Indian Finance Minister Nirmala Sitharaman with International Monetary Fund Deputy Managing Director Gita Gopinath during a meeting in New Delhi on August 17, 2024. | Image credit: PTI
India lags behind among G20 countries in job creation. Given population growth, the country needs to create an additional 148 million jobs by 2030, IMF First Deputy Managing Director Gita Gopinath said on Saturday (August 17, 2024).
India grew by an average of 6.6 percent in the decade since 2010, but the employment rate was below 2 percent, she said at the Delhi School of Economics’ Diamond Jubilee event.
Compared to other G20 countries, India’s employment rate is much lower, she said.
“If you look at India’s population growth projections, India will need to create between 60 million and 148 million additional jobs between now and 2030… we are already in 2024, so we need to create a lot of jobs in a short period of time,” she said.
Given the scale of what is needed, fundamental reforms will be necessary, including land reform and the implementation of new labor laws.
In order to create more jobs, private investment must be increased, she said, because it is disproportionate to GDP growth of 7 percent.
However, she said that public investment was going well but private investment needed to be increased.
She also said that India should modernize its education system to improve the skills of its workforce.
In addition, doing business needs to be further facilitated, the regulatory environment improved and the tax base expanded, she said.
“India needs further reforms to stay on growth path”
India needs to undertake further reforms to continue its path of increasing economic growth and ensure that sufficient jobs are created in the country, Ms Gopinath said.
Ms Gopinath further said that India needs to reduce its import duties if it wants to be a major player in global supply chains.
“The government has made significant improvements in terms of structural reforms over the years.” Gopinath noted that trade integration was being questioned globally, but said it was important that India remained open to global trade.
“India has higher tariffs than comparable economies. If the country wants to be a major player on the world stage and an important part of global supply chains, it must reduce these tariffs,” said the renowned economist.
Gopinath said that attaining the status of a developed country is a huge goal, but it does not happen automatically and to achieve this goal, continuous, consistent and large-scale efforts are required in many areas.
“India has seen good growth in terms of its overall growth rate and is the fastest growing major economy in the world at 7%.
“The question is how to maintain and further increase this momentum to increase per capita income in India and make it a highly developed economy,” she said.
Responding to a question on taxation, she said that there are parallels between India and other developing countries: most of the tax revenue in these countries comes from indirect taxes rather than direct taxes and not in the form of income taxes.
“We have also advised other developing countries to broaden the income tax base so that more income can be generated there,” she said.
Referring to the Modi government’s cut in corporate tax, Ms Gopinath said that while it had been helpful, the issue was less about the tax rate and more about ensuring that there were no loopholes and there were not many leakages in tax exemptions.
“It is very important that the tax system is sufficiently progressive. It will be crucial to ensure that India gets enough out of capital gains tax and capital gains tax,” she said.
Gopinath also pointed out that there is now better technology for implementing property tax and that more work is needed in this area as well.
