Some Perspective

What is an index, and why does the definition matter?

An index is one number summarising many prices. It picks a basket, assigns weights, and tracks the weighted total against a base year. Two choices make it political: what goes in the basket (urban professional spending looks nothing like a landless labourer's), and where you set the base year (reset it and the whole series shifts).

If onions are 15% of the basket, a 67% spike adds ~10 points to inflation on its own.

What GDP counts — and what it silently ignores

GDP is the money value of all final goods and services produced in a year. Three routes to the same room — they should match:

GDP counts a hospital treating a pollution victim, not the clean river that would have prevented the illness. It counts a soldier's salary, not the unpaid care work of 200 million women. Nominal GDP uses today's prices; real GDP strips out inflation — and the difference is who gets to claim the growth.

Why the 2015 GDP revision is still disputed

MCA21 includes dormant companies with stale filings. The EAC-PM called the critique "cherry-picked." No independent review was ever commissioned.

The big picture, in five numbers

A big economy and a poor country at the same time. Most arguments about India start by stressing one and forgetting the other.

Same start in 1991. Very different destinations.

China ran labour-intensive manufacturing and built a consuming middle class. India ran services — which export dollars but don't employ at scale.

Jobless growth: GDP grows, formal jobs per rupee collapse

In the 1980s, 1% of GDP growth created ~2 lakh formal jobs. By the 2010s, the same 1% created fewer than 20,000.

A massive young population and a tiny formal job market. The two eras compared: UPA averaged ~7.1% growth, NDA ~6.1% — see Era Comparison.

Output here, jobs there

Same investment. Vastly different jobs.

Choosing electronics over garments favours output-per-worker over employment scale. The statistics look better; the person who needed the job loses.

GDP climbs. Most wages stand still.

Under UPA, real rural wages grew 3–6% a year. Under NDA, growth collapsed toward zero (negative in FY17, FY22, FY23) even as GDP expanded 7–8%. Jean Dreze (2023): wages, more than unemployment, are the thing to watch.

Unemployment: the ruler decides the number

Female labour-force participation has risen on paper — but much of it is distress work; the salaried urban number has barely moved and is among Asia's lowest.

If you earn ₹50,000 a month, you are in the top 3–5% of India

Monthly income, and where it places you.

The "300–400 million middle class" of market research includes everyone above subsistence. By any serious income threshold, the consuming, salaried, tax-paying middle is 80–120 million — about one-seventh of what gets quoted.

What the bottom half actually earns

A rural family of four spends ~₹15,000 a month on everything. That is the median Indian's world — not the newspaper lifestyle section.

The long view: India was most equal in 1981

Banerjee & Piketty: the top 1% income share fell from 12% (1951) to a historic low of 4.4% in 1981 — driven down by high marginal taxes and nationalisation. The 1981 IMF loan came with conditions; Indira Gandhi began the pro-business reversal. Inequality has risen in every decade since. Today the top 1% takes ~23%; the bottom 50% takes ~13%.

How the inflation number is built

The government tracks ~ goods and services from urban markets and villages every month, against a base. Food is nearly half the basket (~%), so a bad monsoon pushing onion and tomato prices up adds points before anything else moves. The RBI targets CPI at %.

Inflation fell and mostly stayed inside the RBI band under NDA — partly because farm-gate food prices fell. Relief for the consumer; distress for the farmer.

Your real inflation index

The headline says . The thali disagrees.

The index tells you about the basket; it doesn't tell you about your basket.

The monsoon machine

~% of cultivated area is unirrigated and depends entirely on the southwest monsoon. The transmission chain:

Climate change is making the monsoon more erratic. The economic vulnerability is rising, not falling.

For every ₹100 the state takes

■ shared with states · ■ not shared. GST hits everyone at the same rate; the poor pay more as a share of income.

The tax reversal: corporates pay less, individuals pay more

The shortfall was covered by GST, fuel excise, and new cesses — paid by ordinary people. The individual now contributes more direct tax than the corporation.

The tax we abolished, and how GST works

India abolished its wealth tax in (it raised only ~₹ cr — poorly designed). Piketty's proposal: a % annual tax on net wealth above ₹ crore (~150,000 people) could raise 0.5–1% of GDP without touching ordinary savings.

GST (2017) merged central and state taxes into one. 41% of the divisible pool is devolved to states by formula — but cesses and surcharges sit outside the pool and have grown sharply, so states get nothing from them. Petrol, diesel and alcohol stay outside GST: a political choice, not a technical one.

For every ₹100 the state spends

Interest + states' share take 42 paise before a single scheme is funded. More goes to buildings (₹22) than to people (₹11).

BE, RE, and why the welfare budget shrinks twice

Social-sector spending is routinely cut at the RE stage because capex and interest are stickier. ₹ announced for MGNREGA at BE often reaches only ₹– by actuals. The family that needed the work was not consulted on the revision.

Below our own targets, for decades

Cash in hand: Tamil Nadu's KMUT

The case: recognises unpaid labour, boosts bottom-end consumption (largest multipliers), no significant inflation spike post-launch. The concern: fiscal space — if all states match, national arithmetic breaks; cash is supply-neutral.

The deficit fell — with borrowed help

The direction is right — but a record RBI dividend and off-budget borrowing (FCI, NHAI) prop up the arithmetic. Add those in and the true deficit is higher.

Rich states finance poor states

Return per ₹100 paid to the Union. Redistribution is the design — but it creates a tension: the states that run services well and grew slowly get less back.

The double punishment: delimitation

Seats were frozen on data; the freeze ends with the first census after 2026. Reapportioning on today's population: northern states gain, demographically stable southern states lose.

Less money back from the Centre AND fewer MPs to fight for more. Each MP already represents ~ million people, up from million in 1951.

Goods in deficit, services to the rescue

Why petrol doesn't fall when crude does

More than a third of the ₹ pump price is tax — excise + VAT (■). Most tax is fixed per litre, so the pump price doesn't fall one-for-one when global crude falls. India imports % of its crude.

When a PM asks citizens not to buy gold, the balance of payments is speaking

Indians hold 25,000+ tonnes of gold (~$ tn — larger than GDP). They buy it because the formal system left them no better option: ~ mn adults excluded from banking, insurance penetration just % vs % globally.

Poverty: the contested number

Declining consumption data (2017-18) withheld; rising data (2022-23) released. A government that chooses which surveys to release has taken over the role of the statistician.

Among the most unequal countries in the world

More unequal than Brazil on income; among the most concentrated on wealth of any comparable economy.

The economy shows up in bodies and classrooms

A single hospitalisation can push a household below the poverty line — the medical poverty trap, not measured in GDP.

Every number rests on a choice

Which base year, which basket, which survey methodology, which poverty line, when to hold the census. Those decisions are technical — and political, because each has winners and losers. Five places where the choice, not the economy, moved the number:

How to read any official number