India's lower-middle-income trap: growth without prosperity

India risks being ensnared in a lower-middle-income trap — a scenario where consistent economic growth at the macro level coexists with stagnant wages, limited job quality improvement, and a failure to lift the broad middle of the population into genuine prosperity. This is the central argument of a new analytical piece in Frontline Magazine that challenges the triumphalist narrative surrounding India's GDP growth rates.

The concept of a middle-income trap — more commonly associated with countries that get stuck before reaching high-income status — is being applied here in a sharper, more immediate form. The concern is not just that India might fail to become a developed economy in the future, but that even now, at its current stage of growth, the gains are not reaching enough people fast enough.

Structural factors often cited in such analyses include an employment market skewed toward low-wage, informal work; limited expansion of manufacturing as a share of the economy; and persistent inequality between urban and rural India and across social groups. While India's services sector has driven much of the GDP growth, its job-creation footprint is narrower than broad-based industrialisation would offer.

The critique lands at a politically sensitive moment. The government points to infrastructure investment, digital public goods, and financial inclusion schemes as evidence that growth is becoming more equitable. But the Frontline analysis suggests that headline numbers can mask a more complex and sobering picture of lived economic reality for hundreds of millions of Indians.

The debate over growth quality versus growth quantity is likely to intensify as India approaches a crucial juncture in its development, with the government's stated ambition of becoming a developed economy by 2047 requiring not just faster growth but fundamentally better-distributed growth.