India’s rising growth rate in recent years did not align to formal sector jobs and labour market participation, said the International Monetary Fund (IMF) in its report.
India has elevated millions out of poverty being the world’s fastest-growing economies, however, recent labour market data reveals that unemployment is high while labour force participation has gone down, particularly in women, said the IMF’s report on its annual consultations with India released in Washington on Monday.
“Without more inclusive and sustainable growth, India’s potential demographic dividend over the next few decades, from its young and rapidly-growing labour force, could be wasted,” warned the report.
The report pointed out that regulatory uncertainty is the cause for slowing growth of the Indian economy on the deceleration of consumption and investment that was made worse by.
It added that the comparatively low food prices added to “rural distress”.
While talking to media, the IMF Mission Chief for India, Ranil Salgado, said that other factor that contributed to this comprises of “abrupt reduction in non-bank financial companies’ (NBFC) credit expansion and the associated broad-based tightening of credit conditions'” and a few issues with implementing “important and appropriate structural reforms, such as the nation-wide goods and services tax (GST).”
India is now in the middle of a important economic slowdown and the IMF was reworking downwards the growth forecast it had made of 6.1 percent for the current year and 7 percent for the next year, he said.
Furthermore, the IMF report said, “Over the medium term, growth is projected to gradually rise to its medium-term potential of 7.3 per cent” helped by a firming in investment and private consumption in the second half of the fiscal year.
“This is expected to be supported by the lagged effects of monetary policy easing, recent measures to facilitate monetary policy transmission and address corporate and environmental regulatory uncertainty, and government programs to support rural consumption being rolled out,” it said.
The report added that other contributing factors helping to attain an improvement would include “continued commitment to inflation targeting, gradual macro-financial and structural reforms, including implementation of reforms initiated earlier, such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), as well as ongoing steps to liberalise FDI (foreign direct investment) flows and further improve the ease of doing business.”
Salgado said that in a bit to get the growth rate going again, “ways to boost confidence in the economy” and a “substantial structural reform agenda to kind of reinvigorate confidence will be very helpful”.