public, academics and politicians that they can, and should, evaluate development not only by economic advances but also improvements in human well-being.
It is time we moved from going gaga over quantitative superlatives like biggest and fastest to qualitative terms like justice, compassion, and the real conditions of people’s lives. Statistics describe averages whereas society lives in extremes.
The Real Shrink
Let’s look at the shrinking employment landscape. According to the ‘India Employment Report 2024’, (taken from National Sample Surveys and Periodic Labour Force Surveys between 2000 and 2022) – 83% of the unemployed workforce in India is made of the young. If we check those with secondary or higher education, the total unemployed has almost doubled between 35.2% in 2000 to 65.7% in 2022.
Other statistics in the report are equally gloomy and paint a dismal picture about declining real wages, increasing platform and gig workforce, increased migration (expected to reach 40% by 2030 to big cities and projected to become 607 million, close to half the total population of the country), growing regional disparity and a widening gender gap.
Coming to the ‘Purchasing Power of Households’, there is a clear shrink. According to a BBC article (Billion Indians have no spending money – report dated 26 Feb. 2025), “India is home to 1.4 billion people but around a billion lack money to spend on any discretionary goods or services, a new report estimates. The country’s consuming class, effectively the potential market for start-ups or business owners, is only about as big as Mexico, 130-140 million people, according to the report from Blume Ventures, a venture capital firm.
Another 300 million are “emerging” or “aspirant” consumers but they are reluctant spenders who have only just begun to open their purse strings, as click-of-a-button digital payments make it easy to transact. What is more, the consuming class in Asia’s third largest economy is not “widening” as much as it is “deepening”, according to the report. That basically means India’s wealthy population is not really growing in numbers, even though those who are already rich are getting even wealthier”. We get the same feeling of “shrinkage” when we look at “Small Businesses and Local Economies” as well as “Public Welfare and Social Responsibility”.
A Nation Rising with People Left Behind
While the mainstream media will trumpet India’s high-speed growth and higher GDP ranking, the fact remains that three interconnected challenges confront us. There is deepening inequality, democratic institutions are weakening (a clear shift of allegiance from the Constitution to those in power), and a complete lack of accountability and probity in governance. There is an increased concentration of wealth in the hands of a few, with the economy acquiring a duopolistic and monopolistic structure. This had led to vast sections of society with stagnant incomes, shrinking social mobility, and limited access to essential public goods. Naturally, this is hurting the space for dissent and the right to ask uncomfortable questions to the government.
Those who criticise are crushed and have to bear organised and funded social media trolling (if they are lucky). If they are not as fortunate, they are arrested under draconian laws and undergo years of incarceration without bail.
Islam teaches us that “economic stewardship (amanah)” demands that wealth be redistributed and not be allowed to circulate only among the rich. Institutions such as the judiciary and financial auditors are completely independent and non-corrupt. Unless the state navigates itself using a moral compass, its economy risks becoming fragile, unequal, and spiritually hollow. Iqbal was spot on when he said, “Jalal-E-Padshahi Ho KiJamhooriTamasha Ho, Juda Ho DeenSiasat Se To RehJati Hai Changaizi” (Whether it be a monarch’s rule or a democratic performance; statecraft divorced from faith leads to a reign of terror).