Modi at 11: Economy’s good, but job creation, land & labour reforms need a push

The Indian economy is currently witnessing a significant transformation under Prime Minister Narendra Modi’s leadership. Celebrating nearly a decade in power, economists have noted that while the economy is demonstrating robust growth and comparatively controlled inflation levels, there are pressing challenges that require immediate attention. Among these are the critical areas of job creation and the urgent need for land and labor reforms.

### Economic Performance Overview

To gauge the performance of any economy, two primary indicators are typically examined: growth rate and inflation. During the tenure of the United Progressive Alliance (UPA), India’s GDP growth averaged about 6.8%. In contrast, between 2014 and 2025, Modi’s administration has achieved an average growth rate of approximately 6.2%. Interestingly, if we adjust for pandemic-induced disruptions, the average growth rate for the current government actually works out to be 7.1%.

Inflation statistics offer an even more favorable comparison. During Modi’s years in office, the average inflation rate hovered around 8.1%, notably better than the 5% experienced under former Prime Minister Manmohan Singh, though this is worth contemplating within different contextual frameworks. Improved management strategies, particularly concerning food prices, alongside favorable crude oil prices have contributed to this success.

As of June 2023, India’s crude oil costs have seen a significant decrease, bringing down the effective price per barrel compared to historical highs during Modi’s early years in office. This deceleration in commodity prices, coupled with favorable weather conditions anticipated for agricultural output, signals a promising outlook for the Indian economy.

### Current Economic Landscape

Crisil’s chief economist, D.K. Joshi, remarked that the Indian economy is positioned healthily. Factors including controlled inflation, resilient corporate and bank balance sheets, low current account deficit, and substantial foreign exchange reserves contribute to this buoyancy. India’s growth is projected at 6.5% for fiscal year 2026, although uncertainties loom due to fluctuating global economic conditions.

The Indian economy has not only been resilient but has also shown fiscal prudence and transparency over the past decade. Siddhartha Sanyal, the chief economist at Bandhan Bank, emphasizes that India’s lower public debt and stable inflation make it an attractive destination for investment, especially against the backdrop of global economic uncertainty.

### The Need for Job Creation

Despite these promising macroeconomic indicators, the central challenge remains: job creation, particularly in the organized sector. A stark observation is that while GDP growth figures paint a positive picture, private investment has not kept pace. Many firms are not expanding their operations to generate more employment opportunities. Moreover, advancements in technology and the rise of artificial intelligence are further complicating the employment landscape.

Without an increase in job opportunities, there’s a risk that a significant portion of the population might not benefit from the economic improvements witnessed at a national level. This underscores the vital need for expedited reforms in the labor and land sectors.

### Urgent Reforms Needed

Reforms in land and labor markets are deemed crucial for stimulating private investment and consequently elevating job creation. The Modi government initially sought to tackle land acquisition challenges shortly after taking office in 2014, but public protests effectively derailed those efforts. The same applies to efforts related to agriculture laws, now paused.

While several labor codes have been drafted, their implementation has faced hurdles, particularly due to reluctance from opposition-led state governments. The momentum for reform becomes all the more critical as India enters free trade agreements that require a more dynamic and efficient workforce.

### Political Will and Public Sector Dynamics

As the political dynamics within the Bharatiya Janata Party (BJP) evolve, the central government’s ability to push through reforms will be pivotal. The strategic sale of public sector enterprises and effective asset monetization could have generated substantial funding for new capital expenditure projects; however, these initiatives now seem to be sidelined. Nonetheless, with a renewed political confidence, Modi might be positioned to advance these necessary reforms more decisively.

### Conclusion

India’s economic journey over the past eleven years is marked by significant achievements; however, it is equally highlighted by challenges, notably in the realm of job creation. Growth is commendable, but true progress will be measured by how effectively the government can introduce and execute land and labor reforms that create better job prospects for the burgeoning workforce.

Addressing these issues with urgency is vital for ensuring that the gains of economic growth are broadly shared among the populace. As the country moves towards a potential resurgence in private investment, the onus lies on policymakers to foster an environment conducive to job growth and sustainable economic development. Only through a proactive approach to reform can India hope to fully harness its economic potential and secure a more prosperous future for its citizens.

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