Amid sputtering global conditions, India has emerged the world’s fastest-growing major economy, outpacing China.
A World Bank report has said emerging market economies that led the global recovery from the 2007-08 financial crisis are slowing down, with one exception — India. It has called India-led South Asia a “bright spot” in an otherwise gloomy outlook for emerging markets. In recent months, the phrase has been used regularly to describe India.
India is poised to grow at 7 to 7.75% in 2016-17 after growing at an average 7.4% in the previous two years, ahead of China’s 6.9% expansion in 2015.
National income, or gross domestic product (GDP), has crossed the $2 trillion mark joining the elite group of the globe’s richest economies.
That said, two key concerns remain: jobs and inflation.
While the broader economy’s recovery is consistent, it requires to be more evenly spread, analysts have said.
“Our heat-map of high-frequency data indicates that the economic recovery remains uneven,” Nomura, a broking and research firm, said in a recent report. “Divergence between weak private investment and rising consumption (urban) and slowing industry versus a relatively robust service sector continues,” it said.
Reserve Bank of India (RBI) governor Raghuram Rajan, too, has said the recovery is uneven. “Broadly, the economy is in the midst of a recovery but it is uneven… Some sectors are certainly experiencing stress. There is still work to be done. A good monsoon is going to be very beneficial for growth,” he said in Odisha on Saturday.
The central bank’s focus, he said, was on creating an environment for strong, sustainable growth and generate more jobs.
The Modi government is struggling to add more jobs, one of the big promises it rode to power on in 2014. Employment generation in eight sectors slowed to a seven-year low in 2015, the government data has showed.
Textiles, leather, metals, automobiles, gems and jewellery, transport, information technology and handloom sectors together created 135,000 jobs during 2015, 67% lower than the 421,000 jobs that were added in 2014, the last year of the UPA government.
Creating employment for armies of young people — about 12 million people join the job seekers’ queue in India every year — also remains a key challenge.
On the price front, the main inflation rates have broadly remained low over the last two years, aided partly by fall in global oil prices, but pulses are a worry. A key source of protein for most Indians, prices of pulses are now at a five-year high in some parts of the country hit by storms last spring and successive droughts.
The silver lining, however, is that despite two back-to-back droughts, India’s retail inflation rate — the broadest metric to track changes in shop-end prices — has remained consistently below 6% since October 2014. It was 5.39% in April.
This year’s monsoon rains are critical for the broader economy. While normal rains will act as a strong check on inflation through plentiful food stocks, a patchy monsoon could hamper the recovery by threatening to crimp food output and raise prices. The good news is an above normal monsoon has been predicted this season, so let it rain.