Economic dichotomy of Modi's India: high growth, weak jobs

ECONOMIC DICHOTOMY OF MODI'S INDIA: HIGH GROWTH, WEAK JOBS

Unemployment remains a primary concern for Indian voters, more than any other election issue, according to several surveys as polling kicked off last week in one of the world's fastest growing economies.

Jobs data in India is inconsistent as no official real-time numbers are available, but putting together several different sources suggests that there is indeed an unemployment problem, said Shumita Deveshwar, chief India economist for GlobalData.TS Lombard, in a note.

"India's job market was already in the midst of a slowdown before the pandemic hit, and has since been lagging the broader recovery in economic growth."

Meanwhile, recent a report by International Labour Organization (ILO) and the Institute for Human Development showed that 83% of the total number of unemployed people in India were youths. And they noted that high unemployment rates amongst the educated youth reflected "a mismatch with their aspirations and available jobs."

"Even though government numbers show the labour market recovering, the scale of unemployment is likely much worse than the numbers suggest as most people are engaged in low quality jobs, including unpaid work and economically inefficient rural employment," Deveshwar said.

The lacklustre labour market, according to the GlobalData.TS Lombard note, helps explain why private consumption growth lags, especially in rural areas, despite the South Asian country's strong growth.

"While Prime Minister Narendra Modi's re-election for a third successive term seems imminent, it increases the pressure on him to create more jobs to sustain India's high GDP growth," said Deveshwar, cautioning that policy complacency and a loss of will to reform under his rare third term could be a risk.

For instance, Modi government's ongoing second term was the worst-performing for Foreign Direct Investment (FDI) reforms since the mid-1990s, according to the Centre for Strategic and International Studies, a US-based think tank.

(Bansari Mayur Kamdar)

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