Global agencies going gaga over Indian economy, but rural area still a big drag

Though factors like higher inflation levels, especially in the food segment, and erratic rainfall are taking a toll on the rural economy, all is not well across Bharat on many other fronts. If this continues, the 2024 General Elections will turn out to be an interesting electoral battle

In a recent development, the International Monetary Fund (IMF) rated Indian economy as a star performer on the global economic landscape. According to the global financial body, India will account for over 16 per cent of the global economic growth, while remaining the fastest growing major economy in the current calendar year. That means 16 per cent of the global economic growth will come from India in 2024.

This IMF’s take on the Indian growth story came a few days after Prime Minister Narendra Modi gave a guarantee in a public meeting that India would become the world’s third largest economy during his third innings.

Speaking after inaugurating the Surat Diamond Bourse in Gujarat a week ago, Modi reiterated that BJP would secure a third consecutive term hands down and so his third term is a foregone conclusion. It’s now a Modi guarantee that India will be the third largest economy during his third term!

The Prime Minister’s confidence levels on BJP’s electoral prospects in 2024 went up phenomenally after the saffron party’s decisive win in three out of four States that recently went to Assembly elections, dubbed as the semifinal to next year’s General Elections.

Barring Telangana where Congress came back with an emphatic win, BJP walked away with massive victories in the two big States of Madhya Pradesh and Rajasthan, besides Chhattisgarh, a relatively small State. The saffron party went to the electoral semifinals with the Modi face, and won. So, Modi strongly feels that there is no credible alternative to him even at the national level.

On the economic front, the IMF is not the only global agency that has gone gaga over the Indian economy. A few weeks ago, the World Bank projected India’s growth for FY24 at 6.3 per cent, citing robust domestic demand and rise in investments. Asian Development Bank (ADB) and other rating agencies are also bullish on the Indian economy these days, while the Reserve Bank of India (RBI) has gone for an upward revision of its growth forecast to seven per cent for FY24 from the earlier 6.4 per cent.

But the economic growth story is not as rosy as it is being painted. Though topline growth numbers from recent quarters are enticing, and, so are the forecasts, the country’s rural heartlands are not in good stead when it comes to the key economic indicators.

During the second quarter of the current fiscal (Q2FY24) for which official gross domestic product (GDP) growth numbers are available, the private final consumption expenditure (PFCE) witnessed a steep decline. It nosedived to 3.1 per cent during July-September 2023 quarter from a high of around six per cent in the preceding three months. As India is still a rural economic story with the population from non-urban areas making up the majority, a steep fall in PFCE implies a deep fall in rural consumption.

Further, the agriculture sector, the heart and soul of the hinterlands, also registered a significant slowdown in the second quarter. It expanded at a meagre 1.2 per cent during July-September 2023, a drastic fall in growth rate from a healthy 3.5 per cent in Q1FY24 (April-June 2023). That was the lowest upswing in the key sector in nearly five years. This segment grew at a higher rate of 2.5 per cent even in the second quarter of the last fiscal (July-September 2022). For the uninitiated, the economy grew at 7.8 per cent in Q1FY24, and was a tad lower at 7.6 per cent in Q2FY24.

Though factors like higher inflation levels, especially in the food segment, and erratic rainfall are taking a toll on the rural economy, all is not well across Bharat on many other fronts. If this continues, the 2024 General Elections will turn out to be an interesting electoral battle.

As I mentioned in several of my earlier articles, no Indian Prime Minister barring Pandit Jawaharlal Nehru secured a third consecutive term. But Modi and his BJP are exuding confidence that Nehru’s political record will be equaled this time. But winning a third consecutive term is not going to be an easy task for Modi and BJP given the economic headwinds in rural areas. However, once the third quarter (October-December 2023) GDP numbers are out, there will be more clarity on whether distress in rural areas is continuing or not.

However, BJP and its leadership are displaying unbridled overconfidence on its victory in 2024. This was amply reflected in the way the BJP government suspended over 140 opposition MPs from Lok Sabha after some protestors breached parliamentary security and threw gas canisters inside the Parliament.

This security breach and startling attack took place on the anniversary of the 2001 attack on Parliament that claimed 11 lives. Incidentally, the recent attackers entered the Parliament premises with the help of passes issued by Pratap Simha, a BJP MP from Karnataka. But BJP did not take any action against him. Furthermore, there was no immediate statement from the government to pacify the opposition.

The recent victory in Assembly polls may have emboldened the ruling party to take the opposition lightly. But such an attitude doesn’t augur well for democracy and also for the ruling party at a time when elections are inching closer. No ‘India shining’ campaign and no developmental narrative will come to BJP’s rescue if the majority of Indians feel that the Modi government is turning dictatorial. Practicing democratic tenets is always good for India, its well-being and its economy. There are no second thoughts about that. And there is no harm for a ruling party to practice them. Practicing democratic tenets always elevates a ruling party’s image. Isn’t it?