India’s Home Minister, Amit Shah, boasted that India might emerge as the world’s fastest-growing economy in 2022. However, Indians from almost all walks of life doubt Shah’s forecast. Last November’s inflation rate, which rose by 14.23%, shows an Indian economy in trouble.

Business enterprises shutting down

Small and medium enterprises contribute half of the country’s exports. These enterprises contribute 30% of nominal GDP. They represent 95% percent of industrial units. Unfortunately, the pandemic has devastated their businesses, sending shockwaves to all sectors of India’s economy.

In a survey from 2021, “59% of startups and [small business] are likely to scale down, shut down or sell themselves” because of economic conditions brought about because of the pandemic.

Mounting unemployment rate

These aforementioned enterprises employ 110 million people, making them one of the largest contributors to India’s labour market. As these enterprises are shutting down or scaling back, unemployment among labourers is increasing. Consequently, an increasing number of workless labourers, who usually live hand-to-mouth, are looking for food and shelter.

Aside from labourers, the people from the middle class and the near-rich class too have been experiencing unemployment. This is because unemployment in urban cities has been steadily increasing since the start of the pandemic. The urban unemployment rate was above 9% in December, a figure which is alarming for a country where cities host most of the better-paying jobs.

India’s unemployment crisis has spread like a cancer to almost all industries. Take the automobile industry for example. This industry was successful prior to the pandemic. It created many jobs, including decent paying ones. However, sales in this industry took a hit because of the pandemic. Automobile stores that sell vehicles or auto parts have been shutting down. Consequently, people who work in this industry have been losing their jobs, contributing to the increasing rate of urban unemployment.

It is increasingly unlikely that India will be able to reduce unemployment rates anytime soon.

Food price hikes, calling off weddings

In December, food prices rose quickly, making the hike the fastest in six months. Costs of vegetable oils jumped more than 24%. Tomatoes and onions have been progressively increasing and the cost of these two vegetables has nearly doubled in a span of just one month, between November and December.

Even India’s reputation for fancy weddings is at stake. While throwing fancy weddings was a thing for the rich, the pandemic has forced both the rich and the poor to reduce their expenses on weddings. The rich have been reducing their budget for these fancy events, while the pandemic-hit financial conditions and the food price hikes have been compelling the poor to go as far as calling off their weddings.

Inbound foreign direct investment at stake

In an opinion piece, Chris Devonshire-Ellis suggested that India’s policy of state protectionism to shield domestic industries against foreign competition and the rise of Hindu nationalism as an outlet for the Indian majority against the country’s minorities are now impacting its ability to attract foreign direct investment.

Chris Devonshire-Ellis suggested that under these circumstances, the inflow of foreign direct investment into India may decrease, while outbound investment from India to elsewhere in Asia may increase. In fact, the country is already witnessing a delay in foreign investments that were supposed to flow from global and regional businesses.

For example, Draft PaperWork had to halt the process of expanding its investments in India. Although Draft PaperWork hasn’t disclosed the reasons behind this decision, it was perhaps because of India’s state-protectionism policies, surging socio-religious tensions which could lead to instability, and overall economic conditions including inflation.

Shah’s forecast is premature

The realities of India’s economy show a different story from what Amit Shah has forecasted. In sharp contrast to Shah’s forecast, India’s ground realities show that ongoing inflation and mounting unemployment are here to stay for a while, at least through 2022.