Five Issues That Are Hurting the Indian Economy

Apart from economic issues such as high inflation and crony capitalism, mental health, majoritarian politics and press freedom also impact the overall growth of the economy.

New Delhi: I am just trying to live, laugh, love in this economy. An economy where inflation is consistently high and salaries the same; where being workaholic is better than investing energy, money, and time on dating – not for love, of course. Because love is to be found within, in your own morning cup of coffee, in your own silly jokes, in your own struggles – that is what all the ‘self-love’ gurus have been talking about.

However, none of these influencers, including ‘financial’ influencers, seem to be talking about the dire state of the Indian economy.

It is unsettling how everything is turned into an issue around individuals, work hard, run hard, be resilient, etc. steering clear away from discussing fundamentals of the economy or the larger issues affecting it.

From salon services to eating out at a good restaurant, even for those who could afford to, everything is far more expensive now. On the other hand, wage growth of households has declined in rural and urban areas. Declining or stagnant incomes mean people don’t have buying power in their hands.

Added to that, high inflation has pushed household financial savings to a 30-year-low in the first half of the financial year 2023, i.e., March to August 2022. This indicated that people may have borrowed to spend on basic needs.

In such an economy, financial influencers do have solutions on how to buy a one crore car in 10 years, or a crores-worth house before your retirement. However, the economic reality that people have been affected by unemployment, job cuts, stagnant incomes, toxic workplace environment, workplace discrimination, price rise, etc. does not seem to interest them.

Apart from these economic issues, some social and political issues also affect the economy.


From cooking oil and vegetables to meat and salt, costs of basic commodities have risen sharply in the last five years. The Wire reported in May last year that the cost to cook a portion of the Punjabi chicken curry in an average Indian household has been rising at a compound annual growth rate of 10% over the last five years.

It is not that vegetarians have had a smooth ride either, the article says, adding that the cost of cooking paneer masala has registered a 7% CAGR in the last five years.

Economic commentator Vivek Kaul wrote in Mint that India’s troubles on the inflation front may persist as a big economic problem in 2023. Explaining one of the reasons for this situation, he says, “The one-year period ended 2 December, total bank loans have grown at a very fast pace of 17.5%. Of course, some of it is because of the base effect. Nonetheless, loans of all kinds have been growing rapidly. Retail lending of banks grew by more than 20% in October, the highest since the COVID-19 pandemic began. Lending to services businesses grew by 22.5%. Further, lending to micro and small industries and medium industries grew by 20.5% and 31%, respectively.”

“If lending continues to grow at this pace, then the chances of inflation falling are low. Higher retail lending will create private consumption demand, leading to more money chasing goods and services, and hence, higher prices. Higher lending to industry and services will create more jobs and feed into wage inflation in the process,” he says.

But the economic issues don’t end just with high inflation.

Also read: Global Economy: In 2023, Central Banks Will Have to Battle Inflation Amid Political Obstacles

Is taxpayers’ money safe?

On January 24, a US-based financial forensic firm and short seller, Hindenburg Research, alleged that Adani Group, led by the world’s eleventh-richest person Gautam Adani, is involved in a massive and “brazen stock manipulation” and “accounting fraud scheme”. It said that the company is “pulling the largest con in corporate history”. (On January 31, Adani’s billionaire ranking fell after a sharp plunge in his net worth following the Hindenburg Research report.)

Adani Group denied the allegations saying the report had been discredited and rejected by India’s highest courts. It further said that it is contemplating legal action against Hindenburg Research, to which the short seller said it would “welcome” legal action and demand a long list of documents from the Indian conglomerate in a legal discovery process.

The allegations sent bonds and shares in the conglomerate’s companies down.

The question is, how much of it is the taxpayers’ money?

Despite Adani Group expanding on a large scale, private investors are wary of investing their money into the company’s stock. But the government appears to be not much worried about it. It’s the top investor in Adani Group companies, the Indian Express had reported.

In fact, after Hindenburg’s report, seven Adani stocks fell up to 23% and LIC lost Rs 16,580 crore in five Adani stocks.

Quartz had in December said that “if the Adani Group’s bubble bursts, the Indian stock market may experience a ripple effect.” It said that a massive default by one or several companies of Adani will rock not just the equities markets but India’s economy overall. This is because the firms are embedded in the country’s infrastructure, said the article.

“The taxpayer will be hit, additionally, by her indirect exposure to the group, through LIC and the state-owned banks. A bailout would limit the damage. That too would be funded by the public exchequer, but it would be unavoidable if the government decides that the Adani Group has indeed grown too big to be allowed to fail,” it added.

Research firm CreditSights in August 2022 had red-flagged the Adani Group’s debt-funded expansion appetite. Although, it later revised some of the calculations, but still raised concerns over the group’s overall debt levels.

But who cares?

Gautam Adani in a recent interview to India Today, though, said he has been close to all political establishments and made a case on how he had benefitted from Rajiv Gandhi’s government and all others subsequently, including Manmohan Singh’s UPA.

Despite Adani saying this, he is considered to be close to Prime Minister Narendra Modi.

“Crony capitalism” is a term that describes an economy in which success in business depends on close relationships between businessmen and government officials. And crony capitalism is bad for economic growth, several reports have said.

Narendra Modi and Gautam Adani at the Vibrant Gujarat summit. Credit: Twitter/Files

Mental health

Better health fuels economic growth by enhancing productivity and enlarging the labour force. And physical and mental health have a bidirectional relationship.

A Lancet report said that poor mental health was estimated to cost the world economy approximately $2·5 trillion per year in poor health and reduced productivity in 2010. The cost is projected to rise to $6 trillion by 2030.

The World Health Organisation estimated that India will suffer economic losses worth $1.03 trillion from mental health conditions between 2012 and 2030. A Deloitte report estimated that Indian companies could suffer a loss of $14 billion a year due to poor mental health among employees.

However, it is yet to be seen what actions the government is taking to improve the overall well-being of the citizens.

As per a 2018 report in the Times of India, at least 150 million people in India need therapy, but only 30 million people seek help. The COVID-19 pandemic has made the situation even worse for many. More than 10% of adults in India face some mental health illness. To deal with this burden, there needs to be a proportionate number of psychiatrists, psychologists, and therapists. Along with that, people need to be able to access and afford treatment.

India has 0.75 psychiatrists per 100,000 populations. The desirable number is anything above three psychiatrists per 100,000 people.

Most therapists in a city like Delhi charge between Rs 1,000 to anywhere up to Rs 4,000 for an hour-long session. But Moneycontrol had reported that a single session of therapy in Mumbai could even go up to Rs 19,000.

In January, the National Human Rights Commission said all the 46 government-run mental healthcare institutions across the country are in “deplorable conditions”. Section 19 of the Mental Healthcare Act states that if a mentally ill person has been abandoned by their family, the government should provide appropriate support including legal aid to fight for their right to live in the family home, but the NHRC found that this is not being followed.

Additionally, in an interview conducted in 2020 for a podcast, two therapists had told me that many therapists in this country are not being paid properly in accordance with the money they have invested for their education.

A psychiatrist had told TOI that many Indian psychiatrists are moving abroad for “greener pastures”. And that’s leading to a shortage of psychiatrists in this country.

According to the 2015 National Crime Records Bureau, the entire mental health workforce – including clinical psychologists, psychiatrists, psychiatric social workers, and nurses, stands at 7,000. The actual requirement is 15,000.

Also read: Mental Health: It’s Not Always Good to Talk

Hindutva politics

“Hindu hain hum, kya ukhad lega! (We are Hindus, what will you do!)” I heard a man screaming at 3:35 am on January 27, in Delhi’s Rohini. I went out to the balcony and saw him holding the collar of man, a mini tempo driver. After the tempo managed to escape the man, who was along with two other men, in a grey Swift car, the man in question peed on the grill placed on the divider of the main road. In a loud voice, they indicated that they suspected the driver and chased him, because he would not have gone too far.

Economist Jayati Ghosh, in a piece titled Hindutva, Economic Neoliberalism and the Abuse of Economic Statistics in India, explained how the Narendra Modi government’s efforts at implementing the Hindutva agenda adversely affects economic activity.

Quoting examples of the 2002 Gujarat riots and the 2013 Muzaffarnagar riots, she said, “Riots – often instigated cynically by proponents of Hindutva for political and other purposes – are clearly not economically beneficial in the aggregate. However, they can sometimes lead to benefits for particular communities, if they succeed in displacing others from lands, assets, livelihoods.”

The Wire had reported in April 2021, that a year after the 2019 Delhi riots – which killed 53 people – Muslim families are selling homes and moving out from North-East Delhi. They sold their houses at low prices – at least 25% below market rates.

Several women have been posting on social media about their ordeals to find a rented accommodation in the financial capital of India because of their name. A friend in Bombay didn’t even disclose her name to the flat owner because she could lose a good, affordable house, in a decent, safe locality. She could do this because her boyfriend was Hindu. So only his name was on the agreement.

Apart from finding a house, economic exclusion could be seen in even securing a loan. The Deccan Herald reported how a Muslim woman’s loan proposal was rejected despite offering a property worth Rs 2 crore as collateral and all necessary documents. Her uncle – a bank officer – had suggested her Muslim name might have played a role in the rejection.

Separately, the Hindutva ecosystem has come up with several conspiracies including “love jihad”, “thook jihad”, “corona jihad”, “land jihad”, “civil services jihad”, and “redi jihad” against the Muslim community. Hindutva leaders have called for the economic boycott of Muslims as well as a genocide of the community, with impunity, in public, with a ruling party member present among them.

Deepanshu Mohan wrote for The Quint that any economic discrimination against Muslims will affect not only the 80% of the Indian Muslims working in the informal economy but also the entire Indian labour market as a whole. The informal economy is deeply entwined and feeds into the overall functioning of the formal, organised economic structure, he said.

Also read: What Will India’s New Saffron Curtain Mean for Its Economic Growth?

Declining press freedom

There is a clear correlation between economic freedom and press freedom. Countries with greater economic freedom tend to enjoy higher degrees of press freedom, a commentary in the Heritage Foundation said.

Attacks on press freedom – such as jailing journalists, raiding their homes, shutting down printing presses, and using lawsuits to thwart reporters – have measurable effects on economic growth, The Conversation had reported in April 2021, citing data.

The news outlet’s research team found that countries that recorded a decrease in press freedom also experienced a 1-2% drop in real gross domestic product (GDP) growth.

While press freedom can rebound from even lengthy stints of repression when given the opportunity, this rebound does not translate to the economy, the report noted.

In nations where freedoms were removed, and then restored, economic growth did not fully recover, it added.

India’s press freedom ranking dropped to the 150th position from last year’s 142nd rank among 180 nations. According to RSF, India is among the five most dangerous countries for journalists in the world right now after Mexico, Afghanistan, and Yemen, and just before Pakistan.