India's 8.4% GDP growth masks uneven recovery across investment, jobs, and consumption

India's economy expanded at 8.4 percent in the three months ending September, a figure that arrived on Tuesday with enough force to clear the hurdle set by most forecasters, including the Reserve Bank of India's more cautious estimate of 7.9 percent. The number looked strong on its face. But beneath it lay a story of recovery that was working unevenly—surging in some places, stalling in others, leaving whole categories of people behind.

The engine driving that growth was investment. Gross fixed capital formation, the measure economists use to track how much money businesses and government are pouring into factories, infrastructure, and equipment, had climbed back to 102 percent of what it was two years earlier, before the pandemic arrived. That was the real story: capital was moving again. But consumption—the spending by households and government that normally anchors an economy—remained depressed. Private consumption and government spending both sat well below their pre-pandemic levels, a gap that suggested the recovery was built on a narrower foundation than it appeared.

Meanwhile, in the telecommunications sector, the race to the bottom had finally hit bottom. For years, Indian telecom companies had been locked in a price war that left them offering some of the world's cheapest mobile services. Reliance Jio, the company that had ignited that race when it entered the market in 2016, announced on Sunday that it was raising its prepaid plan prices by 21 percent. Bharti Airtel and Vodafone Idea had already moved first, with increases in the 20-to-25 percent range. The hikes would hurt consumers' wallets, but the industry needed the relief—balance sheets had been hollowed out by years of unsustainable pricing. The question now was whether Indian customers would accept the new reality, or whether the damage to the sector had already been done.

The jobs picture told a more troubling story about who was actually benefiting from the recovery. Urban unemployment had fallen to 9.4 percent in the March quarter, a sharp improvement from the catastrophe of the first lockdown. But the improvement had not been evenly distributed. Men's joblessness had returned to pre-pandemic levels, sitting at 8.7 percent. Women's unemployment, by contrast, remained stuck at 11.8 percent—higher than it had been a year earlier at 10.5 percent. The recovery, in other words, had largely passed women by. They were still waiting to get back to where they had been before the virus arrived.

Capital spending plans announced with fanfare at the start of the fiscal year were also running behind. Both the central government and state governments had promised ambitious increases in capital expenditure to help pull the economy out of the pandemic's grip. But by the halfway point of the fiscal year, most states had spent a third or less of what they had budgeted. The Centre itself had deployed only 46 percent of its planned capex in the first seven months. Officials suggested that spending might accelerate in the coming months—a common pattern in Indian government budgeting—but the shortfall raised questions about whether the promised stimulus would actually materialize.

Other headwinds were gathering. Delhi's air quality had plunged to its worst in seven years as November ended, with stubble burning in neighboring states turning the capital's skies severe on eleven days and never once reaching the "good" category. The emergence of the Omicron variant of coronavirus was also casting a shadow over the recovery in travel and tourism. The government had announced plans to resume scheduled international flights on December 15, but reversed course just five days later, citing the new variant. States were tightening protocols at airports. These measures threatened to interrupt the fragile revival in airline passenger traffic that had been underway.

The broad picture, then, was of an economy that had found its footing but was walking unevenly. Investment was recovering. But consumption remained weak. Jobs were returning, but not for everyone. Capital spending plans were behind schedule. And new risks—both environmental and epidemiological—were emerging. The 8.4 percent growth number was real, but it was also incomplete. It masked as much as it revealed about who was actually recovering and who was still waiting.