As India prepares for the upcoming Union Budget 2025, economist Sajjid Chinoy outlined three key areas that the government should focus on to navigate a challenging economic landscape – employment generation, structural reforms and a strong fiscal framework. Speaking in an interview with Moneycontrol, he said that India must balance domestic growth concerns with global economic uncertainties while ensuring macroeconomic stability.
Chinoy is managing director and chief India economist at JP Morgan. He is also currently serving a second term as part-time member of the Economic Advisory Council to the Prime Minister (EAC-PM).
Chinoy stressed that employment should be at the center of the government's strategy, building on initiatives introduced in the interim Budget. "Continuing with this employment theme that was started in July and extending it beyond incentives to PLI schemes for labor-intensive sectors, and more importantly, a focus on health and education to make labor more employable," he stated. He highlighted the need for sustained investment in human capital augmentation through education, skilling, and health reforms.
He further pointed out that for India's economic growth to remain sustainable, it must become more labor-intensive. "If you look at the annual survey of industries data, capital intensity in manufacturing has continued to increase. For a young country like India, very capital-intensive growth is a challenge. We have to make growth more labor-intensive," Chinoy remarked. He suggested that the government should explore targeted incentives for labor-intensive sectors and create an ecosystem conducive to job creation.
Structural Reforms for Competitiveness
Discussing structural reforms, Chinoy noted that improving India’s business environment is critical for attracting global investment and strengthening the country’s manufacturing sector. "As companies look at India and shortlist locations to relocate, we have to give the impression that we're ready, willing, and waiting and make the business environment extremely competitive," he said.
He also highlighted the role of factor market reforms, particularly land and labor policies, in enhancing India's attractiveness as a manufacturing hub. "The finance minister did speak about working with the states on factor market reform. That was a really important part of the speech," he added.
Fiscal Stability and Public Investment
On fiscal policy, Chinoy underscored the importance of maintaining a credible fiscal framework to ensure macroeconomic stability. "The government has said that from this year on, fiscal deficits will be calibrated to a declining debt-to-GDP ratio. If this is a declining combined debt-to-GDP ratio, that’s exactly right," he said.
While acknowledging fiscal constraints, he argued for the continuation of public investment in infrastructure to sustain demand visibility and economic momentum. "Public capex has almost doubled, from 1.7 percent of GDP to 3.2 percent. It's important that we don't let up momentum on that front, despite limited degrees of freedom," Chinoy emphasised.
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