Today, India has emerged as the world’s fifth-largest economy, with a nominal GDP exceeding $3.7 trillion
K.V CHANDRA MOULI
India’s economic transformation since the 1991 liberalisation reforms represents one of the most remarkable development stories of the modern era. Three decades ago, India was associated with low productivity, foreign exchange shortages, slow industrial growth, and widespread poverty. In 1991, foreign exchange reserves had reportedly fallen to levels sufficient for only a few weeks of imports, while economic growth hovered around the so-called “Hindu rate of growth” of 3–4 per cent annually.
Today, India has emerged as the world’s fifth-largest economy, with a nominal GDP exceeding $3.7 trillion. According to the International Monetary Fund, India remains the fastest-growing major economy, projected to grow above 6 per cent despite global uncertainty. The country has become a major global centre for information technology, pharmaceuticals, telecommunications, digital finance, and startup innovation.
Yet, despite this transformation, a growing narrative suggests that rising inequality somehow undermines India’s growth story. Such a conclusion overlooks a more fundamental reality: India’s greatest achievement has been the unprecedented reduction of mass poverty and the expansion of opportunities to millions historically excluded from economic progress.
According to recent World Bank estimates using the revised $3-per-day poverty line under 2021 Purchasing Power Parity standards, India’s extreme poverty rate declined sharply from 27.1 per cent in 2011-12 to about 5.3 per cent in 2022-23. In absolute terms, the number of Indians living in extreme poverty reportedly fell from around 344 million to nearly 75 million people. This means approximately 269 million Indians escaped extreme poverty within little more than a decade — one of the largest poverty reductions recorded anywhere in the world in recent history.
The improvement was broad-based. Rural extreme poverty reportedly declined from 18.4 per cent to 2.8 per cent, while urban poverty fell from 10.7 per cent to nearly 1.1 per cent. These are not merely abstract statistics; they represent millions gaining access to improved nutrition, sanitation, housing, healthcare, education, electricity, and financial services.
The expansion of infrastructure and welfare delivery has also been significant. Government data indicate that more than 55 crore Jan Dhan bank accounts have been opened, integrating millions into the formal banking system. Unified Payments Interface (UPI) now processes more than 18 billion digital transactions monthly, making India a global leader in digital finance. Rural electrification, sanitation initiatives, LPG distribution, direct benefit transfers, and rural road connectivity have substantially improved living conditions across lower-income households.
A family gaining access to electricity, banking services, internet connectivity, sanitation, healthcare insurance, and formal welfare support experiences a meaningful rise in quality of life, even if wealth concentration at the top continues to increase.
Critics frequently point to rising top-income shares as evidence that India’s growth has become excessively unequal. However, such patterns are not unique to India. During periods of rapid technological transformation and global integration, wealth accumulation among entrepreneurs, investors, and highly skilled professionals naturally accelerates. The United States during the technology boom, China during manufacturing-led industrialisation, and South Korea during export-driven growth all witnessed rising inequality alongside dramatic improvements in mass living standards.
Moreover, inequality and poverty are not identical concepts. A country may experience increasing wealth concentration while simultaneously improving the living standards of lower-income groups. India’s experience appears closer to this reality. Mobile phone penetration exceeds 80 per cent, internet users reportedly exceed 900 million, and digital commerce has widened economic participation far beyond metropolitan elites.
India’s development path also differs fundamentally from classical Western industrialisation models. Unlike Europe or East Asia, India moved directly from an agrarian economy toward a services-led growth structure without prolonged labour-intensive industrialisation. Information technology, finance, telecommunications, and digital services became major growth engines. Therefore, mechanically applying traditional Kuznets Curve assumptions to India’s unique economic structure may yield misleading conclusions.
Inequality statistics themselves also require careful interpretation. Consumption-based inequality indicators in India remain relatively moderate compared with several advanced economies. Wealth-based inequality measures naturally appear sharper because capital ownership and asset accumulation are inherently more concentrated in market economies. Selective emphasis on top-income or wealth statistics alone may therefore present only a partial understanding of broader welfare conditions.
This does not mean inequality should be ignored. India still faces serious structural challenges relating to employment quality, informal labour, agricultural productivity, educational disparities, and skill development. According to the International Labour Organisation estimates, a large proportion of India’s workforce remains engaged in informal employment. However, such informality is characteristic of many developing economies undergoing structural transition.
Recent National Statistical Office data reportedly show informal sector employment crossing 15 crores during January–March 2026, reflecting continuing livelihood generation even outside the organised corporate sector. The long-term solution lies not in discouraging wealth creation but in accelerating manufacturing growth, industrial investment, infrastructure expansion, vocational education, and productivity enhancement.
Calls for aggressive redistribution and punitive taxation also deserve scrutiny. India still requires enormous investments in manufacturing, logistics, green energy, transportation, semiconductor production, and urban infrastructure. Excessive taxation at this stage may discourage entrepreneurship, weaken private investment, and reduce long-term employment generation.
Economic history repeatedly demonstrates that sustainable welfare systems emerge from productive economies capable of generating wealth at scale. Redistribution without sufficient wealth creation may provide temporary relief, but cannot create lasting prosperity.
India today stands at a decisive stage of development. With one of the world’s youngest populations, expanding digital infrastructure, rising manufacturing ambitions, and increasing geopolitical relevance, the country possesses enormous long-term potential. To convert this demographic advantage into durable prosperity, India requires stronger investment, higher productivity, manufacturing expansion, and sustained enterprise-driven growth
(The author is BE Mech, BOE, ASME, Deputy Director of Boilers (Retd), Mysuru)