The Modinomics Buffet: Significant progress mixed with works in progress

A common thread across most commentaries about India is that the country stands on the cusp of an economic leap, poised to leverage its demographics, technological prowess, and entrepreneurial spirit to emerge as one of the most dominant forces on the global stage.

In the summer of 2013, a financial analyst at Morgan Stanley coined the term “Fragile Five” to represent emerging market economies that have become too dependent on unreliable foreign investment to finance their growth ambitions. The five members of the Fragile Five included Turkey, Brazil, India, South Africa and Indonesia.

Ten years later, in 2023, India moved up to become the world’s fifth largest economy, overtaking the United Kingdom, its former colonial ruler.

On July 30, 2025, US President Donald Trump imposed a 25 per cent tariff on Indian goods, topped it up with another 25 per cent a few days later, and described India as a “dead” economy. Twenty five days earlier, on June 15, 2025, India became the world's fourth largest economy.

On August 15, 2025, Prime Minister Narendra Modi announced a bold stride into a new growth doctrine powered by `atma-nirbharta’ and next generation reforms, signalling the urgency for policy measures to accelerate growth, simplify tax rules, empower entrepreneurship, create jobs, boost investment, and dismantle barriers to turn India into a vast market, less dependent on external factors and conditions.

By 2028, the US prepares for its next Presidential elections and Trump readies to demit office, India would have become the world’s third largest economy.

The symbolisms are inescapable.

UPI: FROM CASH TO CLICK

A decade ago, Indian bazaars echoed with the rustle of rupees. Today, they chime with smartphone taps. UPI is now the default payment option for most Indians. a street-side vendor scanning a QR code for a cup of chai, a family settling utility bills from their living room, or an aspiring investor swiftly participating in an IPO, redefining convenience and fostering financial inclusion for millions.

The edifice of this change has been India's "digital public infrastructure" (DPI), commonly known as the India Stack. This comprehensive platform comprises a set of open APIs and digital public goods, including Aadhaar (a biometric digital identity system), UPI (the unified payments interface), Digilocker (a secure digital document wallet), and eKYC (electronic Know Your Customer). These components interoperate seamlessly, allowing for paperless, cashless, and consent-driven online service delivery.

Unlike many other nations where digital infrastructure is often fragmented or primarily driven by the private sector with proprietary solutions, India's government took the initiative to build a foundational tech stack for the entire country—from identity to payments to secure document sharing.

India jumped directly to a mobile-first, interoperable digital payment system, showcasing how strategic infrastructure investment can leapfrog traditional banking limitations and create unprecedented financial inclusion.

For the record, in August 2025 total transactions valued at Rs 24.85 lakh crore took place through UPI. The monthly volume stood at more than 20 billion.

GST: PRESENT CONTINUOUS

While the India Stack has powered its aspiration to transition into a developed economy, some of the changes over the last ten years have been more structural.

Eleven years ago, a usual bill in a restaurant had multiple components: food bill, service charge, VAT, and service tax. This mirrored the untidy patchwork of India’s indirect tax structure, which was a gobbledygook of central excise duty, additional excise duty, duty levied under the Medicinal and Toiletries Preparation Act, service tax, countervailing duty, special additional duty of Customs, VAT, CST, entertainment tax, octroi, purchase tax, luxury tax, taxes on lottery, betting, gambling and cesses and surcharges, and sundry other levies.

The Goods and Services Tax (GST), has dramatically altered this by consolidating this web of levies into a single tax. That said, GST, which came into effect in a grand midnight event in Parliament on July 1, 2017, has had its share of pain points of course, being the multiple slabs and rates.

Earlier this month, the GST Council, headed by Union Finance Minister Nirmala Sitharaman, announced a strategic rationalization of the GST rate structures is essential. The new structure, which will kick in on September 22, would involve moving towards a simpler framework with fewer, well-defined rates—mostly two core rates of 5 per cent and 18 per cent along with zero-rated and demerit goods categories that would attract 40 per cent GST.

SPENDING POWER

One of the key markers of growth is to examine trends in people’s spending, particularly in creating assets, such as houses. The crucial determinant of a family’s decision to buy a house is not as much as current income, but more about what it thinks about its future income.

Most houses, particularly in the urban areas, are bought on loans. A commitment to buy a house would imply that the family feels confident about its ability to fund it over a 10-15 year period. The home loan statistics can be a good marker to gauge this. Between 2014 and 2024, housing loans have grown about six times—from Rs 5.4 lakh crore to Rs 30.10 lakh crore, clearly demonstrating greater current spending ability and the confidence about future income.

Another interesting way to measure changes is how people travel. The flight status display board at an airport today makes for a fascinating sight. Tier-2 towns and cities now clearly outnumber the metro and state capital destinations as more Indians are taking to the skies. The data reinforces this. The commercial fleet strength in India has gone up from 395 in 2014 to 820 in 2024, vaulting by more than 100 per cent, as millions criss-cross across the country's firmament.

If people are travelling more and creating more physical assets, it can serve as a reasonably good proxy to assume that people’s income levels, at the macro level, are rising.

The headline macro numbers over the last ten years appear to corroborate this hypothesis. India’s gross domestic product (GDP), which is the sum total of everyone’s income or expenditure. For, one person’s spending is another person’s income. (Savings is income set aside or not spent).

India’s GDP at current prices has grown nearly three-and-a-half times—from Rs 1,12,36,635.0 crore in 2014 to Rs 3,30,68,145 crore in 2024-25 rising by 194 per cent. During this period, the average income of an Indian more than doubled or by 161 per cent. The annual per capita income—the level of income that an Indian on average earns in a year—grew from 89,821 in 2013-14 to Rs 2,34,859 in 2024-25.

The spark in these numbers, however, could be masking some economic unease that should not be glossed over. A more appropriate way of measuring how much people’s well-being (measured purely by income levels) has progressed in the last 10 years, would be to test it against the “real” or inflation-adjusted values.

Tempered by inflation, India’s real per capita income growth has not really been sizzling, growing by a relatively modest 47 per cent from Rs 78,480 in 2014 to Rs 1,33,501 in 2024-25. True, people’s average earnings have more than doubled. But equally true high prices have shaved about a third of these earnings growth. A weaker rupee, too, has played its part in fanning inflation, offsetting some gains from higher income and salary levels.