India’s economy will grow at a solid pace for the rest of this fiscal year and next, but well below its potential rate, according to a Reuters poll of economists who also said the employment situation will improve only slightly. The world’s most populous country aims to move into developed nation status, taking advantage of the unprecedented demographic dividend, which calls for an annual gross domestic product (GDP) growth rate of around 8 percent over the next 25 years. But reaching this milestone depends on the implementation of key reforms in education, infrastructure, healthcare and technology. “If we want to achieve that 8 percent growth potential in this decade… the biggest challenge facing policymakers is to reallocate surplus labor from agriculture to more productive sectors with gainful employment,” Dhiraj Nim said. , economist at ANZ Research.
“If India’s reform drive is lackluster, a less exciting outlook looms.”
The latest Reuters poll of 53 economists conducted between July 13 and 21 showed that the Indian economy would grow 6.1 percent this fiscal year, a respectable rate when other major economies are expected to slow, maintaining a conducive environment for job creation.
It was forecast to grow 6.5 percent next fiscal year, with expectations of 6.2 percent growth this quarter, followed by 6.0 percent and 5.5 percent. The outlook was largely unchanged from a June survey.
“I think 6.0 to 6.5 percent is a very achievable and very conservative forecast for India’s growth trajectory,” Nim added.
World Bank President Ajay Banga recently said the key to India’s growth story is creating more jobs, describing the opportunity to capitalize on the “China Plus One” strategy, a plan adopted by many companies to build manufacturing units outside the People’s Republic.
DEMAND VS SUPPLY
When asked how the employment situation will change over the next year, 17 of 25 economists said it will improve slightly. “The unemployment situation has not improved yet… and to some extent skills are also lacking. So, there is a gap in terms of demand versus supply,” said Radhika Piplani, chief economist at DAM Capital Advisors. When asked what impact the Production Linked Incentives (PLI) scheme, designed to attract foreign manufacturers to set up factories in India, would have on the country’s GDP this fiscal year, 21 of 27 economists said it will only increase it. modestly.
The remaining six said the PLI scheme, which allocated billions of rupees as incentives from the Union Budget in 2023-24, will have no impact. “All the sectors where PLI has started are booming, but the actual impact of that on employment on the ground is something that remains to be seen,” Piplani added. While India has much further to go to replace China as the world’s manufacturing hub, some economists acknowledged that the PLI plan was a step in the right direction. More economic reforms could bolster the plan’s prospects and create millions of jobs, they added.
“Manufacturing needs to see strong growth and that will only be possible when… we solve the problems preventing new investments in the sector,” said Suman Chowdhury, chief economist at Acuite Ratings and Research.