Finance minister Arun Jaitley said the government’s highest priority right now is to create new jobs for the millions of young people that are entering the workforce every year in India.
Jaitley cited employment generation, slowdown in investments and the impact of the US Federal Reserve’s move to restore normal monetary conditions on emerging economies as the three policy challenges before the government. He was speaking in Washington on Saturday at a meeting of the International Monetary and Finance Committee (IMFC), the panel that advises the International Monetary Fund (IMF), according to a statement from the Indian finance ministry on Sunday.
Despite the Narendra Modi government’s emphasis on job creation—it swept to power in 2014 pledging to create millions of jobs—its performance on employment generation has been dismal. As the ruling Bharatiya Janata Party eyes general elections in 2019, the government is stepping up efforts to find jobs for the nation’s rapidly expanding workforce.
“For creating more jobs in the traditional way, manufacturing and construction sectors have to improve. These two sectors have not been doing well in the recent past. We also need to restore the competitiveness of sectors such as textiles, gems and jewellery, which contribute to job creation. We need to act fast on these,” said D.K. Joshi, chief economist at rating agency Crisil Ltd.
IMF managing director Christine Lagarde was optimistic about India’s medium-term prospects. She told reporters on Saturday that despite a slight lowering of growth projections for India for the current year and the next, the multilateral agency sees “a very solid track ahead for the Indian economy” for the medium term, according to a transcript of a press conference made available by IMF.
IMF had on 10 October cut its growth estimate for the Indian economy by 0.5 percentage point to 6.7% for 2017, blaming the aftershocks of last year’s demonetization exercise and the rollout of the goods and services tax (GST) in July. Lagarde said IMF believes India is on a growth track for the medium and long term that is much more solid as a result of the structural reforms in the past two years.
“We very much hope that the combination of fiscal, because the deficit has been reduced, inflation has been down significantly, and the structural reforms, will actually deliver the jobs that the Indian population, particularly the young Indian people, expect in the future,” said Lagarde.
Jaitley said India is currently one of the few large economies in the world in a “virtuous phase of its demographic transition and the most important priority of the government is to find ways to provide employment to the 12 million young people entering the workforce annually”.
He also conveyed to the US authorities concerns of Indian IT professionals’ related to H-1B visas that they need to work in America. “Those coming from India on H-1B visas are high-value professionals, who contribute immensely to the US economy. They are not illegal economic immigrants, about whom there are concerns in the US. They come here legally,” news agency PTIreported from Washington, citing Jaitley. The minister raised this issue in his meetings with US treasury secretary Steven Mnuchin and commerce secretary Wilbur Ross, PTI reported.
At the IMFC discussions, Jaitley said that finding ways to revive investments is critical to sustain global growth, for which collective and coordinated action was needed.
In Washington, Jaitley also highlighted the issue of cyber threats to the interconnected global financial system.
Jaitley, who also attended the annual meeting of the World Bank during his visit to the US, said the short-term adverse impact of GST and demonetization has mostly been overcome.
While the high value currency ban impacted liquidity of small enterprises, GST imposed a high compliance burden on them.
“Recent data in manufacturing sector indicate that India’s growth story is soon getting back to its normal course,” the finance ministry statement quoted Jaitley as saying.
India’s industrial output rebounded strongly to a nine-month high of 4.3% in August as companies stepped up production ahead of the festival season, the Central Statistics Office had said on Thursday.