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India’s Economic Transformation
Poverty Levels, Food and Fertiliser Subsidies
Context: As the NDA government completes 11 years at the helm, it’s an opportune time to review India’s macroeconomic performance, welfare progress, and structural challenges that lie ahead. A comparison with the United Progressive Alliance (UPA) era from 2004 to 2014 also offers useful context for India’s evolving growth story.
What are the Macroeconomic Milestones?
- Nominal GDP: In 2014, India’s nominal GDP stood at $2.04 trillion, up from $709 billion in 2004 under the UPA.
- In 2025, India’s economy is estimated to touch $4.19 trillion, nearly doubling over the past decade.
- This positions India as the world’s fourth-largest economy, just behind the US, China, and Germany.
- PPP: In Purchasing Power Parity (PPP) terms — which reflect actual living standards — India has grown from $2.75 trillion (2004) to $6.45 trillion (2014) and an estimated $17.65 trillion in 2025.
- This makes India the third-largest economy in PPP terms, trailing only China ($40.72 trillion) and the US ($30.51 trillion).
- Per Capita Income: To assess economic inclusivity and welfare, per capita income in PPP terms offers better insight: 2004: $2,424, 2014: $4,935 and 2025: $12,131.
- Global Rankings: India’s global rank improved from 181st in 2004 to 149th in 2025, yet it still lags behind most G20 countries and even some South Asian peers like Sri Lanka and Bhutan.
- China’s per capita PPP income stands at $28,978, while the US leads at $89,105. However, India continues to outperform Pakistan and Bangladesh on this metric.
What about Income Inequality?
- Despite economic growth, income inequality has remained stable, with India’s Gini coefficient marginally fluctuating from 0.34 in 2004 to 0.33 in 2021, indicating moderate inequality.
- This suggests that while growth has expanded national income, its distribution remains an ongoing concern.
Where stands Agriculture and Inclusive Growth?
- Agriculture is central to inclusive development, employing 46.1% of India’s workforce as per PLFS 2023–24.
- Despite back-to-back droughts in 2014–16, the NDA government achieved 4% average annual growth in agriculture GDP (FY15–FY25), outperforming the 3.5% growth under UPA (FY05–FY14).
What about Welfare Gains?
- The NDA government’s expansive welfare delivery programs — including free food grains, affordable housing, PM-KISAN income support, and fertiliser subsidies — have played a pivotal role in reducing extreme poverty.
- According to World Bank estimates (2021 PPP):
- Extreme poverty ($3/day) dropped from 27.1% in 2011 to 5.3% in 2022, a remarkable 80% reduction.
- Moderate poverty ($4.20/day) fell from 57.7% to 23.9%, marking a 60% decline in a single decade.
- This is one of the fastest poverty reductions in India’s history and represents a significant achievement for the NDA government on the economic front.
What is the Way Forward?
- Rationalising Food Subsidy: India currently provides free rice or wheat (5kg/person/month) to over 800 million people. However, with extreme poverty reduced to 5.3%, there is a case for replacing free grains with digital food coupons. These could be used to buy nutritious foods like pulses, milk, and eggs from verified stores.
- Reforming Fertiliser Subsidy: With fertiliser subsidies projected at ₹1.56 lakh crore in FY26, the government should consider direct benefit transfers (fertiliser coupons) to farmers. Deregulating fertiliser pricing and allowing choice between chemical and bio-fertilisers will improve soil health, reduce import dependency, and promote sustainable agriculture.
- Identifying and Supporting Tenant Farmers: Policy success hinges on accurately identifying tenant farmers through data triangulation and effective communication.
