Rate Cuts, Rising Markets, and the Forgotten Majority?

It’s a peculiar paradox of our times that while India’s economy posts glowing numbers on paper, most of its citizens feel no tangible change in their daily lives. The Reserve Bank of India, in its latest monetary policy move, cut the repo rate by 50 basis points. The business media called it decisive. The stock markets cheered, with indices scaling new peaks. Economists dissected it in familiar language — credit transmission, liquidity easing, and growth impulses. And yet, outside the controlled air of boardrooms and television studios, it’s hard to find anyone genuinely relieved.

But amidst all this, one fundamental question remains buried under the flood of economic jargon and stock market records: for whom is this economy working? Who benefits when rates fall and capital becomes cheaper? And why does it feel, for most ordinary Indians, that these economic ‘victories’ never arrive at their doorstep? The dissonance between macroeconomic celebration and ground-level stagnation is not a glitch in the system — it is the system.

The popular narrative claims that lower interest rates make credit cheaper, boost investment, and stimulate economic activity. But in a country where a vast majority of middle- and lower-income citizens can’t access formal credit at all, this is little more than an academic platitude. The reality on the ground is that banks remain reluctant to lend to small borrowers. Most people in the informal sector or lower-middle class find themselves locked out of institutional finance. They are left at the mercy of NBFCs, microfinance firms, or informal moneylenders who charge predatory interest rates far beyond what monetary policy can influence. The supposed benefits of rate cuts never reach them.

The reasons are systemic: lack of collateral, absence of formal income proof, and an entrenched bias in lending towards organised, corporatised businesses. Indian banks have long been skewed in favour of large corporates, business houses, and politically connected entities. Even when they default, banks find it difficult to recover. But a poor borrower or a small business owner without paperwork isn’t even offered a seat at the table. It’s no surprise, then, that monetary policy in India often feels like a performance staged for the benefit of a financial elite who can leverage low rates, while the rest remain invisible in policy discussions.

This brings us to the deeper crisis haunting the Indian economy — weak consumption. Consumption demand, which drives nearly 60% of India’s GDP, remains worryingly subdued. Real wages are stagnant, job growth is anemic, and inflation has cooled not because supply is abundant, but because people lack the purchasing power to spend. Low inflation in this context isn’t a victory. It’s a symptom of economic distress.

Small businesses, once the backbone of India’s employment generation, are now struggling to survive in an increasingly monopolised market. The rise of corporate behemoths and online giants offering steep, unsustainable discounts has squeezed the margins of local traders, manufacturers, and service providers. In sector after sector — retail, logistics, consumer goods — large players with deep pockets are capturing market share at the expense of unorganised vendors and SMEs. The entry of conglomerates into every imaginable sector is systematically dismantling the competitive ecosystem. This is not the ‘creative destruction’ Schumpeter once theorised as essential to capitalist renewal. It is unchecked market concentration — what political economists today call monopoly capitalism.

Meanwhile, policy institutions celebrate record GST collections. At first glance, this might appear as evidence of a buoyant economy. But it demands a closer look. GST, by design, is an indirect tax. Unlike income tax, it is levied uniformly on consumption, regardless of a buyer’s income. This makes it a regressive tax structure, disproportionately impacting lower-income groups. When GST collections hit record highs amidst low wage growth and weak job creation, it should raise alarms, not applause. It signals increased financial extraction from citizens without a commensurate rise in incomes or public welfare benefits.

This taxation burden, coupled with stagnant real incomes, leaves most households with little discretionary spending power. The so-called ‘formalisation’ of the economy has, in practice, transferred tax burdens downward while concentrating profits upward. The historical function of taxation, as theorised in classical political economy by figures like Adam Smith and later Karl Marx, was to balance state revenue needs with public welfare obligations. In contemporary India, however, taxation increasingly appears as a mechanism of resource transfer from citizens to corporate capital via state policy.

Adding to this fragile economic edifice is the quiet but relentless march of artificial intelligence and automation. While India’s demographic dividend was once touted as its greatest economic asset, the country now finds itself unprepared for a labour market upheaval. Automation threatens routine jobs not just in IT and BPO services, but across retail, logistics, financial services, and even blue-collar sectors. With no serious national policy conversation about labour displacement, reskilling, or a universal social safety net, the implications are ominous. The dystopian future scenario that political theorists like David Harvey and Guy Standing have warned of — where precarious labour becomes the norm, and permanent employment a relic — may well be India’s emerging reality.

And yet, amidst this grim scenario, stock markets continue to soar. It’s a phenomenon neither unique to India nor difficult to explain. Global capital liquidity, speculative trading, and wealth concentration have decoupled financial markets from real economies worldwide. In India, a tiny fraction of citizens actively participate in equity markets. For them, capital gains provide a personal economic buffer. But for the vast majority, market rallies are an alien event — numbers on a television screen bearing no relation to their lived economic realities.

Monetary policy alone, in such a fractured economic landscape, is powerless to address structural inequality. As Keynes taught nearly a century ago, during periods of weak demand and income disparity, fiscal policy must intervene decisively. India, however, has exhibited a persistent reluctance in this regard. Despite surging GST collections, government social spending on health, education, employment, and food security remains anaemic relative to needs. Instead, fiscal conservatism is passed off as prudence, and economic management reduced to deficit figures rather than real indicators of public welfare.

The problem isn’t one of fiscal capacity — it’s one of ideological orientation. The Indian state today increasingly functions as a market-enabling entity rather than a welfare-guaranteeing institution. This inversion of the classical postcolonial social contract — where the state was meant to ensure equity while facilitating growth — marks a significant political shift. Citizens are no longer treated as beneficiaries of public policy, but as passive consumers within an economic system optimised for capital accumulation.

It’s not a question of whether growth is happening. The issue is for whom, and at what cost. A nation’s economic health cannot be judged solely by GDP growth rates or stock market indices when a vast majority of its citizens struggle to access credit, secure employment, afford healthcare, and find basic economic security. If economic victories exist only on corporate balance sheets and trading terminals, while streets, towns, and homes reel under unemployment, inequality, and financial exclusion — it’s a crisis of both governance and morality.

The very legitimacy of governance in a democratic society lies in the idea of a social contract. Citizens confer power upon the state in return for security, welfare, and equitable opportunity. But when economic policy becomes a private negotiation between the government, financial markets, and big business — leaving out the middle class, informal sector, and poor — it amounts to a breach of that contract. The great political theorist John Rawls argued that a just society is one in which inequalities are arranged so they benefit the least advantaged. By this measure, India’s economic order increasingly resembles its opposite.

India's economy today is at risk of becoming a two-tiered system: one where capital is cheap, markets are buoyant, and profits concentrated for the top 10%; and another where employment is precarious, consumption remains muted, and access to formal credit or public services is a daily battle for the remaining 90%. What emerges is a regime of extractive modernisation — a phrase fittingly used by sociologists to describe economies where growth is achieved by extracting more from the many to enrich the few.

The argument isn’t against growth, or even market dynamism. It’s against a model that systematically excludes the majority while celebrating indicators that serve only the privileged. A society cannot sustain itself if its policies consistently favour capital over labour, corporations over communities, and tax extraction over welfare distribution.

The time has come to ask whether our obsession with repo rates, fiscal deficits, and Sensex points has blinded us to the more important question: what is the purpose of economic growth? And for whom is it intended? If a nation’s economic institutions cannot ensure dignified employment, financial security, affordable education, and basic public welfare for its citizens, then stock market highs and record GST collections are hollow victories.

In the absence of a radical fiscal push — one that redistributes resources, creates public employment, protects small businesses, ensures universal social security, and regulates corporate monopolies — India’s economy risks entrenching a dangerous inequality trap.

There’s still time to course-correct. But it requires courage: to rethink fiscal priorities, to challenge corporate monopolies, to demand accountability from policymakers, and to reaffirm the principle that in any modern economy, people — not capital markets — must come first.