Mint | India's employment challenge: 20 million jobs need to be created each year

A number of analysts attribute the Bharatiya Janata Party’s (BJP) underperformance in the general election to voter unhappiness with the Narendra Modi government over unemployment, job reservations and farmer livelihoods. 

The Agnipath scheme of military recruitment came in for criticism during the election campaign and many political commentators expect that the new government will be compelled to make changes to it. We should view interpretations of election results with some scepticism, but it does appear that the issue of inadequate employment opportunities has bubbled up to the surface of our political ocean.

Read the full article here.

Deccan Herald | Time for Structural Reforms

The World Economic Outlook brought out by the IMF in April did not project an optimistic economic scenario for the global economy. The world economy is estimated to grow at 3.2 per cent in 2024 and 2025, which is the same rate as it was in 2023. Read the full article here.

The Hindu | India-China consumption comparison

In 2023, India surpassed China to become the world’s most populous country. The development came against the backdrop of a declining birth rate (6.4 births per 1,000 people) and total fertility rate (~1%) in China. China also recorded a negative population growth rate for the first time in six decades. This means a rising dependency ratio, which is projected to increase over time. In contrast, India’s population, despite reaching replacement levels (total fertility rate of 2.1), is expected to grow and peak around 2060. Read the article here.

Divide Forex Reserve Into Two Components

The United States (US), European Union (EU) and several countries have imposed a raft of punitive measures on Russia for invading Ukraine. One of the more serious forms of sanctions has been the freezing of the Russian central bank’s assets held in foreign-denominated currencies. When a country earns more foreign exchange (forex) than it spends, it moves the surplus into its reserve account for future contingencies. These reserves are not held in physical currency, but in different forms of financial assets such as gold and debt instruments (bonds and bills) of foreign governments. Countries prefer to invest in currencies that are liquid (easily convertible), widely accepted and trustworthy. The US dollar fits all these criteria.

A retreat from global trade will hurt India’s geopolitical stature

Almost a year ago, this column had warned that the economic slowdown that India was experiencing would have a negative impact on India’s geopolitical standing, because it is “presumptuous to expect countries and companies to be sympathetic to India’s political interests if they do not see an economic upside". “Sheer momentum will allow Indian foreign policy to tide over a mild, short slowdown. If, however, we go into a deep, prolonged slump, we should expect a tough time in international relations." This was before the COVID pandemic began. Events and India’s own policy choices since then have worsened the prognosis.

With an economic recovery distant, rising trade restrictions, and a reluctance to participate in a wider geopolitical contest against China, India risks undermining its relevance as a world power. For its part, Beijing is unlikely to miss any opportunity to push its hegemonic agenda further and box New Delhi into a sub-subcontinental role. The international environment that was so conducive to India’s developmental and political interests over the past three decades might turn against us within the next couple of years. One has only to recollect the experience of the 1970s and 80s—when import and foreign exchange restrictions, international sanctions and foreign sympathy for domestic insurgencies kept us on the back foot and dissipated our strategic establishment’s energies—to conclude that the government should do everything possible to avoid a similar plight.Read More

Lockdown Is Choking The Economy

When the national lockdown was imposed, with four hours notice, the country had less than 200 positive cases and a two percent fatality rate. The world marvelled at India’s determination in imposing such a strict control on a billion people.  Two months later, the number of virus positive cases is nearing 1.5 lakh and the fatality rate has inched up to 3 percent. Now the world is not so sure whether the strict lockdown has achieved what it set out to do.The stated goal was to “flatten the curve”, that is decrease the upward slope of the spread of the virus. Since the virus mainly spreads from people to people contact, the method was to isolate people in their own homes, observe social distancing, restrict movement.Three fourth of the economy was shut down. It was as if collectively the nation was holding its breath. But after holding our breath for two months, we are feeling breathless, the economy is choking, having run out of its oxygen. The four-hour notice given on March 24, also meant that people did not have any time to plan their own lockdown. Many families suddenly found themselves separated, since one or two members were stuck in a different city due to office duty.Read more

Indian economy needs structural reforms & behavioural change, not macroeconomic jargon

Okay, the Indian economy is in a slowdown and it is absolutely important for us to quickly get back onto the path of high growth. Economic output is the sum of consumer expenditure, investment, government expenditure and net exports. The best way to increase growth is to increase all four of the above. There is a need for technical discussion among macroeconomists, financial analysts, business journalists and policymakers, but it cannot be the only show in town.Read more

Slow economic growth is both immoral and anti-national. Don’t ignore falling GDP rate

Having convinced ourselves that the Narendra Modi government’s policies cannot be at fault, we are now debating whether the economic slowdown that began in 2017 is cyclical or structural. More than three million people emerge out of poverty for every percentage rise in GDP. The Indian economy will have to grow at over 10 per cent per annum every year to become a five-trillion-dollar economy by 2024. The RBI now projects a growth rate of 6.9 per cent for the next year.Read more