Five economic challenges for India's Modi

Asad Ahmed, one of about 1.2 million young Indians entering the cutthroat job market each month, diligently scribbles notes at a computer class in New Delhi.
While nationalist Prime Minister Narendra Modi won a new five-year term promising to step up his campaign for a "new India", 18-year-old Ahmed is pessimistic about getting a new job.
"There are so many people in Delhi and the competition is intense," said Ahmed, dressed like the other students in a black-and-white uniform at the three-month community course run in a police station in Old Delhi.

"I know this stint may not be enough for me to get a job but I am trying my best."
Modi came to power in 2014 promising jobs, but delivering on that has been a challenge.
And as soon as the election euphoria settles, Modi's government will have to find ways to boost investment and revive manufacturing to create new jobs.

Like Ahmed, most of the other 60 students at the government-sponsored "skill development" classes at the Old Delhi police station, all from poor families, were also apprehensive.
Nudrat Akram, 19, signed up for the course because her family could not afford to pay for higher education.
"I want a job in the retail sector where I can earn 10,000 rupees ($143) a month," Akram said, as she practised speaking English with pretend customers.

More jobs, more debt
India's conservative prime minister came to power in 2014 on a pro-business platform, promising to create 10 million jobs a year.
The world's fastest-growing major economy has grown about 7 percent a year since, but jobs have been elusive.
The promise was barely mentioned in Modi's triumphant re-election campaign.
Nearly two-thirds of India's 1.3 billion population are of working age, between 15 and 64, but an increasing number are in the unemployed list.
No official data has been released for more than two years but a recent leaked report -- denied by the government -- put the unemployment rate at a 45-year high of 6.1 percent.

The Centre for Monitoring Indian Economy, a private research firm, estimates the jobless rate rose to 7.6 percent in April.
"The economy is going to be a huge problem. The government simply cannot create jobs for millions entering the workforce," said political analyst Parsa Venkateshwar Rao.
"Modi will rely on businesses but they are also struggling so he has a real problem on his hands."

'Not easy to survive'
Unemployment is particularly dire for women.
A Deloitte consultancy report in March said female labour force participation fell to 26 percent in 2018 from 36 percent in 2005 because of poor education and socio-economic barriers.
The manifesto of Modi's Bharatiya Janata Party (BJP) promised a $1.4-trillion infrastructure boost to create jobs if it won the election. It offered metro trains for 50 cities and to double the national highway network.
But analysts say the government, which has drastically increased its debt over the past five years, will have to borrow huge new amounts to pay for the works.
In 2015, Modi launched a Skill India programme aiming to train 500 million people by 2022. But the results have been mixed.
According to 2018 data, only a quarter of people who joined the scheme found jobs.

"The Skill India mission has not had as much success as say the highway programme," said economist Arvind Virmani.
"The real crisis is about job skills and basic education."
India's rural jobs guarantee programme offers work to about 70 million people at a minimum wage for 100 days a year, but there is no equivalent for the growing numbers of urban youth.

Experts say the government must consider an urban employment guarantee scheme in order to reap the true benefit of its economic growth.
At the Delhi classes, 18-year-old Sehar, who uses one name, is worried about helping her poor family, including four younger sisters.
Her father, who works at a hospital, is the only earner.
"I am the eldest and I want to help my family, it's not easy to survive in this city."

Five economic challenges for India's Modi
With Hindu nationalist Prime Minister Narendra Modi and his Bharatiya Janata Party securing a landslide win in the Indian elections, AFP looks at the key economic challenges facing Asia's third-biggest economy:

Reforms
In his first term, Modi was widely credited for trying to change a culture of crony capitalism throughout government and numerous reforms, including a nationwide goods and services tax (GST).
These were credited with helping India soar up the World Bank's ease-of-doing-business ranking by 23 places to 77th between 2017 and 2018.
But experts say Modi needs to do more, in particular by reducing red tape and protectionism.

In December, the government announced surprise restrictions on e-commerce that would limit how foreign companies like Walmart and Amazon could operate.
"Modi needs to focus on reinvigorating the economy and work towards improving ease of doing business that can boost economic growth and attract foreign investors," Pradip Shah, chairman of fund advisors IndAsia, told AFP.

Joblessness
Thus far, Modi's government has failed to create jobs for more than a million Indians entering the labour market every month, experts say.
A newspaper recently published a leaked government report, allegedly buried by the government, showing India's unemployment at 6.1 percent, the highest since the 1970s.

A staggering 19 million people applied for 63,000 positions at Indian Railways last year, highlighting the stark disparity between job seekers and employment opportunities.
Stringent labour laws and insufficient investment in skills are hampering India's non-farm sectors, according to the Organisation for Economic Co-operation and Development.
"Modi needs to encourage states to improve labour laws and undertake massive vocational training programmes for youngsters to create employment and also boost economic growth," Gunjan Bagla from management firm Amritt Inc told AFP.

Oil
India imports over 80 percent of its crude oil requirements and has stopped buying from Venezuela and Iran under US pressure.
New Delhi previously got sanctions waivers from Washington to buy Iranian oil, but these expired May 1.
This has pushed India to source oil from elsewhere, including from Saudi Arabia, pushing refiners to spend more in dollar terms.
Any oil price spike, for example on the back of tensions in the Middle East, could push up fuel prices and therefore inflation, which has long dogged the Indian economy.
"We would not like to see a move towards any escalation in any way... for the simple reason that we depend very heavily on stability in that part of the world," India's ambassador to the US Harsh Vardhan Shringla said Thursday.

Shadow Banking
A liquidity crisis triggered by the collapse last year of financial company IL&FS spotlighted how India's shadow banking sector had defaulted on payments.
Modi seized control of the company to contain the crisis and the central bank created a separate supervisory and regulatory body to ease the liquidity crunch.
Reports in Indian business dailies state the central bank will meet the finance minister to discuss the liquidity and shadow banking sector issues once Modi forms his cabinet.
The "Modi government needs to urgently take a comprehensive look at shadow banking sector and mutual funds industries as there is no safety net and legal system for loan recovery," Shah added.

Autonomy
In Modi's first term, two central bank governors -- Raghuram Rajan and Urjit Patel -- exited amid reports of government interference following public spats.
While Rajan's term was not extended, Patel quit unceremoniously after weeks of speculation and was replaced by Modi ally Shaktikanta Das.
Das has worked with various government bodies and was part of the economic affairs ministry when Modi announced his controversial cash ban in 2016.
Experts believe during his second term, Modi will have to signal the independence of the Reserve Bank of India (RBI) to boost investor and market confidence in the long run.

Conveniently for Modi, as the election approached, the central bank under Das cut interest rates twice in a boost to the economy.
Analysts believe the bank may again cut borrowing costs in June as the government enters its second tenure.
"I hope the new finance minister leaves RBI alone. Interfering with its independence can only produce short-term gains but will hurt the Indian economy in the long run," Bagla added.