Indian economic outlook improves as inflation eases
The Indian economy is improving, thanks to increases in private consumption and a strong public sector capital expenditure, according to the Reserve Bank of India’s (RBI) latest State of the Economy report.
Despite a depressed global economy, the report flagged “a new risk to global financial stability”, with crude oil prices hitting a 10-month high, due to Saudi Arabia and Russia extending production cuts to the end of 2023.
“The strength of the US dollar… is also making crude prices higher. Global inflation is once again under siege as deep deficits in global oil balances become persistent unless global demand is hit by a sharp economic downturn,” said RBI Deputy Governor Michael Debabrata Patra in the report. “Dispelling this global gloom, the Indian economy is picking up steam and strength.”
India’s retail inflation, which fell in August on the previous month’s figure, is expected to fall again in September, the report said.
Headline inflation, as measured by year-on-year changes in the Consumer Price Index (CPI), fell to 6.8% in August, down from 7.4% in July. This, however, was still outside the RBI’s goal of inflation of between 2%–6%. Food inflation fell to 9.2% year-on-year in August, from 10.6% in July.
Gross domestic product (GDP) growth for the first quarter of 2023-24 came in at 7.8%, led by domestic drivers – private consumption and fixed investment – which offset “the negative spill from net exports”, the report said.
Looking forward, a key indicator on how the economy will fare will be how inflation evolves, with expectations of a sharp fall in September, on top of the August’s fall, giving grounds for optimism.
India’s consumer market is expected to become the world’s third largest by 2027, with household per capita spending outpacing all other developing economies in Asia, the report said.
Regular employment growing, new report finds
On the employment front, the number of workers with regular wage has increased since 2004, with the country creating three million regular jobs annually till 2017 and five million jobs between 2017 and 2019, according to the new ‘State of Working India 2023: Social Identities and Labour Market Outcomes’ report.
Written by economists and researchers at Azim Premji University, which is located in Bengaluru, the report added that, since 2019, the pace of regular wage jobs creation decreased due to economic slowdown and the pandemic.
The researchers found that only 6% of these jobs provided any kind of social security, including health or accident insurance.
The number of men working in regular jobs, where salaries are provided on a fixed date in a month or fortnightly, has grown from 18% to 25% over the period studied, and from 10% to 25% in the case of women.
The report said gender-based earnings disparities have also been cut in the past 20 years. “In 2004, salaried women workers earned 70% of what men earned. By 2017, the gap had reduced, and women earned 76% of what men did. Since then, the gap has remained constant till 2021-22,” the researchers said.
The report said that since the pandemic, the unemployment rate was lower than it was pre-Covid for all education levels. “But it remains above 15% for graduates and more worryingly it touches a huge 42% for graduates under 25 years,” it said, adding that the rate of women unemployment was rising due to a “distress-led increase in self-employment”.
It added: “Before Covid, 50% of women were self-employed. After Covid this rose to 60%. As a result, earnings from self-employment declined in real terms over this period. Even two years after the 2020 lockdown, self-employment earnings were only 85% of what they were in the April-June 2019 quarter.”
The report is based on the data sourced from National Statistical Organisation’s surveys, census reports, periodic labour force surveys and other government sources.
