India’s new government that takes the reins of an economy boasting a headline growth number that’s the envy of many. Gross domestic product (GDP) surged 8.2 per cent in 2023-24, the highest since 2016-17 (excluding the post-lockdown rebound). However, beneath the shiny surface lurk challenges that demand immediate attention, warn economists.
Goldman Sachs and Crisil project a moderation in growth to 6.7 per cent and 6.8 per cent in calendar year 2024 and 2024-25, respectively. This deceleration reflects concerns about the sustainability of the current pace.
A key worry is the sluggishness in private consumption expenditure, the engine of India’s growth story. It rose a mere 4 per cent in 2023-24, according to government data. Radhika Pandey, Associate Professor at the National Institute of Public Finance and Policy (NIPFP), blames high inflation and stagnant wages for this weak performance.
“The government needs to prioritize policies that boost employment and improve its quality to revive consumption,” Pandey emphasizes. Incentivizing smaller businesses to expand, she adds, is crucial for a sustained consumption uptick.
The “jobless growth” phenomenon continues to plague India. The Indian Employment Report 2024, a joint publication by the International Labour Organization and the Institute of Human Development, reveals a stark reality. Between 2012 and 2019, India’s GVA (a measure of economic output) grew 6.7 per cent, while employment creation remained abysmally low at 0.01 per cent.
The report also throws light on the precarious situation of young Indians entering the workforce. Youth unemployment, though down from 17.5 per cent in 2019 to 12.4 per cent in 2022, conceals a worrying trend. Many of these jobs, Biswajit Dhar, Distinguished Professor at the Council for Social Development, points out, were likely “distress employment” – individuals taking up any available work due to the economic slowdown.
The new government should prioritize job creation, acknowledging the electorate’s desire for dignified work opportunities, Dhar said.
“A low hanging fruit should be to encourage tourism and hospitality, and this should now be on mission mode. Increasing exports, both goods and services, will also help create more jobs,” Saugata Bhattacharya, independent economist said.
