India’s development journey has been marked by both progress and challenges. While the Human Development Index (HDI) has improved over the years, income inequality has widened, and household debt levels have reached a record high. These factors highlight the need for a rethinking of India’s growth strategy, with a focus on prioritizing human development as a route to accelerate sustainable economic growth.
The Human Development Report 2023-24, published by the United Nations Development Programme, ranked India 134th out of 193 countries in the HDI. This represents an improvement compared to 2021, when India ranked 135th. However, India still lags behind neighboring countries such as Bhutan, Bangladesh, Sri Lanka, and China. The report also raises concerns about rising inequality, with the share of national income going to the bottom 50% of the population decreasing in recent years.
The World Inequality Lab study, published in March 2024, provides long-term trends in income and wealth inequality in India. The study found that the top 1% of earners in India accounted for 23 times the average income of the rest of the population in 2022-23. This stark income inequality has important implications for aggregate demand, consumption, and human welfare.
The combination of low levels of human development, high levels of inequality, low savings, and high debt levels suggests that India needs to adopt an alternate growth strategy. This strategy should prioritize human development and convert it into a route to accelerate growth. This will require political will and thinking beyond short-term electoral gains. As a first step, the narrative of development needs to be recast to emphasize the importance of human well-being and sustainability.
