“To achieve this herculean task, India’s growth engine needs to fire on all cylinders, from manufacturing to services in the next five years,” she said in a research note.
While India’s economy is expected to grow more than 7% this year — among the fastest in the world, the pace still not rapid enough to create jobs for its 1.4 billion people. High youth unemployment is a challenge for Prime Minister Narendra Modi as he seeks an unprecedented third term in office in the ongoing national elections.
Read more: Booming India Prepares to Take China’s Global Growth Crown
Despite India’s economy generating 112 million jobs over the last decade, only about 10% of jobs are formal, Nguyen wrote. The country’s overall labor force participation rate stands at 58%, much lower than its Asian peers, according to the World Bank. Nguyen said India’s services sector, which makes up more than half of the gross domestic product, has limited scope in terms of headcount and quality of labor. This means India can tap into the manufacturing sector and compete for firms and countries actively looking to diversify from a China-centric supply chain, she added.“The incoming administration needs to jump on the manufacturing train and capitalize on demographic and geopolitical tailwinds,” she said in the note. “Even if the road forward is challenging, it is never too late to walk down the right path.”
