India 'clearly has trouble’ finding new drivers of economic growth

Even as its economy expands rapidly, India „clearly has trouble” finding new drivers for its economic growth., JP Morgan’s Jahangir Aziz said following the country’s Union Budget.

If you look at India in the last two years post-pandemic, the growth recorded has been robust. But if you look at the drivers of growth, it’s basically two: public infrastructure and services exports,” Aziz, chief economist for emerging markets at JPM, told CNBC’s „Street Science Asia” on Tuesday.

Capital spending for fiscal 2025 will be 11.11 trillion Indian rupees ($133.9 billion), or 3.4% of GDP, the country’s finance minister said on Tuesday. .

According to estimates Ministry of Commerce and IndustryIndia’s services exports will touch $30.3 billion in June, up from $27.8 billion in the same month last year.

„Services exports remain at a high level and are not growing as fast as they were two years ago,” Aziz said, adding that the government should focus on increasing private investments and boosting consumption.

„It will be very difficult for India to sustain a growth rate of 6% to 7% in public infrastructure and services exports alone… The question is, can India extend its growth to consumption, but more importantly private investment? We don’t see this happening for a long time.”

India’s Chief Economic Adviser V Ananda Nageswaran on Monday said the economy is expected to grow by 6.5% to 7% in fiscal 2025, lower than the Reserve Bank of India’s 7.2% growth forecast.

According to the International Monetary Fund’s latest World Economic Outlook, the country’s growth is projected. Declines to 6.5% in 2025.

Raghuram Rajan, a professor at the University of Chicago’s Booth School and a former governor, has warned that while India will be largely driven by youth to become the world’s third-largest consumer market by 2027, high unemployment is unlikely to boost consumption. Reserve Bank of India.

The country’s unemployment rate rose to 9.2% in June from 7% in the previous month. Center for Monitoring the Indian Economy.

„You’ve seen consumption growth relatively sluggish over the last few quarters, and if people are more confident that they have jobs and that they’re good-paying jobs, you’re going to see that drag on growth,” Rajan said.

He questioned employment initiatives such as a promise to train 2 million youth over five years and a monthly wage of about 15,000 rupees ($179) for first-time workers announced in Tuesday’s budget.

„Are they as big as India needs, given the enormous concerns about unemployment?”