The prime minister’s speech from the ramparts of the iconic Red Fort built by the Mughals was shorter than his earlier speeches. It was possibly the case because the recent youth movement has undercut Bharatiya Janata Party’s triumphalism just a month back. The PM addressed the youth but not the challenges that the youth movement pointed to. He started with the slogan of ‘Viksit Bharat’ and ended with it. But the youth movement points to the impossibility of achieving it given the crisis in their lives.Why was the Indian youth still protesting on the eve of the 80th year after it attained political freedom to pursue what is good for it? During this time, many other nations that started their journey along with us have achieved far more. It can be said that India has faced far more complexity, not only due to internal diversity but also due to the rapidly changing global context that it has had to navigate during a time of unprecedented technical change and strategic shifts.India at Independence emerged from colonial disruption, entrenched feudalism, lack of experience of running a democracy, widespread poverty and illiteracy, lack of technological capability and under development in every sense. It also encompassed massive diversity – regional, linguistic, religious and economic – which it had no experience of managing. Eighty years later, much has changed but the challenges are no less.The modelChallenges persist because the ruling elite emerging from colonial rule was under the sway of western modernity and wanted to copy it rather than try an indigenous modernity as Gandhi suggested. It adopted a trickle down model which marginalised large sections of the population who were poor, illiterate and suffered ill health, but silently accepted the model in good faith. Transplanting a model which the West had evolved over a few centuries was fraught with difficulties for India with its very different starting point. The initial conditions in India in 1947 were vastly different from what Europe’s conditions were when it started its modernisation. It was in the midst of the industrial revolution, the feudal hold on society was weakening and it was not weighed down by debilitating colonisation. In fact, colonisation enabled Europe’s development through access to additional markets, extraction of capital from colonies and it exported its surplus labour to the United States of America and the colonies. India suffered from a ‘disadvantage of a late start’.India’s adoption of an inappropriate model of development led to new challenges. While education, health, infrastructure, urbanisation, etc. improved, the gains have been largely cornered by the ruling elite, legally and illegally. The vast majority has lagged behind resulting in increased inequality in social, political and economic terms. This has been facilitated by growing elite capture of policies and the increasing non-accountability to people. To achieve this, the institutions of democracy have been hollowed out through subversion of elections, legislature, judiciary, police, bureaucracy, media and institutions of higher learning. Democracy?While maintaining form, democracy has been increasingly subverted. For instance, elections are manipulated so that only the representatives of the vested interests win, thereby marginalising the marginalised. They enter the legislatures through the democratic route of polling the largest number of votes – but only after that they work to favour those who financed their elections. And, election victory is increasingly dependent on who can spend more, and of late, what can they offer to people – bribing the electorate to get its vote.The ruling elite that emerged from the national movement understood the plight of the poor and that they are not to blame for their predicament. So, it was accepted that the nation would have to help them modernise via education, health, work, etc. and that the government should play this role. However, elite capture of policies led to failure. For instance, all children were to be in school by 1965. But even today there is child labour and school dropout. ASER report points to the inability of 25% of children in the age group of 14 to 18 to do 2nd standard reading, over half to solve math problems and about 50% to understand English. They cannot do a modern day job. Effectively, a huge part of India’s youth faces this problem because of poor standards of education.Post 1991, with New Economic Policies (NEP), even trickle down and talk of equity were given up. Markets rule and they further marginalise the marginals because it is the ‘dollar vote’ that replaces the ‘one person one vote’. So, the ruling elite can legitimately launch policies favouring themselves and not feel guilty about it or the rising inequality. That is why, at a very low per capita income, India has the third largest number of dollar billionaires – more than much richer Germany or Japan. Over time, as trickle down failed the marginalised, they have lost faith in long term promises of development. They seek what they can get now – a bird in hand is better than one in the bush. That this works against their self-interest is immaterial to them since their experience is that they will get little after the elections. No wonder, the budgets of the states and the Union government are burdened by these expenditures, leaving less for social services or public investments that would have benefited the marginalised in the long run and increased availability of jobs – what the youth is complaining about.Growing inequalityElite capture of policies marginalised agriculture and rural areas so as to promote urbanisation and industry. So, inequality has risen in its various forms – caste, rural-urban, agriculture – non-agriculture, organised-unorganised, regional, gender, etc. This has led to persistence of demand shortage in the economy and unstable growth dependent on a narrow section of the well-off. To overcome this challenge, the elite have sought export markets which further accentuates disparities because concessions have to be given to exporters, MNCs and foreign governments and that further drains national resources.A vicious cycle of growing inequality and crisis in the lives of Indians is playing out. To cover up, now the ruling elite is manipulating data to claim success of its policies. This is the case with data on gross domestic product (GDP), employment, poverty, consumption, etc. And, any adverse data is rejected. The official claim of India as the fastest growing large economy has been challenged by analysts since demonetisation in 2016. The government claimed support from international agencies like the International Monetary Fund (IMF). However, the IMF is not a data gathering agency and uses government data with all its errors. Moreover, in 2024, the IMF stated that Indian national accounts data is unreliable.Does India need a big export market? Its unorganised sector is under-fed, under-clothed, has poor education and health, and lives in uncivilised conditions. Provision of civilised living conditions to these 1.4 billion people will generate enough demand in the economy to boost employment and growth. This requires a bottom up approach, which the ruling elite does not want. For them, development means linking up with the global elite, and not with the Indian marginalised sections. Development from below is seen as a threat to their lifestyle. Also read: West Asia Crisis: How the Poor Fare in an Economic Shock Remains MaskedIf everyone gets employment, wages and farmers’ incomes will rise which will threaten their luxurious lifestyle. They won’t be able to afford drivers, maids and gardeners, and will have to do household chores.The growing black economyWith time, the elite has increasingly become self-centred and demanded more favours to be able to live a European lifestyle. For instance, they have demanded tax concessions, availability of consumer goods, better urban infrastructure, travel abroad and current account convertibility of the rupee – all so that they can keep funds abroad. This leaves fewer resources for public services, like education and health. In the 1950s and 1960s, when policy required austerity so that investment could be accelerated, the well-off resorted to illegality to earn black incomes and buy smuggled goods. To lead a US-style life when India’s per capita income is only 3% of that of the US, the top 3% would take up 90% of the national income, leaving the rest 97% with only 10%. This challenge was met by the ruling elite through resort to illegality to generate black incomes and taking out a part of it via flight of capital. They are also becoming NRIs to reduce their tax liability and to enjoy a higher living standard. The black economy further reduces the availability of resources for essential development.The growing black economy has led to higher budget deficit and increased borrowing and interest payment and that further reduces funds for public education and health. The direct tax to GDP ratio has stagnated in the last two decades at about 6.5%. To finance its expenditures, the government is forced to depend on the regressive indirect taxes which burden the marginalised sections rather than the well-off who can afford to pay more. Black incomes are generated through systematically violating the laws. That leads to policy failure and unfulfilled goals. The black economy may be characterised as ‘digging holes and filling them’, which reduces investment productivity and leads to waste of resources. For example, potholed roads result in slow traffic, accidents, vehicle breakdowns and higher consumption of fuel.In brief, the rampant black economy affects the economy adversely in multiple ways. It leads to a shortage of resources for development. And, whatever is available gets mostly eaten up by corruption. Whatever is finally spent is also largely wasted. That which should not happen keeps happening leading to uncivilised conditions of living of the vast majority, and it results in growing alienation.The black economy, concentrated in the hands of at most 3% of the population, is the biggest source of inequality and marginalisation in the country. It adds to the demand deficiency in the economy.There is the conundrum of a poor country exporting capital via flight of capital and then giving concessions to MNCs to get capital. Illegality has resulted in rampant question paper leakages and cancellation of exams. This discriminates against poor students who cannot afford to buy leaked question papers. Faith in the two noble professions, education and health, has declined due to rampant illegality and commercialisation. Also read: Why Have There Been No Polls Commissioned To Gauge Impact of Youth Protests?Food is adulterated, medicines are often spurious and air and water are heavily polluted at India’s low level of consumption. Thus, health issues and disease have proliferated leading to undue expenditures which poor families can ill afford and which makes them slip into poverty. Due to poor quality of education, the youth become unemployable and research is reduced to copy and paste.Technological changeWeakness in research and development (R&D) has resulted in the reduced role of India in world affairs. Its strategic autonomy is undermined due to its dependence on the world powers – the US, China and Russia. India has been forced to concede to their demands. The claim of being a Vishwaguru rings hollow when India has to keep accommodating the US’s interests. This claim also falls flat when a large number of young Indians try to migrate abroad for work by legal and illegal means.Crony capitalism has led to a lack of level playing field for investors. They do not know when they may get acquired by a crony through use of government agencies to harass them. R&D in industry is set back. If extra profit can be generated via black economy and manipulation of policies then why take the difficult route of evolving new technologies to compete in the market. So, Indian industry has got used to mostly importing technology rather than developing it. That is why, India’s R&D expenditure as a per cent of GDP is much less than that of, say China or Japan. The PM mentioned the Rs 1 lakh crore innovation fund but simultaneously the research environment needs to be created by granting autonomy which is being severely curtailed in our institutions.India’s weakness in technology is worrying when a new technological revolution is sweeping the world. Artificial intelligence (AI) is rapidly evolving and India is lagging behind in spite of its acclaimed prowess in software. The expensive foundational models are from the US and China. India is into applications using these models and therefore vulnerable – a recipe for recolonisation. There is a possibility of large scale loss of skilled jobs, like of teachers, journalists, lawyers and architects. AI will generate jobs but most Indians with their poor standards of education will not be able to take advantage of them. The PM has mentioned that more than one crore youth will be trained in AI. But, what is the roadmap for it? Will it be like the promise of two crore jobs annually? AI is promising an exponential transformation in other technologies also – for example, in robotics. That will lead to displacement of physical labour. Or, in life sciences, where new drugs discovery and creation of viruses has accelerated.Change?AI is impacting political and social aspects of life. It is being used to manipulate elections and spread fake news. It is leading to growing loneliness. It is being used to conduct wars. To meet the challenge of rapid transformation, the Indian ruling elite has to give up exploiting social divisions to stay in power. The need is for the ruling elite to give up its ways of maintaining its grip over power so as to organise to meet the extreme and overwhelming external challenge. The new situation that is rapidly developing in months and not in decades gives little time to respond. The export markets the Indian elite thought could help sustain demand in the economy will slip away to those ahead in AI. As terms of trade turn adverse, surpluses will leak out of the economy.As AI triggers unemployment of skilled workers, even Universal Basic Income (UBI) will fall short because resources will not be available to distribute to those losing employment since surpluses will leak out of the economy. The demand problem in the economy will grow. There is danger of the ‘Big Seven’ US tech companies investing hundreds of billions of dollars dominating the world. Their CEOs are already getting a place on the high table alongside Presidents and Prime Ministers. But it needs to be asked whether capitalism will survive and if so, in what form, and what will India’s place be in it?To add to the challenges, the geopolitical situation has turned adverse due to the ‘New Cold War’, aggravating since the Ukraine war in 2022, and worsened by the wars in the Arab world and the attacks by the US and Israel on Iran. India is only a marginal player in the shifting world alignments. The Quad is uncertain, and China and Russia do not trust India in BRICS due to its attempts at building strategic relations with the US. During the Cold War, post the Second World War, India played an important role via the leadership of the Non-Alignment Movement, but that is not the case now. In conclusionIndia’s ruling elite has, since Independence, pursued trickle down policies in its self-interest, enabling it to corner the gains while the vast majority live in uncivilised conditions. This underlies the nation’s growing internal and external challenges. Policies to meet these challenges sought to preserve the privileges of the ruling elite and the institutions of democracy were undermined to control the opposition. This has spawned illegality, policy failures and growing alienation. All this has worked against the nation’s long term interest. Critically, education and R&D have been set back, resulting in India falling way behind in technology and getting marginalised globally. Due to the ongoing rapid technological change, this could lead to recolonisation, 79 years after gaining Independence. All because of the Indian ruling elite’s self-centeredness which has prevented it from doing what is required to be done – follow an independent inclusive path of development by rising above narrow self-interests. Or now is it too late for that? Arun Kumar is a retired professor of economics at JNU. He is the author of Indian Economy since Independence: Persisting Colonial Disruption, Vision Books (2020).