India’s economy to top GDP, but not much in jobs growth: Reuters poll

BENGALURU, July 24 (Reuters) – India’s economy will grow at a firm pace for the rest of this fiscal year and next but well below its potential rate, a Reuters poll of economists said, with the employment situation improving slightly.

The world’s most populous country is riding on an unprecedented demographic dividend that claims an annual gross domestic product (GDP) growth rate of around 8% for the next 25 years and wants to advance to developed nation status.

But achieving this milestone depends on implementing key reforms in education, infrastructure, health and technology.

„If we are to realize that 8% growth is possible this decade… the biggest challenge before policymakers is to shift gainful employment away from agriculture to more productive sectors,” said Dheeraj Nim, economist at ANZ Research.

„If India’s reform pace slows, a less encouraging picture is on the cards.”

A recent Reuters poll of 53 economists taken between July 13 and 21 showed India’s economy is expected to grow 6.1% this fiscal year, a respectable rate when other major economies are expected to slow.

It is projected to grow 6.5% in the next financial year, with 6.2% growth expected this quarter, followed by 6.0% and 5.5%. The outlook hasn’t changed much since the June poll.

„I think 6.0% to 6.5% is a very achievable and very conservative forecast for India’s growth trajectory,” Nim added.

World Bank President Ajay Banga recently said India’s growth story has more jobs, as he outlined the possibility of cashing in on the „China Plus One” strategy, a plan adopted by many companies to set up manufacturing units outside the People’s Republic.

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Demand VS Supply

Asked how the employment situation will change in the coming year, 17 out of 25 economists said it will improve slightly.

„The unemployment situation has not improved yet… and the skill is not there to some extent. So, there is a gap between demand and supply,” said Radhika Biplani, chief economist at DAM Capital Advisors.

Asked what impact the Production-Linked Incentive (PLI) scheme, designed to attract foreign manufacturers to set up factories in India, will have on the country’s GDP this fiscal year, 21 out of 27 economists said it would increase only modestly.

The remaining six said they would not be affected by the PLI scheme, which has allocated several billion rupees as incentives from the Union Budget in 2023-24.

„All sectors where PLI has been launched are growing, but its actual impact on underground employment – that is yet to be seen,” Piplani added.

While India still has a lot of ground to cover to replace China as the world’s manufacturing hub, some economists agree that the PLI project is a step in the right direction.

Further economic reforms could increase the project’s prospects and create millions of jobs, they added.

„Manufacturing should see strong growth, and that will only be possible if the issues preventing new investments in the sector are addressed,” said Suman Chaudhary, chief economist at Acuite Ratings and Research.

(This story was corrected to set the voting dates as July 13-21, not July 1-21, in paragraph 6)

Reporting by Miloni Prohit; Voting by Susoban Sarkar and Veronica Kongvir; Editing by Hari Kishan and David Holmes

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Our Standards: Thomson Reuters Trust Principles.

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