Slowing economy and growing unemployment are the twin challenges facing the NDA government as it takes guard for a second term after securing a resounding public mandate. Prime Minister Narendra Modi’s move to set up separate Cabinet committees, under his leadership, is an acknowledgement of the urgency to address these key issues. A five-member Cabinet Committee on Investment and Growth is likely to brainstorm on steps to push the growth momentum and increase investment in key economic sectors like infrastructure and agriculture. And, another 10-member Cabinet panel on Employment and Skill Development is likely to explore ways to create more jobs. Unemployment and the economy were pitched as major issues by the opposition parties during the campaign in the recent general elections. However, the BJP took complete control of the campaign narrative by focusing on muscular nationalism and security, thereby relegating the economy to the background. The disappointing growth figures, kept under wraps till the completion of the elections, were announced a day after Modi was sworn in. The economy grew at its slowest in 17 quarters, touching 5.8% in the first three months of 2018-19. The figure was down from 6.6% in the last quarter of 2018. It means that India is no longer the world’s fastest growing major economy. India has fallen behind China’s pace for the first time in nearly two years. What came as a double-whammy was the unemployment rate, pegged at 6.1%. This was at a 45-year low.
Though the government maintains that the comparison with the past figures was unfair as the present calculation was based on a new design and a new metric, there is no denying the fact that the economy has slowed down, jobs have dwindled and agrarian distress has deepened. A major push is needed to carry forward the reforms in finance, banking, labour, land and other sectors to unlock the potential and kick-start the growth process focusing on jobs, education and healthcare. Unemployment is by far the biggest challenge. Nearly 20 million youth are ready to enter the workforce every year in India and to address this influx the country needs to create nearly 55,000 jobs every day for the foreseeable future. To create jobs on that scale, the economy needs a double-digit growth. A major stumbling block to achieving this growth is India’s poor infrastructure despite efforts by successive governments in the past two decades to create world-class infrastructure. The immediate task before the government is to stimulate demand in the economy and uplift investment sentiments. Spending needs to be stepped up to build more roads, invest more in infrastructure, cut taxes, reduce interest rates, boost exports and catalyse domestic demand.