Next on nation’s to-do list: More productive jobs

4 min readNov 9, 2026 07:00 AM IST First published on: Nov 9, 2026 at 07:00 AM IST

Also by Kishen Shastry

A recent popular book, Breakneck, made a rather convincing argument that the United States is a lawyerly society and rapidly growing China is an engineering state, and that each has much to learn from the other. Many have since commented on how to characterise India. In the past decade, India has pursued a distinctive path by combining the ambition of an engineering state with the checks and balances of a multiparty democracy. It is hard to unpack a state, but let us consider the evidence we have on the Narendra Modi era that allows us to judge how far this has succeeded.

Modi’s path has been much harder than the one faced by celebrated reformers such as Ronald Reagan and Margaret Thatcher, whose reforms were largely subtractive. They inherited a highly capable state and drove reform by removing things: Deregulation, privatisation and lower taxes. However, Prime Minister Modi’s reforms had to be both additive and subtractive. His government had to build the state’s basic reach, through toilets, bank accounts, identity cards, and infrastructure such as roads and ports while reforming existing institutions and making progress on GST and the Insolvency and Bankruptcy Code. India often had to confront 19th- and 21st-century problems at the same time.

The results are validated with the World Bank’s latest brief on poverty. Between 2011 and 2023, India’s extreme poverty declined from 27.1 per cent to 2.6 per cent. At the same time, close to 50 crore people moved above the lower-middle-income poverty line. A sharp reduction in poverty like this is not a result of business-as-usual thinking. The Bank attributes this to strong consumption growth, rising employment, especially among women, and expanded social transfers, including food subsidies. Consumption inequality also decreased.

A part of how this was achieved is equally interesting. Direct Benefit Transfer had a reluctant start with rollout limited to some districts and was eventually abandoned for cooking gas by the previous government before the 2014 elections. Modi not only revived it but transformed and scaled the architecture of identity, bank accounts and payment rails across hundreds of schemes. This allowed subsidies to be paid directly and reduced leakages. Sustained focus on digital public infrastructure has allowed the state to provide effective social protection to a wide array of vulnerable groups.

India has delivered these results at a time when the rest of the world’s economic growth has been relatively subdued and chaotic. From an estimate of Surjit Bhalla and Karan Bhasin, India had an excess growth of 2.2 percentage points above the rest of the world between 2004 and 2013, which increased to around 3 percentage points between 2014 and 2023.

It is natural that people compare the progress on poverty between China and India. China lifted close to 80 crore people out of extreme poverty over four decades, while India moved 50 crore people above the lower-middle-income poverty line in just 12 years. Not much attention is paid to the fact that India has done this in a democratic multiparty system with powerful state governments. Creating more productive employment is the top priority, and much still needs to be done to continue the process of reforms. Reforms in power, land, urban planning and agricultural markets are in the hands of the state governments. A key risk is their fiscal space, as they now spend over 3 lakh crore on subsidies. Karnataka, for instance, has budgeted over 1 lakh crore for subsidies this year, close to a third of its revenue receipts. Combined with salaries, pensions and interest payments, these expenditures are equivalent to over 90 per cent of revenue receipts.

The past decade has shown India’s ability to build state capacity at scale, but the next should focus on sustaining reforms across states. Social protection is essential, but it should go hand in hand with investments and reforms that enable more productive employment.

Surya is BJP Member of Parliament representing Bengaluru South and Shastry is at University of Cambridge