Indian Economy: Status; Budget 2022-23 Analysis; Solutions

Each year around the budget time I write on the state of India’s economy and suggest solutions to resolve the problems facing the country. Normally I condense the material in one blog. This year is different. This work is a joint effort by Yogita and I.  We felt that the information which should be explained to our students and all those who follow our website and buy our book, “Economics Made Easy” could not be managed in one blog. Hence, we propose to do it in 3 blogs. In the first blog in the series, we have briefly covered the relevant global situation, the present state of our economy and the major reasons responsible for India’s poor economic state.  In Part 2 we have analysed the budget by explaining the proposals of the government and comments of eminent economists as well as my own. In Part 3 we have suggested solutions to resolve the problems facing the Indian economy. The references have been given in this blog for our students to read, including references of our own blogs written earlier.

Part 1

Global Situation

The following major economic issues needing to be kept in mind are:

∙      Rise in Interest Rates. Inflation for developed markets is on track to reach 4.7% at the end of this year—not an insignificant number—and in a typical economic cycle, this would be a clear signal for central banks to raise rates and pump the brakes on growth. The impact on India would be as follows:

  • The Dollar will get stronger and the value of Rupee will fall.
  • The availability and cost of foreign funds will rise.

o  FPI inflows into Indian equity and bond markets will reduce.

o  RBI will be forced to raise interest rates soon during the financial year.

∙      High Oil Prices. Oil prices are expected to rise in 2022. For India the likely impact will be:

o  Further inevitable rise in petrol and diesel prices by the government will affect disposable incomes of the population and create inflation because of the cascading effect.

o  It will adversely impact the Current Account Deficit (CAD) by approximately 1.5 to 2% of India’s GDP.

∙       Ukraine War. The war in Ukraine has raised the price of oil even more. This will adversely impact India’s weak economy even further.

Major Contributors to India’s GDP

∙        Domestic consumption: Approximately 55 to 60% contribution.

∙        Private investment: Approximately 30 to 35% contribution.

∙        Public expenditure: Approximately 12 to 15% contribution.

∙        Exports: Since India has a Current Account Deficit, that is imports are more than exports the impact is approximately – (1.5 to 2.5) %. With expectations of high oil prices it may go up to -4%. 

Sector-wise Contribution to GDP

∙      Services: Population engaged: 32%; GDP: 54.27%

∙      Industrial:  Population engaged: 25%; GDP: 29.34%

∙      Agriculture: Population engaged: 43%; GDP: 16.38%

Indian Economy 2019-22: Major Issues

Rise in Poverty

The NSO’s numbers show that the average Indian was poorer in 2020-21, and will be poorer in 2021-22 too, as compared to 2019-20.  Also, he/ she spent and will spend less in the two years than he/ she spent in 2019-20.  The per capita income and per capita consumption expenditure at constant prices in the three years were:

                                 Per capita             Per capita

                                 income                  expenditure

2019-20:                 Rs 1,08,645           Rs 62,056

2020-21:                  Rs 99,694               Rs 55,783

2021-22:                  Rs 1,07,801           Rs 59,043

Rise in Unemployment

According to the CMIE, the urban unemployment rate is 8.51% and the rural unemployment rate is 6.74%.  Unemployment remains the biggest challenge faced by the country. While the creation of additional jobs has stalled, the flow of additions to the stock of working age population continues.

The inability to facilitate employment generation and to expedite the creation of a labour-intensive manufacturing sector to absorb the millions of low and semi-skilled workers is taking a toll.

The quality of jobs is also at stake. The percentage of salaried people has dropped from 21.2 per cent in 2019-2020 to 19 per cent in 2021, which means that 9.5 million people have become jobless or part of the informal sector.

A rise in unemployment is bad, but a fall in the labour participation rate is worse. The former reflects a shortage of jobs compared to the number of people looking for jobs. The latter reflects a fall in the number of people looking for jobs. When we juxtapose this against falling jobs, we see a glimpse of the hopelessness of the people who should be looking for jobs.

Wealth Inequality

Cumulative wealth of 142 people in the country has increased from Rs 23 lakh crore to Rs 53 lakh crore in the last two years.

The total receipt of the government in 2021-22 was only Rs 40 lakh crore. Chidambaram, the former FM, has expressed his fear that “very soon the increase in the wealth of these individuals would be greater than the total receipts of the Government of India”. The government has no plans to raise the taxes of the 142 people for the benefit of the approximately 140 crore Indians.

Poor Domestic Demand

Rise in poverty and unemployment have caused a reduction in domestic demand, which is the chief engine driving growth in India. The government’s policy of ignoring this problem does not eliminate it. The government has been ignoring this major issue since 2019-20.

Importance and State of MSMEs

▪  Employment: It is the second largest employment generating sector after agriculture. It provides employment to around 120 million people.

▪  Contribution to GDP: With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.

▪  Exports: It contributes around 45% of the overall exports from India.

▪  Inclusive growth: MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society.

o   For example: Khadi and Village industries require low per capita investment and employ a large number of women in rural areas.

▪  Financial inclusion:  Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.

▪  Promote Innovation: MSMEs provide opportunity for budding entrepreneurs to build creative products boosting business competition and fuel growth.

Thus, MSME sector is the backbone of the national economic structure and acts as a bulwark for Indian economy, providing resilience to ward off global economic shocks and adversities. It has been providing 80% of the jobs in India.

A study, done by Small Industries Development Bank of India (SIDBI) reveals that 67% of the respondent MSMEs were temporarily closed for up to a period of three months and more than 50% of the respondent units witnessed a decline of more than 25% in their revenues during the FY 2020-21.


During the pandemic the unorganised middle class was caught without adequate (or even any) health insurance. After excluding insurance coverage for the organised sector (both government and private), and those covered by Ayushman Bharat and state-level health security schemes, a whopping 26 crore people had no health insurance when the pandemic started. They found hospitalisation costs staggering. 

While we are still reeling under the biggest health crisis of the century, the expenditure under health continues to be low and misleading as items such as water, sanitation, nutrition, and air pollution (no doubt important determinants of public health) are now clubbed with conventional health expenditure. This makes it harder to track specific expenditure on strengthening health infrastructure and healthcare services. Provision of basic public goods must be a key area of focus. 

Public spending on healthcare in India continues to languish, falling well below levels in other countries which are at similar levels of income. Yet, over the years, there has been a tendency to favour an insurance-based model, moving away from significantly expanding the public provision of healthcare facilities. This crisis is exposing the inadequacies and limits of that model.

In the Union Budget of 2020-21, central government spending on health was pegged at Rs 67,484 crore, or 2.1 per cent of its total budgetary outlay. 


The deep income and digital divide have resulted in virtually no formal schooling for millions of children.

A hundred television channels can never be a substitute for good quality classroom experience.

The economic shock of the pandemic has not just squeezed incomes of families and led to a reverse exodus to rural India, it has also led to the closure of several low-cost private schools.

 India has seen one of the longest school closures in the world. 

This is adding up to a grave learning crisis. A study carried out in January 2021 in five states by a research group from Azim Premji University found not only clear evidence of learning loss, but an alarming regression in children’s foundational abilities — to read, to understand what they are reading or do simple sums. If not arrested, the slide in learning, at this scale, has grim consequences for the young, and is likely to push them out of education entirely and stunt their future income opportunities significantly.

The Centre slashed the education budget by 6 per cent, with school education taking the biggest cut. Educationists fear that the learning loss caused by the pandemic might be inter-generational, with grave consequences for the economy and society.

During 2020-21, it became painfully evident that most students had to rely on remote learning, but many faced the double jeopardy of not possessing their own computing devices and smartphones at home, and their schools remaining in the dark without such facilities. In remote areas, particularly in the Northeast, many had to travel closer to mobile phone towers to access the internet on shared phones to get their lessons. The latest data confirms that a mere 22% of schools across the country on average had internet access, while government institutions fared much worse at 11%.


The average farmer was more a wage labourer than a seller of produce. Out of the country’s estimated 93.09 million agricultural households, over 70 per cent possess less than one hectare land. 

Supposedly designed to “modernise” the agricultural sector, the farm laws ultimately would have actually left millions of people without desperately needed government support, and at the mercy of the private sector and international corporations in an industry that is plagued with inequalities.

While the government was forced to reverse course, farmers in India still face significant challenges including a crisis of poverty and mounting debt driving many to suicide.

At present, there are no government regulations regarding how much or how little a farmer can earn.

Current subsidies help farmers stay afloat, but it is still often impossible to turn a profit given the high cost of production against the low prices for which crops are sold.

Farmers are now asking that the government implement regulations that prevent crops from being sold below real input costs and guarantee a reasonable profit for farms.

The illusion of PM KISAN is unravelling in the villages — the monthly dole of Rs 500, limited to the landowning classes, does not even cover the rise in gas cylinder prices, two-wheeler fuel costs, the hike in tractor diesel prices, or healthcare and education costs that have shot up multiple times.

After six years of rhetoric, the slogan of doubling farmers’ incomes has expectedly and conveniently been forgotten.

Social Security

As much as 91% of India’s workforce of 475 million is in the informal sector, and therefore lacks social insurance.

The latest government effort on the social security front was India’s Social Security Code 2020 (SS Code), which merged eight existing laws.

The much-needed hike in the social security pension for the elderly poor, widows and differently abled persons has not been provided.

The credit guarantee scheme can only be availed of by MSMEs which have been servicing their debt. Those that have been unable to do so – and this could be a very large number – do not qualify for the credit guarantee. Therefore, this measure will not be of any use to them.

Rs. 30,944 crores disbursed as part of cash transfers to women Jan Dhan account holders in 2020-2021 was discontinued last year.

World Economic Forum (WEF) Survey Report 2022

The top five risks identified for the world in the report are climate crisis, growing social divides, heightened cyber risks and uneven global recovery, as the pandemic lingers on. A global survey of experts found that only one in six are optimistic and only one in ten believe the global recovery will accelerate.

On India, the WEF’s Executive Opinion Survey (EOS), identified the following top five risks:

  • fracture of interstate relations, 
  • debt crises, 
  • widespread youth disillusionment,
  •  failure of technology governance and 
  • digital inequality.

Major Policy Decisions Since 2014 Responsible for Economic Ruin

Economics cannot be delinked from politics. Policy formation and way India is governed does impact the economy. The major aspects which have affected the economy have been briefly highlighted here.

Over Centralization. Arun Shourie had called Indian government as that of 2 ½ men, which included late Jaitley. I would call it a government of 4 men: Modi, Shah, Adani and Ambani. The idea of running a diverse country of almost 140 crores by 4 men is a joke. Some of the readers may ask as to why I have included Adani and Ambani as people running the government. I would request them to spend some time in understanding as to how Jio became so big so quickly, how the wealth of Adani has increased exponentially to understand the point I am making. The central government had no business formulating the farm laws to benefit their friends. This subject, in a diverse country like India, is best left to the states. The center did not live up to the promise as regards sharing of GST with the states. There are times when the Center treats the opposition ruled states as if they were a part of alien country. The fractured center-state relations as per WEF is one of the biggest threats to Indian economy. Accusing the investigation agency of running political vendetta, eight states — Punjab, West Bengal, Rajasthan, Jharkhand, Maharashtra, Kerala, Chhattisgarh and Mizoram — have withdrawn consent to the CBI to probe cases in their respective states. MHA increased the jurisdiction of the BSF up to 50 km from the border in Assam, Punjab and West Bengal. This was rightly resisted by Punjab and Bengal. The apparent aim of this policy was to indicate that Modi and BJP are the real guardians of Indian security and safe-guarding of national interests and opposition parties are not.

Alienation of Muslims. Muslims constitute approximately 15% of India. The majority are poor, poorly educated and under-represented in governance. They stand alienated today. I request the reader to read the cases of lynching of Muslims, the handling of anti-CAA protests by the MHA and UP government, the false propaganda of Muslims as spreaders of Covid through the Tablighi Jamaat case to understand the point. The creation of a false image of innocent Hindu girls being abducted by Muslim criminals (if people like Modi and Yogi are not there) is a big election winning formula for the Modi government. By alienating 15% of the population a government can remain in power but a divided India cannot be a progressive India.

False Creation of Internal Enemies. An incompetent ruler has to keep scaring the majority from someone, real or imaginary, to stay in power. Modi led BJP has been doing so consistently and very successfully. “The new frontier of war, what you call the fourth-generation warfare, is civil society… that can be… manipulated to hurt the interest of a nation,” Doval, NSA, said at an IPS passing-out parade at the National Police Academy, Hyderabad. The false idea being promoted among Police officers was that Modi led BJP is the sole saviour of the majority Hindus and those opposing Modi’s policies and voicing opinions against his incompetence are “enemies” and to be treated accordingly.

Role of Women in Governance and Participation in Economy. Women are inadequately represented in governance and their participation in the economy is very poor. As per latest report less than 6% women were employed. The employment rate had fallen from around 10% in 2016 to this level in Feb 2021. India ranked 69th with 30% of women in ministerial positions, and 122nd with 17% of women in parliament. The ndex also fails to factor in state-level leadership, where significant powers sits. Of India’s 28 states, currently only West Bengal has a female Chief Minister.

Focus Only Elections and Propaganda. The government’s prime focus is winning elections by using headlines and propaganda to do so. Since the focus is not on performance governance and economy have both suffered. I request the doubters of my statement to just check as to what happened to big announcements like, “Make in India”, “Doubling farmers’ income by 2022”, “5 trillion economy”, “Beti bachao, beti padhao” (a scheme of which 80% of the budget was spent on propaganda!).

Demonetization. Demonetization caused a loss of approximately 4-5 lac crores in 2016 and the carry forward impact of the loss is difficult to assess. It rendered approximately three crore people jobless while delivering a body blow to the unorganized sector, which houses a substantial portion of the MSMEs in India.

Poor Implementation of GST. The architectural framework of the GST favours the formal sector and adversely affected the informal sector. I could not find any expert opinion on the estimated loss of wealth and jobs it caused but it has been considerable.

Reduction in Corporate Tax. In Sep 2019 corporate tax was reduced from 30 percent to 22 percent which caused a loss of Rs 1.45 lac crore to the exchequer. This was done at a time when demand was slipping and practically all sensible economists were advising actions to focus on job creation and putting money in the hands of the poor. The false propaganda regarding this decision was that it will attract private investment and thus increase jobs. Since the capacity utilization of industry was below 70 percent the big corporates used the savings to reduce debt, improve profits and maybe buy electoral bonds of BJP. Private investment did not increase or jobs got created either in 2019-20 or subsequently. Since the profits of big corporates have increased considerably the cumulative loss of this policy can be assessed as over Rs 5 lac crore till the end of financial year 2021-22.

Sudden Lockdown. The ill planned and sudden lockdown in Mar 20 caused immense loss to the economy, jobs and created the tragic migrant crisis. There is no expert opinion on the quantum of loss it caused. The fall in GDP to Rs 135.13 lakh crore from 2019-20 to 145.69 lakh crore (approximately Rs 10 lac crores) was primarily caused by the lockdown.

Promotion of Corruption. The government has legalized corruption by policies like “Electoral Bonds”, “PM CARES Fund” and routinely indulges in corrupt practices like, “Operation Lotus” which is an umbrella term for buying MLAs and MPs through bribing, threatening or whatever. Overall, since 2014 black money in India has increased. When the government itself indulges in unclean economic practices and allows the big economic offenders to get away economy is bound to suffer. Moreover, there is incentive for people close to the government to create wealth through dubious means. For those doubting the veracity of my statement I would request them to do a little research on how Saffron “Langoti” wearing Ramdev has become so rich in a little time and how he got away by attacking medical experts and promotion of his dubious medicines. 

Misuse of National Agencies to Promote Modi’s Agenda. 

It is common knowledge as to how the Judiciary, EC, media and other supposedly independent institutions have been subverted by the present government. All these actions adversely impact the economy as well.

Fraud Rs 20 Lac Crore Stimulus Package in 2020. When the world was suffering the impact of Covid Pandemic and India the twin impact of the Pandemic plus the Modi imposed lockdown, most countries were providing stimulus to revive the economy. Modi also announced a stimulus package of Rs 20 lac crore in May 2020. As usual it was a fraud package.

What had been included was additional liquidity injected into the system through a number of steps and measures taken by the RBI from February to March adding up to more than 8 lakh crores. It also included the 1.7 lakh crore package announced in March. Thus, a Rs 2 lac crore stimulus package could only do what Rs 2 lac crore can do for a population of around 140 crores. Poverty increased, MSMEs died, unemployment rose, demand for MGNREGA increased and domestic demand remained depressed.

Fleecing of Masses through Tax on Petroleum Products. 

Modi government has collected Rs 22.34 lac crore through taxes on petroleum products since 2014. This fleecing of the masses may have been difficult for even a colonial government. This is one major cause of inflation, reduction in the disposable income of the masses and thus depression of domestic demand.

Fudged Data or No Data

In the Parliament Chidambaram famously called NDA as No Data Government. He said, “No data available on ‘tukde tukde gang’, on oxygen shortage deaths, on bodies flowing in rivers, on migrants walking back to homes. It’s ‘No Data Available’ govt-NDA govt.” As per Modi’s policy, all information which shows the government in poor light is to be concealed from the public eye. Thus, we cannot get any official data on the state of poverty, farmers’ suicides and numerous other important issues vital for planning in addition to what Chidambaram had stated. With the non-availability of data policy making is poor.

Poor Handling of Coal and Telecom Sectors

India has decent coal reserves, yet we import coal. Our telecom sector is in a bad state.

Import Reduction

Our Current Account Deficit (CAD) in the coming financial year may be around 1.5-2% of GDP. This needs to be reduced. Policies should be created to reduce petroleum imports by increased use of sugarcane made ethanol and bio-diesel. Growth of mustard and other edible oil producing crops should be promoted to reduce our import bill.

Dependence on Chinese Goods

Our dependence on Chinese products is unacceptably high. We export raw materials and import finished goods. This is bad economics and should end.

Effective Functioning of Competition Commission 

Even a layperson can discern that when things are going bad for the masses, it seems incredible that a select few are adding crores to their wealth every day. I am implying the Modi favourites Adani and Ambani in particular. It definitely indicates that the Competition Commission of India has not been functioning properly or the policy formulation is ineffective.

Under Utilized Public Assets

The privatization drive has not worked well. There are a large number of public assets which can be monetized to improve infrastructure and public expenditure. 

Mismanagement of Banks and Financial Institutions

The mismanagement of banks and financial institutions has caused an increase of NPAs to the tune of Rs 7 lac crores in Modi’s misrule.

Preference to Sycophants and Political Affiliation Above Merit

No one can locate the degree of PM Modi. The head of RBI was a student of history. Modi ridiculed Amratya Sen for being “Harvard” educated. Most competent people have left the government because the government has no use for them because Modi, as per his own belief and the sycophants like Justice Arun Mishra, knows everything. Since this blog would be subject to the scrutiny of “andh-bhakts” I must add the names of competent people who left the government to substantiate what I am stating. I have given four names here:

  • Raghuram Rajan.
  • Subramanian.
  • Urjit Patel.
  • Panagriya.

Disrespect for Scientific Knowledge and Analysis  

When the PM talks of Lord Ganesh as a case of plastic surgery and Ramdev lectures India on medicine, the Education Minister rates astrology above science a sane person can realize as to where India is heading.

Part 2 

In the next part we shall analyze as to what the government is trying to do for the economy and why the economic condition is likely to remain bad at the end of the year 2022-23 as well. 


World Economic Forum: Youth Disillusionment Among Top Risks For India (

P Chidambaram says NDA is ‘No Data Available’ government (

Women in India – statistics & facts | Statista

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