Unemployment Problems, India Needs to Create 8 Million Jobs Annually

Table of Contents

Context

India needs to create close to 8 million new jobs annually for the next decade, according to the Economic Survey.

Stable Global Growth: Gita Gopinath notes a stable global growth rate of 3.2% for this year and 3.3% for the next year.
Inflation Concerns: While inflation is decreasing globally, it remains a significant concern until fully stabilised without impacting economic activities.
Geopolitical Risks: Increased tensions in regions like the Middle East could potentially raise oil prices, impacting global commodity prices and economic stability.
Political Uncertainty: The ongoing global political climate, marked by numerous elections, could affect economic policies and thereby global growth.
Medium-term Growth Outlook: Projections for global growth in the medium term are weak, averaging close to 3% compared to a 3.8% average over the past two decades.

Effectiveness of Inflation Targeting: Gopinath supports the inflation-targeting regime, noting its success in anchoring inflation expectations globally and in India, helping to contain secondary inflation effects such as those from volatile food prices.
Flexibility in Policy: The regime allows flexibility, acknowledging factors outside monetary policy control, such as supply shocks from global events.

Strong Growth Rates: India is currently experiencing high GDP growth rates, about 7% this fiscal year, making it one of the fastest-growing major economies.
Comparison with China: While direct comparisons are challenging, India’s growth trajectory could potentially mirror China’s historical economic expansion if it continues with significant reforms.
Need for Job Creation: Between now and 2030, India needs to create between 60 to 148 million jobs to sustain growth and improve per capita income levels. This requires broad-based growth across various sectors, not just a few.

Corporate Investment and Labor Market Flexibility: Encouraging more corporate investments and creating a flexible labour market are crucial for broad-based economic growth and job creation.
Regulatory Environment: Improving the business climate by reducing red tape is essential for fostering business dynamism, especially in states like Gujarat and Tamil Nadu which attract significant foreign investment.
Labour and Trade Reforms: Implementing new labour laws and reducing trade restrictions can help integrate India more fully into global supply chains, boosting job creation.
Human Capital and Agricultural Productivity: Investing in education and skills training is crucial for meeting industry demands. Additionally, raising agricultural productivity can help shift labour to more productive sectors.

Potential impact: Around 25% of Indian workers could be exposed to AI.
Positive impacts: AI can address skill shortages, improve education, and enhance public finance management.
Negative impacts: Some sectors, like call centres, may experience job losses.
Broad-based reforms: Essential to mitigate negative impacts and maximise benefits of AI.

Dollar’s dominance: Result of strong US institutions, open markets, and trust.
Benefits of currency strengthening: Improving macroeconomic stability, financial markets, and exchange rate convertibility can bring advantages.
Focus on fundamentals: Strengthening the domestic economy is key, regardless of currency dominance.