Putting pandemic woes behind it, India is set to become the world’s fastest growing major economy for a second straight year, growing at nearly double the rate forecast for China.
India’s economy is projected to expand 8.2 percent this year in comparison to 4.4 percent pegged for China, according to the International Monetary Fund.
Economists, however, warn that the uncertainties created by the Ukraine crisis pose a huge challenge in maintaining the momentum as India too grapples with the runaway fuel prices and high food inflation that are hurting countries around the globe.
Another challenge faced by India is that growth is uneven – while jobs and incomes have come roaring back in some sectors, such as information technology, millions who lost livelihoods during the pandemic are still struggling.
“The evidence is reasonably clear that some sectors of the economy are growing much faster than others,” says Ravi Srivastava, director of the Center for Employment Studies at the Institute for Human Development in New Delhi. “This obviously has consequences — employment and earnings have still not recovered. It is only a small segment that is benefiting.”
India’s economic rebound means different things to different people.
For some people, these are boom times. A 39-year-old employee at a consultancy firm who did not want to be named due to company policy is switching jobs.
“Twenty-five to 30 percent hikes are easy in the job market today. There is no dearth of opportunities,” she said. “If a company does not meet the expectation of an employee, people are quickly moving on. It is happening all around me.”
Some of India’s biggest technology companies have seen attrition rates of more than 20 percent in recent months.
The formal sector, however, accounts for only about 10 percent of jobs. Most livelihoods are created in the country’s vast informal sector, which was hit hard during the pandemic.
Here too there are signs of revival as cities lift all restrictions — small shop owners to taxi drivers say work is picking up.
Dhan Singh Negi, who rents his car to a company, says in recent months about 80 percent of his pre-pandemic business has revived. “I mostly pick up my company’s clients from the airport and take them around the city. In the last two months, work has been good.”
Negi had returned to his village after nearly a year, along with his brother — part of a mass exodus of about 100 million migrant workers who returned to their villages as work in cities dried up two years ago when the pandemic began.
Now, all segments of the Indian economy are open, most offices have begun recalling employees and flights, trains and buses are packed as travel, both business and personal, resumes in full swing.
That has made it possible for Negi to find work after returning.
His brother was not so lucky. He is still in the village, mostly working under a jobs program that offers poor households in rural areas up to 100 days of unskilled labor per year on public projects such as building roads and canals. Launched 15 years ago to offer a livelihood to people in rural India, the program emerged as a huge safety net for migrants who returned to their villages in the wake of the pandemic.
Wages at about $3 a day are meager – much less than workers can earn in cities.
Despite the economic recovery, the numbers seeking employment under the pro-poor jobs program continue to be high, which economists say is a sign of continuing distress. More than 253 million households enrolled last year, according to government figures – much higher than 186 million in 2019 before the pandemic.
The number of workers in the agriculture sector has also surged as migrants who worked in cities returned to their small farms. It was termed “reverse migration.”
“Data shows that a larger percentage of the workforce has slipped off the grid away from regular employment into some form of informal self-employment,” says economist Srivastava. “So the quality of employment is poorer today than two years ago and there is a bulge in rural self-employment.”
Economists say what has happened is essentially a reversal of modern development that sees people leave the agriculture industry to work in more modern sectors.
The government, however, hopes that the overall recovery will trickle down to poor people and is optimistic that the economy will maintain its fast trajectory through this decade.
Indian Prime Minister Narendra Modi, on a visit to Germany, said Monday, “We are confident that India will be an important pillar of global recovery.” But he also said that the impact of “skyrocketing” oil prices and a shortage of food grains and fertilizers due to the Ukraine crisis “on developing and poor countries will be even more serious.”
Already growth estimates of 9 percent that had been made before the war erupted have been pared down – the current estimate is 8.2 per cent.
Still, the rebound in Asia’s third biggest economy is significant. “Healthy for India, but also positive in a world where growth slowdown is creating a major problem,” Kristalina Georgieva, managing director of the IMF, said two weeks ago.