India’s top-heavy boom and the lesson for Bangladesh
During my 14 months as Minister (Press) at the Bangladesh High Commission in New Delhi, I observed India more from metro rails, trains, buses, provincial roads, and a daily dose of discussions with my colleagues in the diplomatic circle and journalistic peers from the Indian media.
Personal travel and official work took me across Uttar Pradesh, Uttarakhand, Rajasthan, West Bengal, Andhra Pradesh and Himachal Pradesh. I spent long hours reading newspapers, watching television, speaking with journalists, researchers, and policy professionals in Delhi, and observing how ordinary citizens moved through the economy.
The impression was consistent. India possesses enormous capability, but it also carries a deep structural imbalance. It is a country of scale without enough spread and wealth without enough diffusion. And also a country with very large ambitions without sufficient economic architecture.
The dominant global story is flattering. India is now the world’s fourth-largest economy, with output above $4 trillion. Growth has often ranged between 6% and 8%. Its stock market has surged. It landed a spacecraft near the Moon’s south pole. Its digital payments network is admired internationally.
Western capitals increasingly view India as a democratic counterweight to China. None of this is false. But none of it is sufficient. Behind the aggregate numbers lies a more difficult truth. India’s growth model has become top-heavy.
The central weakness is straightforward. India has generated elite wealth, urban enclaves of modern prosperity and globally competitive service industries. It has not generated enough broad middle-income employment. The country moved too quickly toward a service-led economy before completing industrialisation.
In doing so, it skipped the stage that, elsewhere, historically created stable mass prosperity: labour-intensive manufacturing at scale.
Every year, roughly 10-12 million young, educated Indians enter the workforce. That is comparable to adding a country the size of Belgium to the labour market annually. No nation can absorb such numbers through software parks, finance offices and high-end services alone.
India has generated elite wealth, urban enclaves of modern prosperity and globally competitive service industries. It has not generated enough broad middle-income employment. The country moved too quickly toward a service-led economy before completing industrialisation.
It needs factories, warehouses, construction supply chains, transport systems and medium-sized enterprises capable of hiring by the thousand. India’s economy has not produced enough of them.
Official labour statistics and private estimates differ, but the broad picture is unmistakable. Youth unemployment remains high, especially in cities and among graduates. Urban youth unemployment has often been in the mid-to-high teens. In some regions, female youth unemployment has been dramatically higher.
Yet even these figures understate the problem because India suffers heavily from disguised unemployment: several family members sharing work that would productively occupy one person. They are counted as employed, but they are not economically advancing.
Stagnation in proper placement
Nothing captures this scarcity better than recruitment frenzies for low-level public jobs. In 2022, Indian Railways announced around 35,000 vacancies. More than 12 million people reportedly applied—roughly one opening for every 357 applicants. When exam rules changed, protests erupted in Bihar and elsewhere. This was a classic labour-market distress.
In Uttar Pradesh, more than 93,000 applicants reportedly sought 62 peon posts in 2024, many of them graduates, engineers and postgraduates. These are jobs involving basic clerical support, file movement and errands. When highly educated youth compete in such numbers for messenger-level work, GDP headlines become less persuasive. Families have paid for degrees, but the economy has not created matching opportunities.
Economists call this jobless growth: rising output without sufficient employment creation. India has become one of its clearest large-scale examples. Capital-intensive sectors such as finance, telecoms, digital platforms, and automated manufacturing can rapidly boost GDP while adding relatively few jobs. Shareholders gain faster than workers.
Historically, countries that lifted hundreds of millions out of poverty followed a different route. Britain, Germany, Japan, South Korea, Taiwan and China all industrialised first. Rural labour moved into factories, productivity rose, exports expanded, and a mass middle class emerged. Vietnam is now following that path. Bangladesh has done so, in part, through garment exports. India was expected to do the same. It did not do enough of it.
In 2014, the Indian government launched “Make in India”, promising to turn the country into a manufacturing hub. The ambition was to raise manufacturing’s share of GDP from around 16% to 25%. A decade later, manufacturing’s share remained well below target and by some measures slipped closer to 13%-14%. India did not merely miss the goal; it struggled to change direction.
That is the heart of India’s missing middle. At the top sit giant conglomerates such as Reliance Industries, Adani Group and Tata Group. At the bottom sit millions of tiny workshops, traders and household enterprises employing five or fewer people. What is scarce are large mid-sized factories employing 500, 2,000 or 10,000 workers and linked to export supply chains.
During the global “China Plus One” shift, multinationals seeking diversification did not move overwhelmingly to India. Many expanded in Vietnam, Mexico and Bangladesh. Vietnam, with a population under 100 million, has become a major exporter of electronics, footwear, leather accessories and apparel. Bangladesh, despite far fewer resources, built a garment export machine exceeding $45bn annually in recent years.
India lost ground in precisely the labour-intensive sectors that could have employed millions: textiles, leather goods, footwear, toys and light engineering. The reasons are practical. Land acquisition can be slow and politically contentious. Power reliability varies by region. Ports and logistics have improved but remain more costly than those of best-in-class Asian competitors.
Contract enforcement through courts can take years. Regulatory burdens remain dense. Medium firms often spend disproportionate time on compliance rather than expansion.
An Observer Research Foundation study found more than 69,000 compliance requirements for doing business in India, with over 26,000 carrying imprisonment clauses. A mid-sized manufacturer can face hundreds of annual filings, inspections or procedural obligations. Under such conditions, staying small is often rational.
That is the heart of India’s missing middle. At the top sit giant conglomerates such as Reliance Industries, Adani Group and Tata Group. At the bottom sit millions of tiny workshops, traders and household enterprises employing five or fewer people. What is scarce are large mid-sized factories employing 500, 2,000 or 10,000 workers and linked to export supply chains.
Those firms built China’s middle class. They remain too few in India.
Inequality at its peak
Wealth concentration has widened the imbalance. According to the latest Forbes rankings, Mukesh Ambani remains India’s richest person with a net worth of about $97.9bn, while Gautam Adani follows with roughly $63.8bn. India now has 229 billionaires, up from 205 the previous year, and their combined wealth has crossed $1 trillion for the first time. The top ten richest Indians alone control around $368bn.
On inequality, the broader picture remains stark. Estimates from the World Inequality Database and Oxfam indicate that the top 1% of Indians own around 40% of national wealth, while the bottom 50% own only around 3%. Exact percentages vary by methodology and year, but the trend in concentration is consistent.
World Inequality Database and Oxfam indicate that the top 1% of Indians own around 40% of national wealth, while the bottom 50% own only around 3%. Exact percentages vary by methodology and year, but the trend in concentration is consistent.
Consumption patterns reflect this divide. Mercedes-Benz India has posted record sales. Ultra-luxury apartments in Gurugram and Mumbai sell out quickly. Yet entry-level motorcycles, small tractors and low-cost fast-moving consumer goods have often seen sluggish rural demand.
Companies have reported weak village sales volumes, meaning poorer households are cutting back not on luxuries but on staples and inexpensive treats.
The service sector, long India’s pride, cannot fully offset these weaknesses. For three decades, IT services created one of India’s clearest success stories. Infosys, TCS and Wipro built global businesses on coding, consulting and back-office support. They created an urban middle class and reshaped cities such as Bengaluru and Hyderabad.
But artificial intelligence now threatens some of the very entry-level tasks that sustained this model. Studies in advanced economies have found falling demand in occupations most exposed to generative AI. Hiring at major Indian IT firms has slowed sharply. Routine coding, customer service and standardised support work are increasingly automatable.
India built much of its middle class by becoming the world’s back office. The back office is now changing.
Agriculture remains another drag. Roughly 45%-50% of the workforce still depends on farming, while agriculture contributes around 15%-18% of GDP. Too many people compete for too small a share of national income. Holdings have fragmented across generations; a once-viable ten-acre farm may become several one-acre plots.
Such land is hard to mechanise and often unprofitable. Debt cycles and price volatility intensify distress.
India’s welfare architecture partly cushions these failures. The government provides free food grains to around 800 million people—close to 60% of the population. Ethically, such support is justified where hardship persists. Economically, it is also revealing. If growth were translating into secure incomes broadly enough, such dependence would be smaller.
Education adds another fracture. India produces graduates at scale, but many employers report that graduates are poorly prepared. Some employability studies have claimed that a large majority of engineering graduates require substantial retraining. Polytechnic outcomes are also uneven.
Students often gain credentials without marketable skills. Families borrow or liquidate assets to finance degrees that do not guarantee mobility.
This creates what sociologists call waithood: young adults no longer students, not yet securely employed, waiting through repeated exams, coaching centres and temporary gigs. Across north India, tea stalls and rented rooms are full of candidates preparing for delayed government recruitment tests that may never transform their lives.
Lessons for Bangladesh
Bangladesh should study this carefully. Our own economy has grown strongly, averaging around 6% for much of the 2010s. Garment exports rose from roughly $12 billion in 2009 to above $45 billion in recent years. Around four million workers, mostly women, gained factory employment. Poverty fell sharply, life expectancy rose above 73 years, infant mortality declined, and female participation in paid work increased.
Bangladesh benefited from precisely the labour-intensive manufacturing route India underused. Millions moved from subsistence dependence toward wage income, and that wage income financed schooling, rural housing, small businesses and consumption. Few policy choices in South Asia have produced a larger social return than integrating low-income women into export manufacturing.
India has generated elite wealth, urban enclaves of modern prosperity and globally competitive service industries. It has not generated enough broad middle-income employment. The country moved too quickly toward a service-led economy before completing industrialisation.
Yet Bangladesh also shows top-heavy tendencies. Garments account for around 80%-85% of merchandise exports, leaving the country vulnerable to recessions in Europe and North America, compliance shocks, buyer concentration and changes in global trade rules. A narrow export basket is profitable until demand turns.
Banking-sector stress remains chronic, with high levels of non-performing and repeatedly rescheduled loans that weaken confidence and starve productive firms of credit. The tax-to-GDP ratio has often been below 9%, among the lowest in comparable emerging economies, limiting state capacity in health, education, transport and urban management.
Dhaka property values have surged to levels comparable to those of many European and North American capitals, while many districts remain dependent on remittances, informal trade, and low-wage work. This is a classic sign of distorted capital allocation: money chasing land rather than machinery, skills or technology.
Like India, Bangladesh has many microfirms and a few large groups, but too few medium industrial exporters outside garments. Pharmaceuticals are a bright spot, as are ceramics, footwear, bicycles, light engineering and shipbuilding niches, yet none has matched apparel at scale.
The lesson is clear: Bangladesh now needs a second-generation growth model built on diversification. That means stronger ports, cheaper logistics, more reliable power, cleaner bank balance sheets, vocational training, deeper capital markets and easier scaling for medium enterprises. It also means moving up the garment value chain into design, branding, synthetic fabrics and technical textiles rather than relying mainly on basic cut-and-sew production.
India still has formidable strengths, including a vast domestic market, entrepreneurial energy, English-language capabilities, digital infrastructure, and geopolitical relevance. It is not collapsing. But resilience is not a strategy. If jobless growth, weak manufacturing depth, educational mismatch and extreme inequality persist, the superpower narrative will remain incomplete.
India has two decades before demographic ageing becomes more pronounced. That is the window to build factories, simplify regulations, improve the courts, upgrade skills, and widen opportunities. Without those reforms, India may grow larger without becoming broadly rich, more visible without becoming more balanced, and more powerful abroad while remaining brittle at home.
Bangladesh also has a narrower window than many assume. The demographic dividend will not last indefinitely. Fertility has fallen sharply, the population is gradually ageing, and the economy will face rising pressure to create higher-productivity jobs before wage competitiveness erodes. That means the next fifteen to twenty years are critical.
This is the period to diversify exports, reform banks, modernise tax administration, improve courts and contract enforcement, expand technical education, and make cities more liveable and productive. Without those reforms, Bangladesh may grow bigger (like India) without becoming significantly richer, urbanise without becoming efficient, and export more without developing real industrial depth.
The country’s progress over the past two decades is substantial and real. But, as India’s example shows, growth alone does not guarantee balance, resilience or lasting prosperity.
Faisal Mahmud is a Dhaka-based journalist. He was the former Minister (Press) of the Bangladesh High Commission in India.
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