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Why Indian Voters See Jobs as the Election’s Biggest Issue

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Why Indian Voters See Jobs as the Election’s Biggest Issue

As India’s marathon election kicked off its first voting phase last Friday, April 19, unemployment was looming large in the minds of millions of voters—despite the country’s rapid economic growth. Since Indian Prime Minister Narendra Modi came to power in 2014, economists have been quick to serve India on a silver platter as a powerful rival to China, particularly for its global manufacturing, investment, and growth capabilities. Investors have reason to feel bullish: between 2014 and 2023, India’s GDP grew by 55%, overtaking countries like the U.K., France, Italy, and Brazil to become the world’s fifth-largest economy. The IMF projects it will likely expand by 6.3% this year—no small feat for a trillion-dollar economy.

According to Indian economist Ajit Ranade, the economy has gained momentum from longer-term factors: “Number one is, of course, the demography,” he says. With an average age of 29 years, India has one of the youngest populations globally, which means that “there’s a large, youthful labor force that’s expanding and a virtuous cycle of people who are going to be looking for jobs, earning, spending, consuming, investing, saving, paying taxes, and so on,” says Ranade.

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Yet, a pre-poll survey by CSDS-Lokniti, a Delhi-based research institute, found that nearly half the electorate sees unemployment and rising prices as the two biggest concerns this election, an indication that India has not yet reaped the economic benefits of this group. As a result, economists say Modi’s government—if it comes back to power for a third term—will now need to find new ways to take advantage of its demographic dividend.

What the numbers show

India has struggled with low job creation over the past decade, with the worker-to-population ratio declining from 38.6% in 2011-12 to 37.3% in 2022-23, according to the government’s labor force surveys. The government has also struggled to create jobs for unskilled and poor workers, with only 20% of Indians currently working in manufacturing or IT services, while over 40% remaining in agriculture, according to the UN University World Institute for Development. What’s more, Indian economist Jayati Ghosh notes that any benefits accrued from India’s economic growth have been unequally distributed among the top 10-20% of income earners. 

But nowhere is the unemployment crisis felt more acutely than by the 8 million young and educated Indians who enter the workforce every year—undercutting the long-held belief among Indians that having an education would guarantee them a job. According to a recent report from the International Labor Organization (ILO), 83% of India’s unemployed population is young, while 66% are young and educated. What’s more, the ILO found that those without university degrees or even full schooling had a higher employment rate. The result is what the ILO calls “paradoxical improvements” to India’s labor participation rate, workforce participation rate, and unemployment rate.  

Yet the numbers—which are still difficult to measure accurately since the government hasn’t released any consumption figures from consumer expenditure surveys typically conducted every five years—don’t fully reflect the unique situation of India’s labor workforce. 

“In the Indian case, a very large percentage of the workforce is in the informal sector, meaning that many of them are working without a contract, don’t have social security or insurance, or are self-employed,” says Ranade. 

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Why investment in India sees sluggish growth

When East Asian economies like Korea, Malaysia, and China reached a similar stage to India’s development in the past, it was mostly due to export-led growth in textiles, garments, or electronic assembly. But even an expanding labor force doesn’t lead most Indian workers to find productive, higher-paying, and higher-quality jobs. “We have not seen the same kind of phenomenon because India did not aggressively embrace labor intensive exports as a big driver of growth,” says Ranade.

There’s a history behind why: After the country gained independence from British rule, it began implementing more protectionist economic policies out of suspicion of international trade and colonial exploitation. That included self-reliance in the capital goods sector and heavy investment in Indian railways, steel companies, and nuclear power. It was, says Ranade, “an import substitution-led model.” Much later, India recognized how international trade could be beneficial. Between 1988 and 1991, it began embracing economic liberalization policies to deregulate industry, pushing industrial growth to a hefty 9.2%.

Read More: India’s Income Inequality Is Now Worse Than Under British Rule, New Report Says

Since then, however, too much regulation around the large-scale industry and relatively cheaper capital compared to labor has slowed down progress. According to Barclays research, investment exceeded 40% in 2008 but currently stands at 34%. “The ironic thing is that the share of manufacturing in India’s GDP has barely moved an inch since 1991,” says Ranade.

Under the Modi administration, “three man-made economic disasters”—demonetization, a “somewhat haphazard” implementation of GST, and pandemic-related lockdowns—have contributed to this, according to Reetika Khera, a professor of economics at the Indian Institute of Technology in Delhi. “Each of these has had a devastating impact on different sections of the economy, especially the vulnerable,” she says.

Voters are worried about the bigger picture

The government’s inability to create more jobs has been surprising, given that Modi has touted an ambitious “Make in India” program to help ease the burden of doing business in India for over a decade. Another production-linked incentive scheme launched by the government in November 2023 aimed to kickstart manufacturing by offering industrial incentives to boost domestic production. In this year’s federal budget, the government set aside another $134 billion for capital spending to build roads, ports, airports, and railways—mirroring what China did more than three decades ago for economic expansion, 

But when the ruling Bharatiya Janata Party unveiled its election manifesto four days before the country’s 960 million voters began casting their ballots, it made little mention of what kind of economic policies Modi would pursue in a third term in power. But economists say that’s worrying, since India’s per capita gross domestic product (GDP) hasn’t raised the quality of life for most Indians. According to the World Bank, India currently ranks 147 for its living standards, despite economic growth which projects its economy to become the third-largest in the world by 2027. “The mere growth in the aggregate income of the whole economy is not good enough because it is not diffused to all sections of society,” says Ranade. Instead, the gains have disproportionately gone to India’s elite, or the top 10%.

The government has supplemented the lack of jobs and per capita income by becoming more welfarist. Over the years, it has spent money on a range of ventures for nutrition, employment, security, health, and even subsidized cooking gas for poorer households.

Still, India’s large domestic economy has proven fairly resilient in the past, and its young population is bound to work to its advantage. “There’s also dynamism, entrepreneurship, and the fact that you have a large proportion of self-employed workers in the gig economy,” says Ranade.

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