In recent years, India is seeing a disturbing trend with the rich becoming richer and the poor poorer, and the middle class shrinking, that is, a K-shaped recovery marked by rise in stark inequality. A report published in March 2024 titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj” found that by 2022-23, the top 1% of India’s population controlled 22.6% of total income and 40.1% of total wealth. In addition to existing inequality, rising inflation has made things worse, especially for the poor. While the Modi government is trying to mask this inequality behind numbers of GDP growth, the on-ground realities are different.
Dissecting the growth of GDP is important to understand what is actually going on. The Blume Venture Capital’s Indus Valley Report 2025 has looked into GDP in two ways – by expenditure component and by sectoral split. Breaking down GDP by expenditure components reveals that in Financial Year 2023-24 (FY24), GDP is dominated by private consumption (56% of GDP), followed by investment (33% of GDP) and then by government spending (9% of GDP). Breaking GDP into contributions by various sectors shows that it is dominated by services (54% of GDP) and then by industry (31% of GDP) and agriculture (15% if GDP). Over the last decade, private consumption as a proportion of GDP has been in the 55-60% range. Therefore, India’s GDP is driven by private consumption and by the service sector.
Blume’s report further analyses the consumption spending and finds that the top 10% of the population contributes to two-third of discretionary spending. While non-discretionary spending is expenditure incurred on essential items or needs, discretionary spending is expenditure incurred on non-essential items. For example, expenditure on rent, food, healthcare and even low-cost education are examples of non-discretionary spending, and expenditure on luxury cars, high end education are examples of discretionary spending. The next 23% of the population contributes to one-third of discretionary spending, while the remaining population does not have the capacity for discretionary spending. This means that the bottom two-third population has the capacity to spend only on essential items. The basket of ‘essential items’ varies with the extent of poverty. For example, with increasing poverty, educating the girl child may no longer be an ‘essential’ expenditure. Similarly, expenditure on fruits and vegetables also becomes difficult with rising poverty, and people’s ‘essential’ items reduce to grains and lentils, denying proper nutrition for the poor.
If we understand this with the state of unemployment and real wage stagnation, the picture becomes grimmer. A recent FICCI-Quess Corp report suggests that while profits of private companies have surged by four times in the last four years, annual growth rate of wages during this period was merely 5.7%. In this same time period, inflation grew at an average annual rate of 5.7%. Effectively, real wage actually declined in the past four years. As corporate profits soar, wages of employees decline!
On the front of employment, the situation is equally grim. While the BJP government is trying their best to fudge data and show increasing employment through the Periodic Labour Force Survey (PLFS) data, thorough reading of the data exposes the sham that it is. PLFS considers a person who has worked even for one hour in the preceding week of the date at which the person is surveyed as employed! The BJP government claims that the female labour force participation rate has risen from 23.3% in 2017-18 to 41.7% in 2023-24. The Worker Population Ratio (that is, share of working population in total population) is shown to have risen from 22% in 2017-18 to 40.3% in 2023-24. Out of this, 67.4% women were ‘self-employed’ in 2023-24 as compared to 51.9% in 2017-18. The figures seem encouraging; at least that is what the Modi government wants us to believe. Let us dig deeper into being ‘self-employed’. A self-employed worker includes a worker who is an own-account worker or works as a helper in a household enterprise, either paid or unpaid. Now, women’s labour has always been used as ‘free unpaid labour’ for years. Including this in official statistics does not translate into more women being employed for wages. The women who are entering the workforce are actually doing it out of distress, to earn more as a family since wages have declined to such levels that meeting basic necessities have become a hassle. By changing definitions and survey methodologies, the Modi government is creating the illusion of rising employment, wherein more and more people are becoming unemployed.
Massive layoffs in the IT sector shows even white-collared jobs are not safe anymore. More than 27,000 layoffs happened in India among tech employees in the first half of 2023 itself, and this trend is continuing. We witnessed how hundreds of Infosys trainees were evicted overnight in the month of February. More and more people are joining the gig economy where jobs have no safety net. While the Modi government shows this as avenues of employment, this portrays distress; people are forced to take up such jobs in the absence of any other alternate source of income.
Rising inequality, declining real wage and rising unemployment has taken a toll on the people. The Modi government is doing everything to ensure that Adani’s profits boom, while leaving the poor to fend for themselves.
