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The Illusion Of Trust: Examining Economic Realities In India – IMPRI Impact And Policy Research Institute



The “chariot of Trust” is now rolled out in the Indian Republic by the current political regime in power. It is claimed to be an unquestionable truth by the latter. Its influence on the economic historians of tomorrow may not be inconsequential unless chariot is thwarted. Till then, economic prosperity of the nation in all its likelihood will no way be different from what some say a ‘magical realism’. The magical realism takes a different route however unscientific it is, to justify itself. Illusion, in consonance with this, is created to facilitate the current regime to make ‘false claim’ particularly about what it has achieved for the impoverished of the Republic of India.

Why the “Chariot of Trust” matters, is that it finds its sacred engagement to follow a preposterous method to rationalize its claim about the steep decline of the incidence of poverty. The ‘make believe” approach emerges out of it only to convert the chariot of trust in to some form of social capital to push the republic in to the kingdom of falsity. The purpose is to mask the truth.

The scale at which the incidence of destitution is haunting the people of the Republic is carefully trampled down. What, however, should never go unnoticed here is how the method to rationalize the claim is used to overshadow the truth about impoverishment of the millions which is deepening over the years.

The “chariot of Trust” wants the Republic not to trust what Global Hunger Index reveals, the truth about “development of underdevelopment “which is silently eating away the vitality of the economy in terms of incessant rise of impoverishment ( when 80% of the people of the Republic suffer from some form of food insecurity?) How does one downplay the fact that India was ranked 11 1among 125 countries as the same Index shows?

The chariot of Trust wants us not to believe that the India accounts for nearly 60% of the global increase in poverty in 2020, just little before the onset of Covid 19 (Pew Research). Even the significant decline of cumulative income of the households during the same period especially of the poorer households, as Azim Premji University revealed is reduced to insignificance by the chariot of trust. What, instead, the latter wants us to believe is what it claims to be true.

The report recently released by the NITI Ayog on National Multi-Dimensional Poverty (NMPI) provides me the context to argue how delusional it is to push the ‘Make believe’ approach of the present political dispensation forward. Here, I am not going to repeat the rigorous statistical infrastructure, nor the flawed methodology being followed (already exposed by several scholars particularly when National consumption expenditure survey is not conducted by the present regime for years) to declare that 24.82 crore people moved out of poverty in nine years from 2013-14 to 2022-23.In other words, as per the findings of the MPI, India witnessed a steep decline of poverty from 29.17 per cent to 11.28 per cent in the period concerned.

The question, however, is: is it possible to make such tall claim without the wherewithal (freebies) of the government? Does it not imply that the claim being made will collapse once wherewithal from the government stops flowing? What is much more disastrous and hence absolutely unacceptable is the sustainability argument. It claims that such a ‘great Transformation’ will put millions of these impoverished lot who hardly could manage to get two square a meal a day today on the road to sustainable development tomorrow, the development that sustains over time.

It is what I call ‘development fallacy ’that has pervaded the economy but have substantial bearing on impoverishment of the people of India. For instance, MPI as an index, as we have argued elsewhere in a joint paper (forthcoming) , captures access of the people to health, education and standard of living, measured through 12 indicators but not quality of the services/facilities . If someone is found, as per the index, to have access, he/she is claimed to have been out of poverty. However, such a claim becomes meaningless and, hence, misleading if it is examined against the backdrop of the quality of the services /facilities which is too poor to account for.

This is precisely one of the reasons why MPI which is primarily driven by access alone is too feeble a measure to claim such a substantial improvement in extricating the impoverished from poverty trap in the country. For instance, even if we assume access to education is made available to a large number of the poor (an unrealistic assumption though!), but quality is absent (as several studies show) end goal is never met. Similarly, one may have opened bank/ post office account, but the latter is not made operational or no transaction has taken place. Hence, the end goal is never met. Does the MPI take this in to account? No.

GDP growth and employment

The story of achieving higher growth rate of GDP being instrumental to dilution of impoverishment seems to be gradually becoming less appealing in the absence of any credible evidence. But, the unbroken legacy of the Washington consensus that the chariot of Trust is carrying forward continues to create oasis of hope in the minds of the unemployed to access productive employment opportunities through trickledown effect. While crux of the accumulated impoverishment lies in the absence of creation of employment opportunities, the sermon given by the neo-liberals constantly about realization of the trickle-down effect has proved to be mockery of development against the backdrop of the stock of unemployed that have been increasing at a frightening scale.

A recent study conducted by Azim Premji University related to employment intensity of capital is certainly an eye opener in this regard. It reveals that “after adjusting for inflation, the number of jobs generated for every Rs of one crore investment fell between 1994 and 2015. In factories, Rs.one crore of investment led to 33 jobs in 1994. By 2015, it fell to eight jobs (Times of India, 5.2.2024). This apart, among family enterprises units that are smaller in size, an investment of Rs I crore led to 4675 jobs in 1994. However, in 2015, just 702 jobs were created for the same investment.

Not to talk about the decline in real wage rate, which has aggravated the living standard of the deprived further. Yet the economy of the Republic with almost 70 per cent of its people who are living in the margin pulls on. It can do so by creating development illusion which is subsumed to the colonial ‘catching –up’ culture. It is here that one may ask: Can development be sustainable if millions of people are kept out of productive employment and income opportunities (not distress)?

Freebies as antidote

While the flawed perspective ingrained in its obscurantist approach yielded a dreadful employment scenario, freebies culture is chosen as anti-dote to poverty and is rated as a vehicle to transform the economy so as to achieve sustainable development. The employment creation which is the most reliable instrument for fighting out impoverishment is substituted by freebies. The truth is that freebies are fundamentally different from welfare schemes.

As it is well established (even RBI observes) freebies are not public or merit goods like education and health care and expenses that the state incurs towards their delivery have wider implications especially for long—term economic development. It is justified on the ground that such welfare measures help the majority of the people to salvage from economic distress that come about in the wake of market failure. And, finally, such measures contribute greatly to improve human development index. But freebies are doled out with a different purpose and have nothing to do with long- term development.

The purpose is to mask the real intension of the ruling party which is nothing but to influence the electorate to cast their vote in its favor. Nevertheless, the chariot of Trust put the latter in the same box of merit goods and justify it as having same development implications for the poor.

Be that as it may. But how does one discount the parasitical impact of such intervention on the poor and then estimates development outcome as positive and significant? Besides, no credible evidence exists that show freebies boosts up overall effective demand of the economy at the aggregate level causing an expansion of the home market. For, it has limited multiplier effect at the local level in the present context.

Structural reforms

In a market economy, ‘Chariot of trust’ is never an unquestionable truth. The unquestionable truth is expansion of the home market as its fundamental pre-condition that must be met by way of raising the effective demand of the poor for the goods and services economy produces.

Such a rise in demand is effected through the rise of their disposable income. And, this is possible to achieve only if employment and income of the poor rises. Why it is agriculture and its allied activities as a potent source to raise the income level of the impoverished is downplayed? Where is the end of the ‘catching-up culture’ so that the same is assigned the crucial role to invigorate the home market to expand? No republic can do justice to the poor in a market economy like ours unless 70% of its population who are now living in the margin become active participant in the market along with the rest 30% of its population.

It requires structural reforms particularly of the agrarian economy from ownership of all forms of natural resources and their market. Reforms of the agricultural market needs urgent attention to escape from alarming agrarian crisis. All these together require a new policy perspective which differs from what the neo-liberals have been preaching for years. The decline in well- being because of decline in employment opportunities within the value creation of limited material production, is countered here by way of calibrating utilization of local resources and job creation. It is here that one may argue how good growth can be promoted against bad growth.

In other words, such production processes and services must be encouraged to grow at the local level that could fully internalize costs, involve renewable energies, zero emission, continue recycling of natural resources and restore ‘Earth’s ecosystem’.

The economy could benefit from it in two ways. One the one hand, they are small scale projects but energy-efficient, non-polluting and community –oriented: on the other, they have the potential to create local jobs through investment in green technologies. One may then have reasons to believe that the new perspective will act as a ‘game changer’ that makes market to act for the people rather than people to act according to what the market asks for. This will open up the routes to the local productive forces to be released and utilized for the local economy to grow as well. Its ramification on employment creation of the poor and thereby their participation in the market will be immense.


Hence, excessive reliance on trickledown effect for employment creation and improving the well-being of those who are living in the margin on a long term basis is an illusion. Economic development is self-defeating in the long run. For, it bypasses the largest segment of the people of the republic, the impoverished ones, and create a huge development gap for them. Although the ruling regime attempts to fill the gap by doling out freebies, nobody knows whether the gap could ever be filled up. But what one knows that it is leading to the emergence of a ‘parasite economy’.

Prof Sunil Ray is the Former Director of A. N. Sinha Institute of Social Studies, Patna. He is currently the Advisor at CDECS and IMPRI.

The article was first published in Mainstream Weekly as Conjuring an illusion of prosperity on February 17, 2024.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

Read more at IMPRI:

The Boeing Dilemma: India’s Moment to Rise in Aircraft Manufacturing

The Plight of Small Farmers in India: Income Disparity and the Need for Reform

Acknowledgement: This article was posted by Rehmat Arora, a visiting researcher at IMPRI.

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