Unemployment Problems, India Needs to Create 8 Million Jobs Annually

Context

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

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• Additionally, Gita Gopinath, IMF’s First Deputy Managing Director, estimates between 60 to 148 million additional jobs cumulatively by 2030.
• This translates to an annual job creation need of 10 to 24 million.

Global Economic Challenges

• 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.

Inflation Targeting in Developing Economies

• 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.

India’s Economic Growth and Potential

• 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.

Policies for Economic Growth and Job Creation

• 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.

Impact of Artificial Intelligence (AI)

• 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.

Global Currency Dynamics

• 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.

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