Why capitalism in the United States and India are vastly different?

In India, the discourse is mostly centred on the GDP growth rate while the inflation, unemployment, and the availability of basic commodities are believed to improve automatically as a consequence

There is a sea of difference between the economic debate in the American and Indian media. In this context, the GDP for the second quarter of 2021-2022 have been released in India. The ruling party's voice is going louder, proclaiming that the nation has achieved a growth rate of 8.4% which is as good as the pre-Covid times.

However, the Opposition is contradicting the official line and argued that as compared to last quarter growth, the second quarter growth is nil.

The Biden administration focuses on inflation, unemployment

In the US, the point of debate is not focused on the growth rate of the GDP. The economic agenda of the Biden administration is focused on inflation, unemployment and availability of essential goods.

President Biden in his speech in Baltimore had clearly underlined three tasks before his government – checking the rising prices, ensuring continuous supply of essential goods and giving employment to American citizens.

India focused on increasing size of the economy

In stark contrast, the debate in India is primarily focused on the growth rate of the GDP. It is not that inflation, unemployment and supply of essential goods is not discussed in India. However, the general belief is that if the growth rate is high, the other issues are automatically taken care of. Therefore, the focus is to increase the size of the economy.

Indian economists feel that the Reserve Bank of India (RBI) must play a part in increasing the size of the Indian economy by formulating flexible finance policies. If the GDP growth was 8.4%, it also means that the economy grew by 4% in size. But why don’t the Americans follow this line of thought? Are the Americans not concerned about the growth in GDP?

Only 1% population derives the benefits of a booming economy

It is in accordance with a new line of thought which says that it is not necessary that the benefits of a booming economy or growing GDP will percolate to the lower rungs of the society. If you see the latest World Inequality Report 2022, it is clear that the fruits of the booming economy go to the richest strata of the society.

The report clearly revealed that 1% of the richest strata of the society gobbled up the profits due to the economic boom supported by economic liberalization. Therefore, it is necessary that the growth should be directed to give maximum benefits to the lowest rung of the population.

Pandemic changed the employment pattern

This new line of thought is even more relevant in the Indian context. The rate of unemployment, as per the government data, says that as compared to the first quarter in 2020, the employment rate has fallen from 50.5 to 48.1 percent.

Data also reveals that temporary employment is fast replacing permanent employment. Workers are being employed on a temporary basis and benefits like EPF and social security benefits are not being given to them. This trend has started after the onset of the pandemic and employers want to negate the risk of providing relief to the workers if there is another lockdown.

This is exactly the goal of the Biden administration and the focus of the US government, which aims to get American citizens their jobs back.

Comparatively, the Indian government is also not focused on controlling the prices. It first inflated the prices of Petrol and Diesel to dizzying heights. The logic was that the money will be used to finance welfare projects. However, after a drubbing in the by-elections, the government rolled back the prices. But this is only a temporary measure. No efforts were made to control prices through sound economic planning.

America, on the other hand, is the leader of the capitalist world and its leaders have realized that the real growth will happen only when the prices of essential commodities are down, unemployment is at its minimum and essential goods are available in sufficient quantities. When these necessary conditions are fulfilled, only then can the nation be called a welfare and happy nation. Our leaders have a lot to learn from them.

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