Citigroup Says India Will Struggle To Create Enough Jobs

The Government has issued a rebuttal to a recent Citigroup research note that had raised concerns over the pace of job creation.

9 July 2024 12:30 AM GMT

On Episode 335 of The Core Report, financial journalist Govindraj Ethiraj talks to Nicole Schwab, the Co-Head of the Nature Positive Pillar at the World Economic Forum, and member of the Executive Committee.

Our Top Reports For Today


(00:00) The Take

(03:50) Stories Of The Day

(04:31) Markets are flat again

(05:55) The Chinese Central Bank has stopped buying gold, could that slow prices?

(07:42) Citigroup says India will struggle to create enough jobs

(12:07) Goldman Sachs says all is well and will be better with the Budget

(14:01) Why companies must step up their investments in and contribution to nature based climate solutions

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.


Good morning, it's Tuesday, the 9th of July and this is Govindraj Ethiraj broadcasting and streaming from and headquartered in Mumbai, India’s financial capital, now facing heavy rain on the last day.

Before we start, the Take: There are several decisions in polity and policy which are linked to data.

There are many instances in India of data once flowing smoothly and then stopping and other instances where we appear not to be making any attempts to collect it, the biggest example of course is the Census which is now 3 years behind schedule, give or take one or two years for Covid19 which in retrospect seems unnecessary since we have managed to hold a bunch of state and central elections all involving the mass mobilisation of Government machinery with smooth outcomes.

The problem is that without a recent Census set of figures, the debates around a host of issues including population, diversity and demographics apart from income start sounding increasingly hollow as different commentators lean on different data sets which the other side does not believe.

It's actually quite sad for a country aspiring to be where we want to be.

The latest data gap is gross goods and services tax (GST) collection figures.

The gap is glaring because no numbers were released in June, at least officially that is, whereas for every month before that for some years, we have been quite literally screaming from the rooftops.

The sudden disappearance of the announcement of these indirect tax collection numbers now leads to several questions, including whether something was off with the previous sets or something has gone so wrong now that the Government is shy of releasing it ?

For June 2024 GST figures came in at Rs 1.74 trillion, a year-on-year increase of 7.7 per cent.

Business Standard which reported this also pointed out in an editorial that this information was not made public this time through the usual press release with details as has been standard practice.

The headline tax collection number was disclosed to reporters informally this time. It has also been reported that this would now be the norm.

At a time when transparency and disseminating timely information are becoming crucial — especially given India’s intent to attract more global investment — discontinuing a practice that had become routine can be counterproductive, Business Standard says.

The problem is that GST is now used, since many other indicators are missing or not there or less trusted, as an important high-frequency indicator for a variety of stakeholders.

It is regularly tracked by many, including financial market analysts and investors.

Given that official numbers like the gross domestic product (GDP) data come with a significant lag, monthly GST collection gives a broad sense of how the economy is doing.

This is something we have discussed including in our conversations with the team at Crisil Ratings who use GST numbers to formulate more detailed expenditure patterns, including across states.

Interestingly, one of the reported reasons for discontinuing the release is said to be buoyant tax collection, says BS, which arguably gives an impression that the government is collecting too much tax.

To be fair, the official reason for discontinuing the monthly release is not known, but the level of tax collection cannot be the reason.

It is incorrect at various levels. First, gross GST collection is not for the Centre alone. It includes the share of the states. It also includes the compensation cess, which is being used to repay the loans taken to compensate states for their revenue shortfall during the pandemic.

The larger question of course is the discontinuity in practice and the lack of reasons for doing so.

Both are triggers for unnecessary speculation and breakdown of trust.

GST data, along with other pending data sets, which we will touch upon at a later date, must be released.

Like in the case of monthly inflation numbers, there could be less fanfare.

The Markets Flat

The benchmarks Sensex, and Nifty50 indices stayed in the negative zone on Monday even as broader Mid, and SmallCap indices hit fresh record highs.

The BSE Sensex index ended at 79,960, down 36 points or 0.05 per cent. On the NSE, the Nifty50 closed at 24,321, down 3 points or 0.01 per cent.

The Sensex was down and up, the recovery was driven by stocks like HUL, Nestle and Reliance INdustries while stocks like Titan, HDFC Bank, TCS, Tata Steel and Sun Pharma were down.

The broader indices, though, hit all-time highs in the intraday trade, ending with a negative bias as well. The BSE MidCap, and SmallCap indices closed 0.14 percent and 0.22 percent lower, respectively.

Meanwhile, global markets were watching the action in French elections

French stocks edged higher on Monday as markets reacted to a surprise win for the left in the country’s parliamentary election.

The CAC 40 erased earlier losses to trade higher although this was off earlier highs. The euro was flat against the dollar, and trading in bond markets was also relatively muted, CNBC reported.

France’s left-wing New Popular Front won the largest number of seats in this weekend’s parliamentary elections, scuppering an expected surge for the far-right. However, the coalition failed to secure an absolute majority, early data showed, leaving markets digesting the possibility of a hung parliament.

China’s Central Bank Pauses

China’s central bank didn’t buy any gold for a second month in June, as the precious metal edged lower from a record high.

The central bank of China had been buying gold for 18 months non stop. China of course is not the only country that has been buying gold, countries like India and China have been too and India has moved some of the gold back home as well.

About 20 central banks still expect to raise their gold holdings in the coming year, spurred by heightened geopolitical and financial risks, according to a World Gold Council report.

Bullion held by the People’s Bank of China was unchanged at 72.8 million troy ounces at the end of last month, according to official data released on Sunday.

The central bank opted not to add to reserves in May, ending an 18-month buying spree that helped push gold prices to their highest ever.

Some analysts still believe that purchases will resume as the world’s second-biggest economy seeks to diversify its reserves and guard against currency depreciation.

It’s possible that soaring gold prices have deterred purchases. The precious metal hit an all-time high above $2,400 an ounce in May, and has since edged lower as investors wound back bets on US rate cuts this year.

When the PBOC published data on the May buying pause, gold suffered its biggest intraday fall in nearly three years.

The Citi vs Goldman Views

The Government has issued a rebuttal to a recent Citigroup research note that had raised concerns over the pace of job creation.

The report 'fails to account for the comprehensive and positive employment data available from official sources such as the Periodic Labour Force Survey (PLFS) and the Reserve Bank of India's KLEMS data', the Ministry of Labour and Employment said, MoneyControl reported.

Citigroup had said that India would struggle to create enough jobs for its growing population over the next decade, even if the country grew at a 7 percent growth rate, and suggested more concerted steps were needed to boost employment creation.

Citigroup’s pronouncement of course sounds quite logical and intuitive and the only problem with Citigroup, unlike other permanently bullish investment banks, is that it has said this publicly and evidently stirred a hornet's nest.

Which also tells you that the one constituency that the Government seems to be listening to is foreign investment banks.

It also tells you on the flip that no investment bank ever puts out questioning reports on anything which would be considered strange even in the most prosperous nations in the world and in their home countries too.

Back to the employment numbers, the Government said India India has generated over 80 million opportunities between 2017-18 to 2021-22, which translates to an average of over 2 crore (20 million) jobs per year.

Citi's economists Samiran Chakraborty and Baqar Zaidi had written in the report that based on a growth rate of 7 percent, India can only generate 8-9 million jobs a year.

MoneyControl also quotes the labour Ministry saying official data sources have shown 'consistent improvements' in labour market indicators, and a falling unemployment rate in the last five years.

It also added that EPF and NPS data further backs this positive employment trend, with manufacturing, services, infrastructure, and other emerging opportunities such as gigi and platform economy and GCCs showing 'robust future prospects'.

The Labour Ministry also cautioned against selective use of private data sources that can lead to distortion about India's job scenario.

The Reserve Bank of India also weighed in saying that India added 46.7 million jobs in the fiscal year ended March, far exceeding numbers in private surveys that point to high unemployment rates.

Reuters says the report, a routine release from the central bank, has traditionally only shown historic numbers.

On Monday, however, the central bank said it is attempting a provisional estimate of productivity for the total economy for the first time for the financial year 2023/24 based on available information.

Well, thank you Citibank.

India's total employment stood at 643.3 million in 2023/24 versus 596.7 million in FY23, RBI data showed. The central bank uses data from the government's National Accounts and Ministry of Labour to extrapolate the country's productivity and employment levels.

The Centre for Monitoring Indian Economy meanwhile estimated the unemployment rate in India rose to 8% in fiscal year 2023-24 from 7.5% and 7.7% in the preceding two years.

The jobless rate in May was 9.2 percent, the highest in eight months. For those aged 20-24, the rate is more than 40 percent, according to CMIE figures, quoted in the MC report.

The CMIE whose figures most people in business and economy at least on the private side trust is now careful with what it says in public domain.

The employment growth rate was 6% in 2023/24 versus 3.2% in 2022/23, the Reserve Bank of India's (RBI) data on measuring industry level productivity and employment showed.

Goldman Is Back With The Positive Spin

The upcoming budget on July 23 is likely to stick to the path of fiscal consolidation, said analysts at Goldman Sachs in a recent note, who expect finance minister Nirmala Sitharaman’s Modi 3.0 budget to focus on the broad economic agenda rather than doling out minor stimulus measures, Business Standard said.

This of course sounds like the broad hints delivered to friendly investment banks, of which Goldman with its hyper bullish reports, is surely one, by some officials close to the Budget making process.

This report is obviously meant to, whether it eventually happens or not, to keep the markets focussed on the economic agenda and not being led to believe that the lack of an absolute majority for the BJP could cause a jump in social spending.

The jump in social spending was also projected to be a response to the electoral message, interpreted by some as a vote against inflation, jobs and so on.

That is evidently not the interpretation of the Government right now, so there we are.

And the markets, going by the way they have risen after June 4, the day the election results were out, are clearly on the same side of the fence.

Goldman Sachs said there was limited fiscal space to stimulate the economy given high public debt. That apart, India’s infrastructure upgrades have created long-term positive growth spillovers, which they believe policymakers may not be willing to give up.

“The government will use the budget as an opportunity to make a big picture statement about the long-term economic policy vision over the next several years, rather than minor stimulus announcements. These are likely going to align with the government’s development agenda for 2047 (coinciding with centennial of Indian independence),” wrote Andrew Tilton, chief Asia-Pacific economist and head of EM economic research at Goldman Sachs in a note co-authored with Santanu Sengupta and Arjun Varma.

Natural Climate Solutions

A survey of prominent Indian business leaders and a survey of 56 companies across 20 industries in India has come up with some interesting insights on how India’s private sector is approaching investing in natural climate solutions.

More on what that means and how it plays out in a moment.

The paper titled Unlocking Private Sector Investment into Natural Climate Solutions in India, is led by the World Economic Forum and has partnered with the Confederation of Indian Industry or CII and IORA Ecological Solutions.

The report argues that some $44 trillion of the global economy is at risk from nature loss.

Natural climate solutions (NCS) represent a key strategy to address the dual crises of climate change and biodiversity loss and strengthen the resilience of the world’s socioeconomic systems.

This in turn represents a range of actions aimed at safeguarding, conserving, restoring and sustainably managing terrestrial, freshwater, coastal and marine ecosystems while providing livelihood benefits.

Focussing on India, it says the prolonged economic effects of climate change also risk increasing India’s national poverty rate by 3.5% in 2040, equivalent to around 50 million more people living in poverty.

With an estimated 30% of forestland in India considered degraded, the great majority of which is due to vegetation degradation, NCS emerged as a comprehensive solution, providing benefits for ecology, people and the planet by focusing on conservation and restoration efforts.

There is more to this of course and the big question being of course if the private sector is stepping up to the task.

I spoke with Zurich based Nicole Schwab, the Co-Head of the Nature Positive Pillar at the World Economic Forum, and member of the Executive Committee. She also works on, the Forum’s trillion trees platform focusing on restoration and conservation of forest landscapes.

I began by asking her to take us through the journey of the report from the draft earlier in the year to the final one now.


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