India’s economic growth is projected to stay strong, but challenges in job creation and private consumption persist, according to a Reuters poll of economists. Despite an 8.2% growth rate last fiscal year - one of the highest globally - there has been insufficient job creation to accommodate the increasing workforce. Private investment remains sluggish, and many job seekers are turning to government positions for stability.
Economists highlighted weak household spending and limited government reforms as reasons for weaknesses in private investment and employment growth. As a result, the benefits of growth are concentrated in the hands of a few. India's growth is expected to moderate to 6.9% this fiscal year and decline further to 6.7% and 6.6% over the next two years, respectively.
Aditya Vyas, an economist at STCI Primary Dealer Limited, emphasized the need for increased consumption and job creation to sustain growth. However, despite a recent recovery, economists warn that growth needs to consistently surpass 8% to generate sufficient employment. A majority of the economists surveyed anticipated only a mild improvement in job creation over the next year.
Manufacturing, particularly within the MSME sector (Micro, Small, and Medium Enterprises), is struggling, leading experts to predict modest job growth and continued negative real wages. Consumer spending, which represents 60% of India’s GDP, faces pressure from rising inflation, forcing households to reduce expenditures and rely on savings. When asked what will happen to private consumption in India over the next 12 months, 19 of 28 respondents said it will increase mildly, while five said it will remain the same.
While some cyclical recovery in consumption is expected, Sakshi Gupta of HDFC Bank noted that a muted recovery in rural demand poses risks. He pointed to the current uncertain global economic climate as an additional source of instability for India's domestic growth and job creation outlook.