Unemployment temporary, structural resilience intact,RBI MPC member

In a discussion on economic trends, Ashima Goyal, member of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has shed light on the issue of unemployment among Indian youth, terming it as transient and not a cause for long-term concern.Recently in the report related to International Labour Organization (ILO), which showed that in 2022, the share of unemployed youths in India's total unemployed population was nearly 83 per cent, she emphasized that while the current unemployment figures may seem alarming, they are largely driven by cyclical factors and are not indicative of a structural issue within the economy.
She pointed out that the Indian economy is undergoing a phase of transition, with various sectors experiencing disruptions due to technological advancements, changing consumer preferences, and global economic dynamics. He stated that such transitions often lead to temporary fluctuations in employment patterns, especially among the younger demographic, as they adapt to the evolving job market.Goyal further emphazised that the ILO report also shows that youth unemployment has been falling in the recent period, it was 17.5 per cent in 2019 and 10 per cent in 2023. Noting that this period (2022) includes the pandemic-related disruptions, Goyal said there is steady improvement with the strong growth recovery.
Talking about why is foreign direct investment slowing down?, Goyal said the re-shoring efforts in advanced economies by which they are inducing capital to come back to home countries to enhance economic security is one reason.Speaking on whether India has been able to leverage the China-plus one strategy, she noted that it is difficult for India to compete with the US Treasury or the governments of other high per capita income countries, given the kind of incentives they offer."But, we can collaborate and use 'friend-shoring' to increase participation of domestic firms in global supply chains," she emphasised.
Goyal argued that while FDI has many benefits it also has costs, so in some ways, it is better that tax-payer resources (PLI) are used more to boost domestic firms."So, rather than pay FDI to come here, or give it special favours, it is better to work on making it more attractive for all types of firms to produce in India," she said.Goyal added that these types of measures include further progress in ease of doing business, regulatory simplification, policy consistency, speeding up Indian courts, lowering logistics and other costs and so on.
Last year, gross FDI inflows slowed marginally to USD 59.9 billion in April-January 2023-24 from USD 61.7 over the same period a year ago, while net FDI inflows fell more sharply to USD 14.2 billion from USD 25 billion.One reason she pointed out was that reparations rose as FDI sent back the large profit it earned to its home country."According to recent estimate, in 2024, there will be a net outflow of up to USD 50 billion from developing countries to advanced economies because of foreign debt repayment obligations," she said.In any case, Goyal said FDI has never exceeded 2 per cent of GDP in India, while domestic investment exceeds 30 per cent, and it is better that way.
"Diversification is good, and over-dependence on any one type of investment carries risks," Goyal stressed.She further pointed out that many large MNCs have come in and benefited from Indian markets.FDI inflows to China have fallen dramatically from a share of 12.5 per cent in the first nine months of 2022 to only 1.7 per cent in the same period of 2023.Various countries like the US, Canada, Mexico, Brazil, Poland and Germany have witnessed significant gains in the global market share, following the decline of FDI flows to China.

(Ira Singh, Asstt Correspondent, Gandhinagar)