The post-pandemic pent-up demand driven recovery seems slipping. The most obvious indications are available in the October 2024 reports of the RBI and FinMin. The RBI’s “state of the economy” of October 21, 2024 pares down growth from 8.2% in FY24 (P) to 7% in FY25 (BE) – 6.7% in Q1, 6.8% in Q2 and 7.4% each in Q3 and Q4. This is a fall from 7.2% the RBI Governor had projected a fortnight earlier (October 9, 2024 MPC report). The FinMin’s “monthly economic report” of October 28, 2024 pegs the growth at 6.5-7%.

This means growth would be more than a full percentage point lower (average of post-pandemic FY22-FY24 is 8.3%). Both the reports admit to “slackening” (RBI) and “softening” (FinMin) in growth but remain optimistic with one promising “steady growth” (RBI) and the other “good” growth outlook (FinMin) but both rely excessively on “festival” buying – the full data for which would be available later. It must be noted that no matter how good the single festive-buying turns out to be, it alone can’t drive an economy or sustain growth.

Enough indications of worsening growth prospects exist even within the positive narrations of these two reports to warrant immediate attention.

Growth engines less than robust

A close scrutiny of the RBI’s positive indicators reveals the following:

1. Aggregate demand is “poised to shrug off the temporary slowdown in momentum” as “festival demand picks up pace”; “although” initial e-commerce sales are “underwhelming” retailers are “expecting a late season push”; rural demand to “get a boost” from the improved agricultural “outlook”; “despite high prices tempering some enthusiasm” many buyers are “prioritising discounts”.

2. Private investment is showing “encouraging” lead “although the slack continues”; corporate results for Q1 had shown “deceleration” by non-government non-finance companies; “real investments” in plants and machinery “remained subdued” while net fixed assets “slowed down”.

3. Robust financial market with IPO boom setting “the stage” for “mega IPOs to shine this Diwali”. The RBI de-linked the stock market boom from the ‘real’ economy under the same Governor earlier. Even the stock market boom is on the downturn with FPIs pulling out and the DIIs and retail investors unable to keep the momentum going.

The FinMin report is more of the same in content. Its “improvement” indicators include merchandise imports, agriculture growth, “the festive season” sales, “likelihood” of increased government spending, rural (FMCG) and “steady” labour market.

None of it translates into robust growth engines. Growth in consumption relies primarily on the festival spending, the initial indication for which are “underwhelming” (RBI). Note, PFCE grew at 4% in FY24 – less than half of GDP’s 8.2%. Slowdown in merchandise exports mean not only weakening of the export engine but also rising trade deficit. While private capex remains elusive (not even coming to infrastructure as the July 2024 budget announced a VGF for it), government capex driving growth since 2019 (FY18) fell by (-)15.4% in H1 of FY25, forcing it to direct ministries to speed up spending on November 11, 2024.

What, however, should attract the attention of policymakers are the deeper distress signals – on jobs and income fronts.

A few of these in the past one month.

Latest distress signals

1. On October 18, 2024, a national daily reported that Indian youth were rushing to the UAE for delivery jobs (gig jobs) for better pay, which is being facilitated by the Telangana government. Fairwork India’s October 2024 report had found only two e-commerce platforms, out of 11 engaging gig workers, provided “local minimum wage after costs” but none of the 11 gave “local living wage after costs”. An expert wrote recently The rapid rise of low-paying delivery services jobs (“quick commerce”) comes with a huge cost – not just psychological but also financial, economic and social costs; financial resources are getting diverted to such ventures, rather than creating real jobs. Not long ago, CEA V Anantha Nageswaran had sought data on post-Covid gig economy as he suspected Indian labour market had become “more informal rather than becoming more formal”?

2. On October 25, 2024, India announced that Germany had raised the annual visa for Indian professionals from 20,000 to 90,000. At the same event, German Foreign Minister Annalena Baerbock said: “In Germany, we need labour.” This may be a welcoming development but the experience with the G2G labour supply to Israel is a grim reminder that it may go awry (hundreds of “skilled” Indian workers were deployed for menial jobs because they were found lacking in skills for which they had qualified).

3. On October 29, 2024, PMO said: “India had signed agreements related to migration and employment with 21 countries in recent years, including countries like Japan, Australia, France, Germany, Mauritius, Israel, UK and Italy, apart from Gulf countries.” This may come as counter to scores of Indians getting duped into fighting the Russian war and thousands of other duped into “cyber slavery” and “scam farms” across Cambodia, Laos and Myanmar but essentially it points to the continuation of the domestic job crisis.

4. On October 25, 2024, the US Customs and Border Protection (US-CBP) said it had detained 90,415 Indians for trying to illegally enter the US in FY24 (US fiscal which starts from October and ends in September) – 10 Indians per hour, of which about 50% were from one of the better performing Gujarat. Such detentions of Indians have increased three-old in three years – from 30,662 in FY21.

5. On October 29, 2024, RC Bhargava pointed at lack of affordability leading to declining sale of entry-level cars (below ₹10 lakh). He was the one who first alerted to this inversion (higher priced utility vehicles outselling lower priced passenger cars) two years ago (K-shaped recovery) which continues into H1 of FY25 (6.6 lakh of PCs versus 13.4 lakh of UVs as per SIAM data).

6. On October 18, 2024, a news report said luxury houses priced ₹4 crore and above increased by 38% in 2024. Affordable house sales went down to luxury homes since early 2023 and continues in 2024.

7. On October 25, 2024, initial results for Q2 showed corporate revenue and growth declining – which have adverse implications for jobs and incomes. A Bank of Baroda (BoB) report had shown a marked slowdown in jobs growth in large corporate entities from 5.7% in FY23 to 1.5% in FY24. These are the best quality jobs.

8. On October 23, 2024, Nestle chairman Suresh Narayanan said the Indian middle class was “shrinking” – leading to the fall in FMCG sales in urban areas – while “premium consumption still continues to be fairly strong”.

9. On November 1, 2024, it was revealed that GST growth had fallen to a single digit in October (compared to 2-digit in FY23 and FY24) – pointing to a slowdown in consumer spending.

10. On November 2, 2024, news reports said, gold loans saw 43.3% growth in H1 of FY25 – a distress mortgage of gold showing worsening financial health of small businesses and households.

11. On November 12, 2024, MoSPI statement showed consumer inflation rising to 6.2% and food inflation 10.9% in October (both rising since September) – which eats into household incomes.

These are serious signs of trouble – weakening income and jobs in an economy in which income and wealth are increasingly concentrating at the top. Piketty et al shown in their study published on May 24, 2024 that as a result of this upward flow, in 2022-23, 57.7% income and 65% wealth had concentrated at the top 10%. Such concentration makes growth unsustainable. Besides, disaggregate household data, available until FY23 (released on May 8, 2024), had shown a fall in households’ net savings and net financial savings (plunging to 47-year low) but doubling of financial debts doubling between FY21 and FY23.

There is a need to take immediate corrective measures to stop growth from slipping – by actively focusing on job and income generation.

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