Eye on elections, can Modi government create enough jobs? Here’s what UBS has to say

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Published: May 12, 2018 12:12:27 PM

Even as the run to 2019 elections begins and the Narendra Modi-led government looks to woo voters by promising jobs, UBS says that the pace of job creation may increase if the government’s policy push is successful.

According to data from CIME (Centre for Monitoring Indian Economy) the unemployment rate in India has doubled between July 2017 and April 2018.

Even as the run to 2019 elections begins and the Narendra Modi-led government looks to woo voters by promising jobs, UBS says that the pace of job creation may increase if the government’s policy push is successful.  According to a recent World Bank report, India must create 8.1 million jobs a year to maintain its employment rate. “Every month, the working age increases by 1.3 million people and India must create 8.1 million jobs a year to maintain its employment rate, which has been declining based on employment data analyzed from 2005 to 2015, largely due to women leaving the job market,” World Bank said.

According to data from CIME (Centre for Monitoring Indian Economy) the unemployment rate in India has doubled between July 2017 and April 2018, whereas the number of jobs in the country in the last financial year 2017-18 also fell to 406 million from 406.7 million in the previous year. However, in January this year, Rajiv Kumar, Vice-President of Niti Aayog said that that there is “much better news on employment. UBS notes that that job creation see

Further, while the pace of job creation will increase if the government policy push is successful, a likely worsening job quality mix implies a slowing middle in its proprietary household income pyramid, UBS said. “Press articles suggest that the Govt may push labour-friendly reforms ahead of the elections (mandatory minimum wages, medical and pension benefits, etc.) but postpone those perceived as pro-industry,”  Gautam Chhaochharia, Head of India Research & Sanjena Dadawala (Analyst), UBS said in the report. Taking stock of the government’s efforts to spur job creation, the analysts said that the government has already withdrawn controversial proposals from the Labour Code on Industrial Relations – such as allowing companies with 300 workers to lay off staff without Govt permission (retained the current limit of 100).

With the Union elections in 2019, another report by the firm says that many investors have priced in a “Modi win in 2019” as the base case. “We met with more than 50 investors in the US/EU over the past month. Our meetings indicated many investors have priced in a “Modi win in 2019” as the base case,” UBS said in the report adding that investors are also consider the Karnataka state election outcome (voting on 12 May; results on 15 May) as a near-term sentiment indicator of the political environment.

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