Union Finance Minister Nirmala Sitharaman with Deputy Managing Director of the International Monetary Fund Gita Gopinath, during a meeting, in New Delhi, on August 17, 2024.
| Photo Credit: PTI
India has been a laggard among G20 nations in terms of employment generation and the country needs to create an additional 148 million jobs by 2030 given the population growth, IMF’s First Deputy Managing Director Gita Gopinath said on Saturday (August 17, 2024).
India on an average grew at 6.6% for the decade starting 2010 but the employment rate was under 2%, she said at the Delhi School of Economics Diamond Jubilee event here.
So, India’s employment rate is much less when compared to other G20 nations, she said.
“If you look at India’s projections in terms of population growth, India will have to create anywhere between 60 million to 148 million additional jobs cumulatively between now and 2030… we are already in 2024, so in a short period of time we have to create a lot of jobs,” she said.
Given the scale of what is needed, it is going to require basic reforms including land reforms and implementation of labour codes.
To generate more jobs, she said, there is a need for an increase in private investment as it is not commensurate with 7% growth in GDP.
However, she said, public investment is going well but private investment has to improve.
She also said that India should revamp its education system so that it can improve the skill set of its workforce.
Besides, she said, there is a need to further ease of doing business, improve the regulatory environment and broaden the tax base.
‘India will need more reforms to stay on growth path’
India will need to undertake more reforms to be able to continue on the path of raising economic growth and to make sure that enough job creation happens in the country, Ms. Gopinath said.
Ms. Gopinath further said that India will be required to reduce import tariffs if it wants to be an important player in the global supply chains.
“The significant improvements have been made by the government over the years in terms structural reforms.” While noting that the world is in an environment where trade integration has been questioned, Gopinath said it is important for India to remain open for global trade.
“Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs,” the eminent economist said.
Gopinath said it is a tremendous aspiration to get to a developed country status but it does not happen automatically, and requires ongoing, consistent efforts, pretty broad scale, across many areas to deliver on that.
“India has grown well in terms of its overall growth rate, and at 7%, it is the fastest growing major economy in the world.
“The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy,” she said.
Responding to a question on taxation, she said India has parallels with other developing countries, where most of the tax revenue that is collected is indirect taxes and not direct taxes, not in form of income taxes.
“We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there,” she said.
Referring to the cut in corporate tax rate by the Modi government, Ms. Gopinath said although it was helpful it is less the tax rate that matters, but what matters is just making sure that there are no loopholes and there are not too many leakages that happen in terms of tax exemptions.
“It is very important to have sufficient progressivity in your tax system…making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical,” she said.
Gopinath also suggested that now there is better technology to implement property tax and this is again another area where work is needed.
