Are Indians Getting Richer or Poorer? Finfluencer Unpacks the Stark Reality
While India is set to become the world’s fourth-largest economy by GDP, surpassing Japan this year, nearly 800 million citizens still depend on free rations, household savings are at historic lows, and the rupee has depreciated to its weakest levels.
India EconomyGdp GrowthHousehold SavingsForeign InvestmentRupee DepreciationReal EstateJan 26, 2025
On the one hand, India is poised to become the world’s fourth-largest economy by GDP, surpassing Japan this year.
However, the reality on the ground presents a stark contrast.
Nearly 800 million citizens depend on free rations, household savings are at historic lows, and the rupee has depreciated to its weakest levels.
Shrivastava points out that India’s GDP growth, a key indicator of economic health, is showing troubling trends.
Since 2019, the average real GDP growth rate has hovered around 6%, which is concerning for an economy of India’s scale.
In comparison, China experienced double-digit growth during its peak phase.
Private spending, which constitutes 60% of India’s GDP, is also slowing down.
Over the last five years, its growth has averaged only 4.8%.
High taxes and a decline in household savings are key contributors to this slowdown.
India's savings-to-GDP ratio is now at a 50-year low, leaving less disposable income to fuel economic growth.
Foreign investors are sending mixed signals as well.
While foreign direct investment (FDI) inflows increased by 26% in the first half of FY24-25, net FDI, a more accurate indicator after accounting for outflows, has dropped to a 12-year low.
This indicates that foreign investors are not confident about India’s long-term prospects.
The weakening rupee should, in theory, attract FDI, as investors can buy more with their foreign currency.
However, even with the rupee dropping from 54 to 86 against the dollar over the last decade, FDI and foreign institutional investor (FII) participation have declined.
Shrivastava emphasizes, “Domestic consumption alone cannot drive massive growth.
Real growth requires foreign investments or exporting goods and services.”
To reverse these trends, Shrivastava suggests tax cuts and better fiscal policies.
“Tax rationalization is necessary to widen the base beyond the current 2% level.
This would propel markets, boost consumption, and encourage growth,” he explains.
His advice to investors? Diversify globally, invest in high-growth sectors like AI and semiconductors, and prepare for a high-inflation environment.
“Your wealth is in your hands,” he concludes.
Frequently Asked Questions
Is India on track to become the world’s fourth-largest economy by GDP?
Yes, India is poised to become the world’s fourth-largest economy by GDP, surpassing Japan this year.
What are the key concerns regarding India’s GDP growth rate?
India’s average real GDP growth rate has been around 6% since 2019, which is concerning for an economy of its scale, especially when compared to China’s double-digit growth during its peak phase.
Why is private spending slowing down in India?
Private spending, which makes up 60% of India’s GDP, is slowing down due to high taxes and declining household savings, which have reached a 50-year low.
What are the mixed signals from foreign investors regarding India?
While foreign direct investment (FDI) inflows increased by 26% in the first half of FY24-25, net FDI has dropped to a 12-year low, indicating that foreign investors are not confident about India’s long-term prospects.
What solutions does Akshat Shrivastava suggest to improve the economic situation?
Shrivastava suggests tax cuts and better fiscal policies, including tax rationalization to widen the base beyond the current 2% level, to propel markets, boost consumption, and encourage growth.
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