Modi 3.0 has got inflation & growth right but jobs, land reforms are still a challenge

Time of India

a day ago

Narendra Modi government completes 11 years with strong economic growth. Inflation is under control and forex reserves are ample. However, job creation and private investment remain concerns. Experts say land and labor reforms are crucial. Political stability may help revisit reforms. Free trade agreements could pose challenges without reforms. The government needs to address these issues.
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What helped? Lower oil prices, fiscal discipline
Private investment and jobs remain pain points
Reforms on hold, but political stability may help
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As Prime Minister Narendra Modi enters in his 12th year leading the government, India's economy stands on solid macroeconomic foundations, but economists warn that generating jobs and reviving private investment will be key challenges in the years ahead, TOI has reported.With GDP growth averaging 6.2 per cent over the past 11 years (2014-15 to 2024-25), and inflation largely within the Reserve Bank of India 's (RBI) comfort zone, the government has pointed to a decade of fiscal prudence and economic stability. If the distortions of the COVID-19 pandemic years (2020-21 contraction and 2021-22 rebound) are excluded, the average growth rate stands at a healthier 7.1 per cent.Even though, the World Bank has brought down India's growth projection at a steady 6.3 per cent, New Delhi continues to be the fastest growing economy in the world, ready to get past the growing global uncertainties.'The economy delivered an average growth of 6.2% and an inflation rate of 5% over the last 11 years, despite the pandemic,' TOI quoted Crisil chief economist DK Joshi as saying. 'The economy is currently in a healthy shape with inflation under control, corporates and banks having healthy balance sheets, a low current account deficit, and ample forex reserves. Rains and crude oil prices, which are luck factors, are expected to be favorable this year. We expect India's GDP to grow at 6.5% in fiscal 2026, with risks tilted to the downside due to weak global prospects amid heightened uncertainty.'Inflation during the Modi years averaged 5 per cent, compared with 8.1 per cent under the previous UPA government. While part of this can be attributed to better food price management and more responsive supply chains, economists also credit global factors, particularly lower crude oil prices.On June 10, 2014, when Modi took office, the Indian crude oil basket cost $107 per barrel (Rs 6,331 per barrel at Rs 59.26/$). Eleven years later, it stood at $67.38 per barrel or Rs 5,711 at Rs 85.60/$, a drop of nearly 11% in rupee terms.Siddhartha Sanyal, chief economist and head of research at Bandhan Bank , highlighted the Centre's cautious approach to spending.'India demonstrated exemplary commitment to fiscal prudence and discipline over the last one decade despite the unprecedented Covid shock. Accordingly, India's public debt profile turns out to be a strong advantage today, much in contrast to the current global trend. Lower public debt, along with better anchored inflation and current account deficit, political stability and strong domestic demand amidst the current uncertain global economic environment, has enormously enhanced India's attractiveness as a preferred investor destination over the past decade.'Despite the macroeconomic optimism, the biggest concern going forward is the lack of private sector investment and sluggish job creation. Corporates are yet to expand capacity in a meaningful way, a move seen as essential to creating new jobs, particularly in the organised sector.Experts say the government must revive key reforms to unlock private capital. Land acquisition laws and labour flexibility have long been seen as barriers to business investment. Early efforts in 2014 to ease land acquisition rules met with political backlash and were shelved. On labour, the government passed four major codes, but has yet to notify them, citing delays from opposition-led states.Technology and the rapid rise of AI have further complicated job creation, especially in sectors where automation is replacing entry-level roles.With the BJP reliant on coalition partners after the recent election, bold reforms like strategic disinvestment and asset monetisation, key tools for funding capital expenditure, have been pushed to the back burner. However, a surge in political confidence post-election may now allow the government to revisit these decisions.India has been negotiating several free trade agreements , which are expected to bring down tariffs. Experts warn that unless land and labour reforms are addressed in parallel, Indian industry may struggle to compete under these FTAs.(With inputs from TOI)