Written by Diego Maiorano.

In 2014, Indian Prime Minister Narendra Modi promised to bring achhe din (good days) to India. Voters, especially younger ones, trusted that Modi was the leader the country needed to revive India’s growth story, which had been somewhat obfuscated in the last years of the Congress-led United Progressive Alliance (UPA) government amid corruption scandals and sluggish economic growth.

On the surface it seems that Modi did deliver on his promises, since India has become the fastest-growing economy in the world, outpacing China. However, apart from touching a chord with Indians’ pride, sustained GDP growth might fall far short of convincing voters that the achhe din have in fact arrived – for many reasons, of which I will touch on three here.

First, India’s GDP figures are likely to be inflated. The government has changed the methodology used to calculate GDP several times, each time pushing the figures up. Many analysts are highly sceptical of the official figures – some economists privately say that they discount India’s GDP numbers by as much as 1–2 percentage points.

In fact, high GDP growth is in sharp contrast with a number of other indicators which all point to a marked slowdown of economic activity – from sales of motor vehicles to bank credit and investment trends and from corporate and income tax revenues to exports.

Second, recently released data show that India presents a textbook definition of a dual economy, with the agricultural sector growing at a much slower pace than the rest of the economy. This is nothing new. India’s agricultural sector has been engulfed in a decades-long crisis from which it is difficult to see how and if it will ever emerge. However, the most recent trends are particularly worrying, not only in economic terms but also politically, considering that about one-half of the population directly depends on agriculture.

Agricultural GDP growth during Modi’s term has decelerated sharply compared with the previous five years – from 4.3 per cent per year to just 2.9 per cent. According to the estimates of a government-appointed committee, in order to fulfil Modi’s promise to double farmers’ income by 2022, agricultural GDP needs to grow at least three times faster than that. Modi’s promise is pure fiction.

It is not surprising that millions of people are leaving agriculture every year, and that millions of educated youth do not want to work in the sector. It therefore becomes crucial that the economy should generate enough non-agricultural jobs – a key element of Modi’s promised achhe din. This is the third reason why Modi should be concerned: the government’s performance has been a disaster.

The latest Periodic Labour Force Survey (PLFS) – recently leaked to the press – shows that unemployment reached a 45-year high at 6.1 per cent in 2017/18, up from 2.2 per cent in 2011/12. Even more worryingly, not only do the unemployment figures vastly underestimate the problem because they do not take disguised unemployment into account, but nearly 20 per cent of the urban and rural youth – one of Modi’s key constituencies – are unemployed.

According to a report by the Centre for Monitoring the Indian Economy (CMIE), between 2016 and 2018 the workforce actually contracted, despite the fact that India is currently experiencing a demographic transition whereby the share of the working-age population is growing rapidly.

Of course, the fact that the Indian economy (which is very – and increasingly – capital-intensive) is unable to generate sufficient employment is not something that Modi can be directly blamed for. However, his government did inflict two fatal blows on an already difficult situation.

The demonetisation of 86 per cent of the country’s banknotes in November 2016 not only led to losing the equivalent of 1–2 percentage points of GDP. It also resulted in the disappearance of millions of jobs, particularly in sectors such as construction, which had been among the few able to absorb at least part of the flow of migrants from rural to urban areas during the previous decades. Second, the hasty and patchy implementation of the Goods and Services Tax (GST) in July 2017 aggravated the trend, particularly for (labour intensive) small and medium enterprises (SMEs).

In other words, not only was Modi unable to boost job creation – he had promised as many as 25 million new jobs per year – but the government actually made a difficult situation worse through a combination of hazardous decisions (demonetisation) and poorly planned reforms (GST).

Seen from a longer-term perspective, the last five years represent a missed opportunity. Modi came to power in the best possible conditions. On the one hand, his Bharatiya Janata Party (BJP) secured the first single-party majority in over thirty years and many believed that Modi could use this political capital to push for much-needed (but possibly painful) economic reforms. On the other hand, low oil prices – which averaged USD53 per barrel during the first four years of Modi’s government, as against USD93 during the second UPA term – meant that the BJP was not as financially constrained as its predecessors had been and could promote economic development through much-needed public investment.

However, the opportunity was lost, particularly in terms of job generation, reform of the agricultural sector and, crucially for India’s future prospects, investment in education, which remains amongst the lowest in the world. The nature of employment is changing rapidly – in India as in the rest of the world – and the poor quality of education in India translates into millions of formally educated but barely employable youth who struggle and will continue to struggle to find a job. Modi has done little to change that.

Dr Diego Maiorano is a Research Fellow at the Institute of South Asian Studies, National University of Singapore. He tweets at @diegoemme.

The author bears full responsibility for the facts cited and opinions expressed in this article.