Introduction
Steady GDP growth and low inflation are important macro-economic achievements for India, but whether they alone place the economy in “good shape” depends on their impact on employment, investment, livelihoods and overall welfare.
Arguments in Support of the View
1. Macroeconomic Stability Achieved
- Low inflation reflects effective monetary management and improves purchasing power.
- Stable growth reduces uncertainty for investors and businesses.
- Strengthens India’s credibility in global markets.
2. Improved Consumer Confidence and Demand
- Lower inflation protects real incomes, especially for the poor.
- Encourages consumption, a major driver of India’s GDP.
3. Better Investment Climate
- Predictable growth and price stability attract domestic and foreign investment.
- Supports long-term industrial planning and infrastructure expansion.
4. Fiscal Space for Government
- Lower inflation reduces interest burden.
- Higher growth boosts tax revenues, enabling higher spending on welfare and development.
Arguments Against the View (Limitations)
1. Weak Employment Generation
- Growth has been largely jobless, especially in manufacturing.
- Unemployment and underemployment remain serious concerns.
2. Stressed Investment & Credit Cycle
- Private investment remained sluggish due to NPAs and corporate balance-sheet stress.
- This weakened long-term growth momentum.
3. Agrarian Distress Persisted
- Farm incomes remained volatile despite low inflation.
- Rural distress weakened inclusive growth and demand sustainability.
4. Uneven Sectoral Performance
- Growth concentrated in services and a few urban sectors.
- Informal sector, MSMEs and rural economy lagged behind.
5. Rising Inequality
- Benefits of growth were unevenly distributed.
- Weakens the social foundation of economic “good shape”.
6. External Sector Vulnerabilities
- Trade deficits and dependence on global financial flows increased exposure to shocks.
Balanced Assessment
- Steady growth + low inflation are necessary conditions for a healthy economy.
- But not sufficient without strong employment creation, investment revival and inclusive income growth.
- True economic strength requires macro stability + structural + social resilience.
Conclusion
While steady GDP growth and low inflation provided macro-economic comfort to India, the economy could be said to be in genuinely “good shape” only when this stability translated into jobs, income security, investment revival and inclusive growth.
Introduction
Unemployment in India is predominantly structural, arising from a persistent mismatch between labour supply, skills and sectoral demand. In such a context, accurate measurement of unemployment becomes crucial for designing effective labour market and skill policies.
1. Nature of Structural Unemployment in India (Context)
- Sectoral shifts from agriculture → industry/services without adequate skill transition.
- Educated unemployment due to education–market mismatch.
- Technological change and automation displacing low-skilled labour.
- Dominance of informal sector with disguised and under-employment.
Thus, capturing the true nature of unemployment requires a robust measurement framework.
2. Methodology Adopted to Compute Unemployment in India
India’s unemployment estimates are primarily generated by the National Statistical Office (NSO) through the Periodic Labour Force Survey (PLFS), which replaced earlier NSSO employment surveys.
(A) Key Approaches Used
- Usual Status (US): Person unemployed if not working for a major part of the previous year and actively seeking work; captures long-term unemployment.
- Current Weekly Status (CWS): Activity during the preceding 7 days; captures short-term/intermittent unemployment.
- Current Daily Status (CDS): Daily activity during reference week; best for disguised and under-employment.
(B) Key Features of PLFS
- Annual rural–urban employment estimates.
- Quarterly urban unemployment data.
- Rotational Panel Sampling.
- Generates LFPR, WPR and Unemployment Rate.
3. Critical Evaluation of Existing Methodology
Strengths
- Multi-dimensional measurement through US, CWS and CDS.
- High-frequency urban data helps track business cycle shocks.
- International comparability with ILO standards.
Major Limitations
- Inadequate capture of informal sector: Irregular work treated as full employment.
- Skill mismatch not reflected: Overqualified workers counted as employed.
- Seasonality in rural employment: Off-season joblessness not fully captured.
- Disguised unemployment underestimated: Family labour treated as employed.
- Urban bias in quarterly data: Most structural unemployment is rural.
- Migration & gig economy gaps: Short-term migrants and platform workers under-represented.
4. Structural Nature of Unemployment & Measurement Gaps
| Structural Feature | Why Existing Method Fails |
| Skill mismatch | Measures job presence, not skill-appropriateness |
| Informality | Irregular work treated as full employment |
| Disguised unemployment | Family workers counted as employed |
| Labour mobility barriers | Sectoral rigidity not captured |
| Technological displacement | No dynamic tracking of job losses |
5. Suggestions for Improving Unemployment Measurement
- Introduce skill-adjusted employment indicators.
- Expand quarterly rural labour surveys to reflect seasonality.
- Create a separate category for gig & platform workers.
- Strengthen informal sector data via GST, EPFO–ESIC and PM-Shram linkage.
- Develop district-level real-time employment dashboards.
- Measure quality of employment (job security, hours, income stability, social security).
6. Policy Significance of Improved Measurement
- Better targeting of Skill India and education reforms.
- Improved design of MSME and industrial policy.
- Evidence-based expansion of urban employment schemes.
- Shift from job counting to productivity and job quality assessment.
Conclusion
Refining India’s unemployment measurement system to capture informality, skill mismatch and job quality is indispensable for addressing the fundamentally structural nature of unemployment and for designing future-ready employment policy.
Introduction
Public expenditure on social services in India has increased from about 5% of GDP in the early 1990s to around 8–9% of GDP in recent years, reflecting a growing policy focus on health, education, nutrition, housing and social protection in the post-reforms period.
1. Pattern and Trend of Public Expenditure on Social Services
- (a) Overall Trend – Gradual but Uneven Rise
- 1990s: Low social spending due to fiscal consolidation.
- Mid-2000s: Sharp rise with rights-based welfare (RTE, MGNREGA, NFSA).
- Post-2014: Shift towards targeted, technology-driven welfare.
- (b) Education
- Spending around 3–4% of GDP, below the 6% target.
- Shift from access (SSA) to quality, digital learning and higher education (NEP 2020).
- (c) Health
- Historically below 1.5% of GDP; moved toward ~2% after COVID-19.
- Shift from curative to preventive and insurance-based care (Ayushman Bharat).
- (d) Nutrition & Social Security
- Expansion of food security, maternity benefits, pensions.
- Greater DBT usage improved delivery efficiency.
- (e) Housing, Water & Sanitation
- Sharp rise after 2014 due to urbanisation and public health thrust.
- (f) Structural Shift in Spending
- From blanket subsidies → targeted welfare and asset creation.
- Digitisation reduced leakages and improved coverage.
2. Consonance with the Objective of Inclusive Growth
Positive Outcomes
- Expanded Access to Basic Services: Schooling, sanitation, housing and healthcare coverage widened.
- Poverty & Deprivation Reduction: Multidimensional poverty declined due to food security and health coverage.
- Financial & Social Inclusion: JAM-DBT strengthened last-mile welfare delivery.
- Gender & Vulnerable Group Inclusion: Nutrition, maternity and education spending improved outcomes.
Persistent Gaps
- Low Health & Education Spending: Still below global norms.
- Inter-State & Rural–Urban Disparities: Wide regional gaps reduce inclusiveness.
- Quality Deficit: Learning and public health outcomes lag behind spending rise.
- Informal Sector Exclusion: Social protection for migrants and informal workers remains weak.
Conclusion
India’s social expenditure trajectory broadly supports inclusive growth, but growth becomes truly inclusive only when the last citizen is empowered. Sustained investments in health, education and social protection, along with strong outcome monitoring, are essential to convert social spending into durable human development and equitable growth.
Other Economy UPSC Mains Questions
Introduction
The Human Development Index (HDI), developed by UNDP, measures average achievements in health, education and income. However, it ignores how these achievements are distributed. To overcome this limitation, the Inequality-adjusted Human Development Index (IHDI) was introduced, which adjusts HDI for inequality within a country. This distinction is crucial for a highly diverse and unequal country like India.
HDI vs IHDI: Key Differences
| Basis | HDI | IHDI |
| Nature | Average level of development | Actual level after inequality adjustment |
| Treatment of inequality | Ignores inequality | Penalises inequality |
| Value | Always higher | Always lower or equal |
| Interpretation | Potential human development | Real lived human development |
| Policy relevance | Broad progress | Inclusiveness of growth |
India: HDI and IHDI Performance
- India falls under the medium human development category based on HDI.
- When inequality is adjusted, India loses nearly 30% of its human development value.
- This gap reflects regional, rural-urban, gender and socio-economic disparities — e.g., southern vs BIMARU states.
Why IHDI is a Better Indicator of Inclusive Growth
- Captures Distribution, Not Just Averages: HDI can rise even if benefits reach only the elite, while IHDI reflects mass inclusion.
- Reflects Ground Reality: Shows real access to health, education and income.
- Reveals Hidden Inequalities: High GDP growth with poor welfare is exposed by IHDI.
- Guides Targeted Policy: Helps evaluate welfare schemes and subsidies.
- Aligns with Inclusive Growth: Measures both growth and equity together.
Conclusion
While HDI reflects India’s overall progress, IHDI exposes the unequal distribution of these gains. The significant HDI-IHDI gap highlights that development benefits remain uneven. Hence, IHDI is a superior indicator of inclusive growth as it measures equity along with development — a necessity for sustainable and just progress.
