Unemployment emerges as top concern in India despite economic growth: Reuters poll

As India’s elections continue, economists polled by Reuters have identified unemployment as a major economic challenge despite the country’s status as the world's fastest-growing economy.

The consensus among economists indicates that while India is supposed to achieve a growth rate of 6.5 per cent this fiscal year, the failure to generate adequate employment opportunities remains a pressing issue, especially considering its increasing young population.

According to the Reuters poll conducted from April 16 to 23, the majority of economists, 15 out of 26, noted unemployment as the primary challenge awaiting the government post-election.

Kunal Kundu, an economist at Societe Generale, noted the decline in India's labour force participation rate (LFPR) over the past decade, attributing it to discouraged workers.

He warned that without a comprehensive strategy to boost employment, India is at the risk of wasting its demographic advantage.

Statistics have indicated a marginal improvement in the unemployment rate over recent years.

Data from the Periodic Labour Force Survey reveals that the unemployment rate, which stood at 3.4 per cent in 2013-14, marginally decreased to 3.2 per cent by 2022-23.

Nevertheless, the Centre for Monitoring Indian Economy reports a contrasting figure, with the unemployment rate soaring to 7.6 per cent in March.

Despite the grim picture regarding job creation, the government's increased capital expenditure contributed to an 8.4 per cent growth in the economy during the October-December quarter.

Economists project a growth rate of 6.5 per cent for the last quarter and 7.6 per cent for the fiscal year ending on March 31.

However, sustaining the growth witnessed in the previous year presents challenges.

According to Reuters, Alexandra Hermann of Oxford Economics warns against complacency, noting that last year's growth was largely propelled by government spending, which may not be sustainable due to fiscal constraints.

While there are indications of the economy's strength pushing into 2024, the need for fiscal prudence could temper the pace of growth.

Despite these concerns, institutions such as the International Monetary Fund (IMF) have revised India's growth forecast upwards, signalling an optimistic outlook.

The majority of economists surveyed anticipate economic growth to surpass expectations this fiscal year.

Among discussions of economic performance, inflation remains a focal point.

Consumer price inflation, standing at 4.85 per cent in March, is forecasted to average 4.5 per cent over the current and subsequent fiscal years.

However, a major portion of economists, 19 out of 28, express concerns that inflationary pressures may exceed current projections.

(Inputs from Reuters)