24

Aug

Youth Protests Point to Yawning Gaps in Our  Economic Development

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Masood Husain 

New Delhi | Monday | August 24, 2026

The recent agitation among students and young people has raised a fundamental question: why, despite several positive economic indicators, is India not developing as rapidly, inclusively and equitably as it should? More importantly, what is preventing the country from ensuring a basic minimum standard of living and, above all, giving its youth a credible sense of hope about the future?

One useful way of examining these questions is through the influential book Why Nations Fail: The Origins of Power, Prosperity, and Poverty by economists Daron Acemoglu and James A. Robinson. Though published several years ago, its central argument remains highly relevant to India’s developmental challenges.

The authors argue that the prosperity of nations depends not merely on natural resources, geography, technology or the size of an economy, but on how political and economic power is organised and exercised.

Institutions Determine the Distribution of Opportunity

Acemoglu and Robinson distinguish between inclusive and extractive institutions. Inclusive political institutions distribute power relatively broadly, uphold the rule of law and enable citizens to participate meaningfully in public life. Their economic counterparts protect property rights, encourage competition, expand access to education and create conditions in which people can acquire skills, establish businesses, invest and innovate.

Extractive institutions work in the opposite direction. Political and economic power becomes concentrated in the hands of a relatively small group, which uses its influence to secure wealth and privileges at the expense of wider society. Such systems may produce periods of impressive economic growth, but tend to restrict competition and innovation when new ideas or economic forces threaten established interests.

Political and economic power are therefore closely interconnected. Political institutions shape the rules governing economic activity, while accumulated wealth can strengthen political influence. This can create a vicious cycle in which concentrated political power produces concentrated economic wealth, which in turn reinforces political dominance.

The lesson is significant for India. Its developmental problems cannot be explained simply by poverty, lack of resources, geography or historical disadvantages. These factors matter, but they do not by themselves determine a nation’s destiny. Institutions and the manner in which power is distributed can be equally decisive.

The Challenge of Creative Destruction

Perhaps the most important aspect of the authors’ argument concerns technological change and what economists call creative destruction.

Economic development necessarily involves new technologies, businesses, industries and ideas replacing older ones. Society may benefit from this transformation, but established economic and political interests can lose wealth, influence or status.

This creates a tension between innovation and entrenched interests. Those who benefit from existing arrangements may prefer gradual changes that preserve their position rather than transformations that create new centres of economic and political power.

This perspective is particularly relevant to a young country such as India. India possesses enormous human talent, entrepreneurial ability, technological expertise and a large domestic market. Yet these strengths do not automatically translate into broad-based prosperity. The problem may sometimes lie not in a lack of talent or opportunity, but in whether institutions allow opportunities to be accessed widely and fairly.

India’s own history provides grounds for both optimism and concern. At independence, the country was poor, faced severe resource constraints and inherited enormous developmental challenges. Yet it established democratic institutions and, over the decades, achieved substantial economic progress.

China offers a contrasting example. Its extraordinary transformation demonstrates that rapid growth can occur under an authoritarian political system. At the same time, its experience raises a broader question: can rapid growth remain sustainable over the long term without institutional accountability, wider participation and an environment conducive to independent innovation?

The larger issue for countries such as India is therefore not simply how fast an economy can grow, but whether the institutions supporting that growth remain sufficiently open and competitive.

GDP Growth Is Not the Whole Story

Headline GDP figures tell only part of the story. A country can achieve impressive economic growth while large sections of its population continue to face inadequate employment opportunities, unequal access to education and healthcare, weak social mobility and economic insecurity.

The crucial question is: Who benefits from growth?

India’s development cannot be judged only by the size of its economy, infrastructure projects or headline growth rates. The strength and independence of institutions, the rule of law, political accountability, competition, corruption, access to education, social mobility and the concentration of economic power are equally important measures of national progress.

A healthy democracy requires more than periodic elections. It also requires institutions that protect citizens’ rights, prevent excessive concentrations of power and ensure meaningful opportunities to participate in economic and political life.

This is where the recent youth protests acquire significance beyond the immediate issues that may have triggered them. They reflect broader concerns about employment, opportunity, social mobility and the fairness of the economic system.

When young people begin to feel that education does not guarantee opportunity, hard work does not guarantee economic security and economic growth does not necessarily translate into an improved quality of life, the problem goes beyond unemployment or any individual government policy. It becomes an institutional question.

India’s Developmental Test

The central issue for India is not whether the economy is growing. It clearly is. The deeper question is whether the institutions governing that growth are creating opportunities for the many or disproportionately protecting advantages for the few.

This does not mean that institutions are the only forces shaping development. Geography, culture, education, technology, natural resources and international conditions all matter. Nor is it easy for societies to transform institutions that have become deeply entrenched.

India has no shortage of talent, ambition, entrepreneurial energy or technological capability. Its challenge is to ensure that its institutions do not prevent these resources from being used to their full potential.

The recent protests by young people make this challenge particularly urgent. They should not be viewed merely as isolated expressions of dissatisfaction. They point to deeper concerns about employment, social mobility, economic security and the fairness of opportunity.

Ultimately, the real measure of development is not merely how rapidly the economy grows, but how widely the opportunities created by that growth are shared.

If India is to realise its enormous potential, economic progress must be accompanied by institutions that promote competition, accountability, social mobility and meaningful participation.

The aspirations of its youth are perhaps the clearest test of whether that transformation is actually taking place.

( By training an engineer , Mr Masood Hussain was chairman of the Central Water Commission and member of several technical committees. Widely travelled he occasionally writes on development-related topics)

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