Economists polled by Reuters highlighted that the most significant economic hurdle facing the Indian government post the ongoing elections is unemployment, despite expectations of robust growth of 6.5% in the current fiscal year for the world’s fastest-growing major economy.
Despite outpacing its peers in economic expansion, India has struggled to generate adequate employment opportunities for its large and burgeoning young workforce, emerging as a critical issue for citizens amidst the electoral process.
In an April 16-23 Reuters poll, 15 out of 26 economists identified unemployment as the primary challenge post-election, followed by concerns regarding rural consumption, inflation, and poverty.
Kunal Kundu, India economist at Societe Generale, underscored the declining labour force participation rate in India compared to other Asian economies, highlighting the need for a more robust strategy to leverage India’s demographic potential, while expressing concerns over the existing employment drivers such as infrastructure, manufacturing, and government jobs failing to drive substantial job creation.
Although Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) had previously pledged to enhance job creation since assuming power in 2014, the reality indicates that the unemployment rate has seen minimal improvement over recent years.
Recent data from the Periodic Labour Force Survey indicates a marginal decrease in the unemployment rate from 3.4% in 2013-14 to 3.2% in 2022-23, while the Centre for Monitoring Indian Economy reported a higher rate of 7.6% in March.
While job generation remains subdued, an uptick in capital expenditure by the government contributed to a stronger-than-expected economic growth of 8.4% in 4Q23.
The survey estimates the economy expanded by 6.5% in the last quarter and 7.6% in the previous fiscal year ending on March 31. Projections suggest a growth of 6.5% in the current fiscal year and 6.7% in the subsequent year, indicating a persistent concern over the unemployment issue despite India’s notable economic growth trajectory.
