India's economic growth maintaining momentum says OPEC

OPEC stated in a monthly update that India's economic growth remained robust in 3Q24, maintaining momentum into 4Q24 and likely through 1H25. Growth in 2Q24 reached 6.7%, y-o-y, moderating from 7.8%, y-o-y, in 1Q24. Gross fixed capital formation rose by 7.5%, y-o-y, up from 6.5%, y-o-y, in 1Q24, reflecting sustained government investment in infrastructure. Government final consumption expenditure showed a slight contraction of 0.2%, y-o-y, in 2Q24, following a 0.9%, y-o-y increase in 1Q24 - a typical pattern as non-infrastructure spending decreases during election cycles. Private consumption, however, grew strongly in 2Q24, rising by 7.4%, y-o-y, up from 4.0%, y-o-y, in 1Q24.

The Indian economy is projected to maintain robust growth through 2025, bolstered by government initiatives in the industrial sector and labour market. However, unemployment remains a concern, and a renewed focus on this issue was emphasized in the Union Budget. Labour force participation currently stands at only 41%, below the global average of approximately 60%. A primary goal of the Employment-Linked Incentive (ELI) schemes is to formalize the labour market, aiming to create 20 million jobs over the next two years. This objective will be pursued through wage support for first-time employees, job creation incentives in manufacturing via social security contribution support, and reimbursement of employers' social security contributions for additional employees with qualifying salaries. While the scheme is ambitious and enjoys strong government backing, its effects are anticipated to take longer to materialize compared to the previously implemented Production-Linked Incentives (PLI).

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