India needs 148 million additional jobs by 2030: Gita Gopinath of the IMF

According to Gita Gopinath, the first deputy managing director of the International Monetary Fund, India needs to create an additional 60 to 148 million jobs by 2030 given its population growth, while modernizing the education system to improve the skills of its workforce.

The country needs to introduce labor laws, implement land reforms, ease of doing business, improve the regulatory environment and broaden the tax base, she said, identifying key areas to advance the vision of becoming a developed nation by 2047.

“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 at the Delhi School of Economics' Diamond Jubilee Conference.

India grew by an average of 6.6 percent per year in the ten years since 2010, but the employment growth rate was less than two percent, lower than in the G20 countries, she stressed during a fireside chat with the Chairman of the 15th Finance Commission, NK Singh.

India needs to adopt policies that do not penalise hiring of new workers. It needs to invest in upskilling the workforce while increasing private investment to increase the share of labour in GDP growth,” she said.

For India to create as many jobs as it needs over the next six years, reforms in factor markets are needed: land, labour and increased agricultural productivity at the same time. “Anything the central government can do in terms of regulation, but also what the central government can do in terms of incentives for states to implement these labour laws, would be helpful to ensure that it is attractive for companies to hire workers,” she said. To create jobs, private investment would have to be increased as it is disproportionate to 7% GDP growth.

Import duties and taxes

Gopinath said India needs to reduce its import tariffs if it wants to be a major player in global supply chains. “Tariff rates in India are higher than other comparable economies. If the country wants to be a major player on the world stage and an important part of global supply chains, it needs to reduce these tariffs,” she said.

Noting that trade integration is being questioned globally, Gopinath said it is important that India remains open to global trade.

“India has been growing well in terms of its overall growth rate and is the fastest growing major economy in the world at 7%. The question is how to sustain this momentum and increase it further to increase per capita income in India and make it a highly developed economy,” she said.

On taxation, she said that there are parallels in India with other developing countries as most of the tax revenue there 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.

Regarding the corporate tax cut, she said that while it was helpful, it was important to ensure that there were no loopholes and there were not too many leaks in tax exemptions.

“It is very important that your tax system has sufficient progressivity. It will be crucial to ensure that you get enough out of your capital gains tax,” Gopinath said.

“Further rationalisation and simplification of GST rates can raise an additional 1.5 per cent of GDP,” she said, adding that India will not see a spending cut given its stage of development and that creating fiscal space will have to be done by increasing government revenue as a proportion of GDP.

Gopinath stressed that better use should be made of property tax revenues and that savings could be made through targeted subsidies. She also called for the expansion of social safety nets such as unemployment insurance to enable workers to continue their education.