Editorial: A mixed bag
Despite all the growth talks and positive outlook, growing unemployment remains a major area of concern for India
The Indian economy presents a contrasting picture; robust fundamentals and optimistic growth projects on the one hand while on the other, shrinking job opportunities for the struggling middle and lower-middle class and widening disparities. Amid hectic campaigning for the Lok Sabha elections, the country is witnessing multiple and often contradictory narratives on the state of the economy. The ruling dispensation, quoting various international agencies, is focusing on how the economy has fared better than expected and the momentum is likely to continue, despite the volatility of the global economy. The National Statistical Office’s second advance estimates have pegged growth for the full year at 7.6%. As per the International Monetary Fund’s Regional Economic Outlook report, India has been a “source of repeated positive growth surprises”. There are expectations of the growth momentum continuing this year as well. In its recent World Economic Outlook, the IMF has upped its growth projections to 6.8% in 2024-25, from its earlier projection of 6.5%. The Reserve Bank of India too is optimistic. In the last monetary policy committee meeting, it projected growth at 7%. The Asian Development Bank has also upped its estimate of growth this year to 7% while the World Bank has pegged the economy to grow at a marginally lower rate of 6.6% in its recent South Asia Development update. Rating agency Crisil expects growth at 6.8%. This range of GDP growth estimates from 6.5% to 7% does suggest that the Indian economy is likely to remain the fastest growing large economy in the world.
However, growing unemployment remains a major area of concern. The share of educated youths among all unemployed people increased from 54.2% in 2000 to 65.7% in 2022 according to the latest figures by the International Labour Organization. There has also been no significant growth in real wages since 2014. The country risks squandering its ‘demographic dividend’ — the economic growth potential from a big working-age population. The unemployment problem is a symptom of larger and deeper issues — employability and job creation, and, therefore, also education, ease of doing business and infrastructure. Manufacturing’s share as a percentage of GDP has remained stagnant in the last decade despite a few incentive policies unveiled by the government. The lack of a large-scale industry means half of India’s population still depends on agriculture for their livelihoods — which is increasingly becoming unprofitable. At 3%, the growth in overall private consumption expenditure — the money people spend on buying things — is the slowest in 20 years. Creating more productive forms of employment opportunities for the millions entering the labour force each year should be the top priority for the government. Experts like former RBI Governor Raghuram Rajan have questioned India’s reported economic growth figures, suggesting that the actual growth rate might be much lower than claimed.
