India’s-Economy

India is showing impressive growth in economy GDP but in low employment

According to a Reuters poll of economists, India's economy will grow at a reasonable rate for the balance of this fiscal year and next, but far slower than its potential rate. The job market will also improve just somewhat.

The world's most populous country aspires to become a developed nation, riding on an unprecedented demographic dividend that necessitates annual GDP growth of around 8% over the next 25 years.

However, attaining this milestone depends on crucial education, infrastructure, healthcare, and technology improvements.

"The biggest challenge for policymakers is to reallocate surplus labor from agriculture to more productive sectors with gainful jobs," said Dhiraj Nim, an economist at ANZ Research.

"If India's reform momentum wanes, the picture will become less exciting."

According to the most recent Reuters poll of 53 economists between July 13 and 21, the Indian economy would grow 6.1% this fiscal year, a reasonable rate when other major countries are forecast to slow, preserving a favorable climate for job creation.

It was predicted to rise 6.5% next fiscal year, with 6.2% expected this quarter, followed by 6.0% and 5.5%. The forecast remained mostly unchanged from a June survey.

"I think 6.0% to 6.5% is a very achievable and very conservative forecast for India's growth trajectory," Nim said.

Ajay Banga, President of the World Bank, has stated that additional employment is the key to India's economic narrative, as he described the possibility of capitalizing on the "China Plus One" plan, a program used by many corporations to create manufacturing facilities outside of the People's Republic.

Supply vs. Demand

When asked how the job situation would alter the following year, 17 out of 25 analysts predicted a small improvement.

"The unemployment situation hasn't improved yet...and, to some extent, skilling is also lacking." So, there is a demand-supply imbalance," said Radhika Piplani, chief economist at DAM Capital Advisors.

When asked how the Production-Linked Incentive (PLI) plan, meant to entice foreign manufacturers to build up facilities in India, will affect the country's GDP this fiscal year, 21 27 analysts claimed it would only have a minor influence.

The remaining six said that the PLI program, which earmarked billions of rupees in incentives from the Union budget in 2023-24, would have no effect.

"All of the sectors where PLI has started are booming, but the actual impact of it on on-the-ground employment is yet to be seen," Piplani noted.

While India still has a long way to go before replacing China as the world's manufacturing powerhouse, some economists say the PLI plan is a step in the right direction.

More economic changes, they suggested, may boost the scheme's chances and produce millions of jobs.

"Manufacturing requires strong growth, which will only be possible if we...resolve the issues preventing new investments in the sector," said Suman Chowdhury, chief economist at Acuite Ratings & Research.