2024-07-29 23:00:12
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Earlier this month, researchers at Citigroup offered a grim picture of India’s economy, saying it was growing rapidly but was severely unbalanced and struggling to seize opportunities brought about by a booming population.
The bank’s economists estimate that even if India’s real GDP continues to grow at 7%, the country will only be able to create a maximum of 9 million jobs a year, far short of the approximately 12 million jobs needed to absorb its workforce. Young Workforce.
“As automation and mechanization are likely to further reduce employment elasticity, India’s GDP growth rate will need to be above 7 percent to meet employment demand,” they wrote in a scathing analysis and detailed policy recommendations.
As India tries to position itself as an alternative manufacturing competitor to China, job shortages remain a sore spot for Prime Minister Narendra Modi’s government. Despite India’s much-vaunted push to promote its growing global role, the jobs issue appears to have cost the Bharatiya Janata Party electoral defeat, with the party losing its parliamentary majority in June.
“It’s a sensitive topic, especially after the elections,” said one Indian banker.
So when the Citigroup report was picked up and exaggerated by the media, the Indian Ministry of Labor issued a “refute” Accusing the Wall Street bank of “failing to explain the broad, positive employment data provided by official sources.”
Coincidentally, the Reserve Bank of India also weighed in earlier in the day. The central bank released provisional data rather than historical figures for the first time, estimating that the country added 46.7 million jobs in the fiscal year to March, higher than a private survey showed.
While Citigroup has incorporated government and central bank data into its forecasts, questions remain about the quality of India’s economic data, including an official unemployment rate of 3.2%, which some believe masks severe low-productivity underemployment.
Many analysts instead cite data from the Mumbai think tank Centre for Monitoring Indian Economy, which estimates India’s unemployment rate at 8.2% and youth unemployment at more than 40%, which they say reflects a more realistic picture.
More broadly, some analysts said the government’s rebuke of Citigroup showed it was sensitive to constructive criticism.
Hemindra Hazari, an independent banking analyst in Mumbai, said it was “very difficult” to conduct any kind of critical research in India. If you say negative things about companies and government officials, “they won’t invite you to meetings with institutional clients or accept your invitations to meetings,” he said. “Everyone is self-censoring… It’s a highly chaotic world, globally and even more so in India.”
Those who dare to claim that things are not going well with the Modi government Amrit Kher – The Sanskrit phrase he often quoted means “the nectar moment.” — Indicates they are already feeling the consequences.
One Indian fund manager told me that they faced intense scrutiny from regulators in a television interview after they questioned the economics of Mr. Modi’s abrupt 2016 demonetization move, which removed much of India’s currency from circulation.
Amit Singhal, chief executive of Indian decor group and economic barometer Asian Paints, caused the recent uproar by saying India’s growth statistics did not reflect a weaker reality.
“The GDP correlation is really problematic this year,” he told analysts on a conference call in May. “I’m not quite sure what the GDP number is going to look like.”
Singhal’s comments were raised by India’s opposition during the country’s election campaign, prompting the company to later say the CEO’s words had been “misinterpreted” and that “he had absolutely no intention of questioning the reliability of the GDP data”.
Some brave economists are still willing to take risks. The day before India’s annual budget was released, French bank Societe Generale published a report saying: “India’s jobs challenge is real.”
Modi’s government appears to be buying into that message after a poor electoral performance. Finance Minister Nirmala Sitharaman last week outlined plans to spend 2 trillion rupees ($24 billion) on a range of job-creation measures, training programs and employment incentives that will begin to “create ample opportunities for all.”
chris.kay@ft.com
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