Infra, reforms road map with jobs focus likely today

The Centre plans to showcase its infrastructure vision and outline measures focused on job creation in its medium- to long-term growth outlook on Tuesday, when the government completes 100 days in power, coinciding with the Prime Minister's birthday.

The government may announce a roadmap covering investment and support for infrastructure, agriculture, small, medium and micro enterprises, manufacturing, and skill development, two people aware of the plans said.

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"The focus of the government going ahead will be to invest and provide support to key sectors, which will, in turn, create employment opportunities," one of the two people cited above said on the condition of anonymity.

"The aim for India is to become a developed economy by 2047, with targets set for every five years, while some departments could follow an annual master plan for achieving their targets," the person said, adding various central departments and ministries have been instructed to carry out new initiatives that result in more employment opportunities.

The latest Economic Survey said India needs to generate an average of nearly 7.85 million non-farm jobs annually until 2030 to cater to its growing population.

Maritime development fund

According to the two people, in the coming months, the government may roll out a ₹25,000 crore Maritime Development Fund to provide long-term and low-cost financial aid for local shipbuilding and blue-water infrastructure projects; a Cruise India Mission to help India become Asia's leading cruise hub; and a flurry of road project awards under the build-operate-transfer (BOT) model, all of which will help create jobs.

While the Centre's key focus areas remain the farmers, the poor, women, and youth, tackling rural distress is a key priority, with further measures to increase crop yield and boost farmer incomes expected in the coming months.

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According to a research report from Motilal Oswal Financial Services, rural consumption spending fell for the third successive quarter in the March quarter, marking the worst in 33 quarters. Rural spending contracted 3.1% in the March quarter and 1.3% in FY24 as government spending fell, reservoirs dried up, fertilizer sales shrank and rural wage growth stayed muted, the report said.

"In agriculture, the government's focus is on promoting best practices to increase crop yield and boost the income of farmers, particularly marginal farmers across the country," said a third official, who also spoke under the condition of anonymity.

A spokesperson for the Prime Minister's Office didn't respond to emailed queries.

Job creation initiatives

The Union Budget for 2024-25 set aside ₹2 trillion in initiatives to create 41 million jobs over the next five years. Additionally, ₹1.48 trillion was allocated to improve education and skill development. The agriculture sector will get ₹1.52 trillion to raise productivity and resilience. Overall, the government retained the interim budget's capex outlay of ₹11.1 trillion,or about 3.4% of GDP.

Meanwhile, the Centre's first 100 days have been a mixed bag, economists said, with slow public spending across both revenue and capital heads, and insufficient private capex.

"These shortfalls and delays could pose challenges for economic activity, labour productivity and per capita income, especially since Indian GDP is yet to go back to the pre-covid growth trajectory. It is important to ensure a conducive environment for easy flow of credit, especially for long-gestation capital projects within the private sector, which will meaningfully contribute to quality job creation," said Debopam Chaudhuri,chief economist at Piramal Enterprises Ltd.

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"The biggest challenge for the government is ensuring equitable growth across the economy. Uplifting poorer regions and states through holistic infrastructural development, reducing gaps in per capita income, and shifting a large number of underemployed agricultural workers to manufacturing jobs will require significant expenditure," he added.

India’s GDP growth moderated to6.7% annually in the June quarter from 7.8% in the March quarter, data released by the statistics ministry last month showed, as government capex declined due to the general elections and urban consumer confidence fell.

Earlier,the Indian economy reported 8.2%, 8.1%, 8.6% and 7.8% GDP growth respectively, during the four quarters of FY24, and 8.2% growth during the fiscal year.

Gross fixed capital formation, an indicator of investment, picked up pace at34.8%, on an annual basis inQ1, FY25, against 34.6% in the same period of the previous year. The government's final consumption expenditure stood at ₹414,945 croreduring Q1, FY25, down from ₹415,961 croreduring the previous year.

Meanwhile, the centre's proposed Employment Linked Incentive (ELI) scheme and an internship scheme for youth in the top 500 companies of India, are likely to be implemented shortly and help create jobs.

‘Capex to revive’

“During election times, there were many postponements of expenditures, particularly in capital expenditure. This impacted the first quarter GDP figures. However, starting from the second quarter, I believe the capital expenditure programmes, both at the central and state levels, would revive, which should positively affect employment going forward," said N.R. Bhanumurthy, director at the Madras School of Economics.

“In particular, the ELI scheme and the internship scheme, once implemented, will likely show positive outcomes in the employment sector in the coming months. We are hoping this will help put the government’s growth trajectory back on the right track," he added.

Utkarsh Sinha, managing director at Bexley Advisors, a boutique investment bank firm, said inflation management remains one of the key challenges for the Centre, especially food inflation, which disproportionately impacts the quality of life and contrary to arguments, is persistent and not transient.

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"This, in turn, impacts core inflation, as it has a direct impact on wage, while also creating underemployment, thereby exacerbating the effects of inflation," he added.

India's retail inflation rose to 3.65% in August, slightly higher than the 3.6% reported in July, according to statistics ministry data.

For now, the inflation remains within the Reserve Bank of India's (RBI) medium-term target of 2-6%. Food inflation, a persistent challenge, rose to 5.66% in August from 5.42% reported in July.

Last month, the Reserve Bank of India (RBI) left the benchmark repo rate unchanged at 6.5%, signalling that interest rate cuts may take a while. The central bank expects real GDP growth for FY25 at 7.2%, and CPI inflation at 4.5% for the ongoing fiscal year. It last raised the repo rate to 6.5% in February 2023.