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Earlier this month, researchers at Citigroup painted a less-than-rosy picture of India’s briskly expanding but deeply uneven economy — one which has struggled to seize the opportunities of its demographic bulge.
The bank’s economists estimated that even if India’s real GDP continues to grow at a clip of 7 per cent, the country can only generate up to 9mn jobs a year — falling short of the roughly 12mn needed to absorb its youthful labour force.
“With the risk of automation and mechanisation lowering employment elasticity even further, a higher than 7 per cent GDP growth is required to satiate India’s job needs,” they wrote in a stark analysis coupled with detailed policy recommendations.
As India tries to position itself as an alternative manufacturing rival to China, the focus on employment shortfalls remains a sore spot for Prime Minister Narendra Modi’s government. Despite trumpeting India’s growing global status, frustration over jobs appears to have cost his Bharatiya Janata party at the ballot box where it was eased out of its parliamentary majority in June.
“It’s a sensitive topic, especially after the election,” said one Indian banker.
So when Citi’s report was picked up and amplified across the media, India’s Ministry of Labour & Employment issued a “rebuttal” against the Wall Street lender, which it said “fails to account for the comprehensive and positive employment data available from official sources”.
Coincidentally, the Reserve Bank of India had chimed in earlier that day. For the first time the central bank released provisional, rather than historic, data that estimated the country added 46.7mn jobs in the fiscal year that ended in March, overshooting private surveys.
Even though Citi had included government and central bank data in its forecasts, the quality of India’s economic data has been questioned, including the official unemployment rate of 3.2 per cent that some argue shrouds serious levels of low-productivity underemployment.
Many analysts instead cite numbers from the Centre for Monitoring Indian Economy, a Mumbai think-tank, which estimates an 8.2 per cent joblessness rate and startling youth unemployment of more than 40 per cent. They believe this presents a more realistic picture.
More widely, some analysts say the government’s denunciation of Citi speaks to its sensitivity towards even constructive criticism.
Hemindra Hazari, an independent banking analyst in Mumbai, said it is “very difficult” to do any form of critical research in the country. Write negatively about companies and government officials and “they won’t give you meetings with your institutional clients, they won’t accept your invitations for conferences”, he said. “Everybody practises self-censorship . . . it’s a highly incestuous world, globally also, India more so.”
Those who have had the temerity to suggest that not all is well in Modi’s amrit kaal — his often cited Sanskrit phrase meaning “time of nectar” — say they have felt the consequences.
One Indian fund manager told me they faced intense regulator scrutiny after a television interview in which they questioned the economic sense of Modi’s sudden act of demonetisation in 2016, which removed much of India’s currency from circulation.
A more recent furore emerged when Amit Syngle, chief executive of Indian decorative group and economic barometer Asian Paints, suggested that the country’s growth statistics weren’t reflective of weaker realities on the ground.
“GDP correlation has really gone for a toss in the current year,” he told analysts during a May conference call. “I am not very sure as to how the GDP numbers are coming.”
Syngle’s comments were picked up by India’s opposition during the county’s elections. It prompted the company to later state the CEO had been “misinterpreted” and had “not, in any way, meant to question the sanctity of the GDP numbers”.
Some brave economists remain willing to stick their necks out. A day before India’s annual budget, Société Générale published a note stating: “India’s employment challenge is real”.
It’s a message Modi’s government seems to be taking on board after its poor electoral showing. Finance minister Nirmala Sitharaman last week outlined plans to spend Rs2tn ($24bn) on a batch of job creation measures, training schemes and employment incentives that would begin “generating ample opportunities for all”.
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