Global Courant 2023-04-17 13:32:47
India is in the world by some estimates most populous country and one of his most youthful. But as the population and economy grow – the International Monetary Fund forecasts the economy to grow at 6.1% this year, one of the fastest in the world – so does the unemployment rate.
Unemployment stood at 7.45% in February, up from 7.14% in January. And estimates show the rate rising to 7.80% in Marchincluding 8.51% in urban areas.
Creating stable jobs for Indian youth is a top challenge for Prime Minister Narendra Modi’s government. Nine out of 10 employees are in the informal economy. According to the World Bank, women’s labor force participation is in 2021 was 23%.
Not only is this low compared to global standards, but it is turned down even as India has become richer. To be sure, the government has tried to formalize the economy and increase women’s participation.
New Delhi is now in a precarious position as the rising unemployment rate threatens to upend a burgeoning economy. To harness India’s economic potential, several challenges – both geopolitical and domestic – lie ahead.
The first is structural. Unlike Asia’s Tiger economies, which were largely based on export-oriented manufacturing, India’s is dominated by services. Also the export of services, of which information technology is the largest component generate an export surpluswhich helps cushion India’s current account deficit.
These industries mostly support white-collar jobs that cannot absorb most of the Indian youth. Manufacturing, which is meant to create more jobs, was 14% of GDP in 2021after services (47.5%) and agriculture (16.8%).
The Modi government has “production incentives”, which aims to provide approximately US$25 billion in subsidies to boost production in 14 sectors, including semiconductors. No doubt this is also motivated by geopolitics as India seeks to grab some of the profits created by Western democracies disconnecting supply chains from China.
Consensus elusive
That creates the second challenge for the government. Unlike the Asian Tigers, who were autocratic regimes, India is still a democracy, albeit with flaws. Like the government’s failed attempts to deregulate agricultural markets as 2021 has shown, it will be difficult to implement economic reforms without first reaching a broad political consensus.
Unfortunately, institutions in India that needed to build such a consensus, such as regulatory and oversight bodies, parliament and media, are now increasingly following the government’s line.
although strongly rejected government watchdogs for global democracy have recently lowered India on their indices.
Linked to this is the third challenge, which is how India consistently invites high levels of foreign investment. Recent allegations of financial fraud against the Adani Group also cast slander on the regulatory ecosystem.
these accusations, currently under investigation by an independent panel in India, did not boost investor confidence. How, then, will India attract the foreign capital it desperately needs to finance its manufacturing boom?
The fourth challenge is the nature of government-corporate relations, which has allowed for the concentration of economic power in a few conglomerates. Unlike the Asian Tigers, the government’s favored domestic champions are more focused on the local market than on exports. This should not lead to a boom in manufacturing jobs.
The 2023 federal budget sent conflicting signals to Indian startups: the budget extended tax holidays period for startups, but brought foreign capital under the scope of a tax on capital raised by startups, derisively referred to in the media as a “angel tax”, further restricting access to foreign capital.
Fifth, job growth needs a stable social fabric. There have been uprisings under Modi’s Hindu nationalist government, which has been in power since 2014 incidents of violence and hate speech, most of which targeted religious minorities.
Last year, the Indian Supreme Court had to three state governments to order the police to take action against hate speech. A former governor of the Central Bank of India warned in 2017 that pursuing populist nationalism would harm economic growth.
I may be feeling this, as India is hosting the Group of Twenty, Modi this year instructed members of his Bharatiya Janata Party (BJP) in January to reach out to religious minorities.
Low and declining participation of women in the labor market may have baffled economists, but sociologists have long done so pointed to conservative patriarchal views as a contributing factor. Like it insist on same-sex marriage a pending Supreme Court case showed that the government reverts to its conservative base on important social issues.
Rising middle power
Finally, India is a hedge power in the current geopolitical competition between the US and its allies on the one hand and China and Russia on the other.
As of 2020, India has limited Chinese investment after deadly military clashes on their disputed border. It remains to be seen to what extent the US, European Union and Japan can leverage their private sector to invest in India. This explains why India has chosen to pursue strategic relations with several countries in the Persian Gulf region in addition to crude oil and labor.
However, these investment plans sometimes get stuck rough weather because of India’s domestic politics. Resolving these challenges while preserving the ruling BJP’s popularity with voters will be a complicated knot for the government to untangle.
The government has rolled out a large welfare delivery system linked to digital platforms and a nationwide biometric ID program. But long-term income redistribution will only keep people afloat. Only well-paid, stable jobs can lead to more social stability, entrepreneurship and innovation.
India will need to unlock its economic potential if it is to maintain its strategic independence as a hedge power amid ongoing geopolitical turbulence.
Creating jobs for its people is an important part of this puzzle.
This article is provided by Syndication Bureauon which the copyright is based.
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