The IMF revised its growth forecast for the world’s top oil exporter from 3.1% projected in its May regional outlook; in June, it said growth could ease to 2.1% in 2023.

“The downgrade for Saudi Arabia for 2023 reflects production cuts announced in April and June in line with an agreement

through OPEC+…whereas private investment, including from “giga-project” implementation, continues to support strong non-oil GDP growth,” the IMF said in its report on Tuesday.

The Saudi economy grew 8.7% last year, as high oil prices boosted revenue and led to the kingdom’s first budget surplus in almost 10 years.

But global macroeconomic worries and an uncertain demand outlook have weighed on prices, pushing growth projections lower.

The world’s top oil exporter said earlier this month it would prolong an extra production output cut on top of a broader OPEC+ deal, and has raised prices for most of its crude to Asian customers in August for a second month.

The bigger than expected slowdown in Saudi growth this year will also weigh on overall growth in the Middle East and Central Asia region, which is projected to decline to 2.5% in 2023, from 5.4% last year, the IMF said.

The world’s most populous country aspires to leapfrog to the status of a developed nation, riding on the unprecedented demographic dividend, which demands an annual gross domestic product (GDP) growth rate of around 8% for the next 25 years.

But reaching this milestone hinges on implementing key reforms in education, infrastructure, healthcare and technology.

“If we want to realize that 8% growth potential this decade…the biggest challenge before policymakers is to reallocate the surplus labour from agriculture to more productive sectors with gainful jobs in them,” said Dhiraj Nim, economist at ANZ Research.

“If India’s reform momentum is lacklustre, a less exciting picture is on the cards.”

The latest Reuters poll of 53 economists taken between July 01 and 21 showed the Indian economy would grow 6.1% this fiscal year, a respectable rate when other major economies are expected to slow, maintaining a conducive environment for job creation.

It was forecast to grow 6.5% next fiscal year, with expectations of 6.2% growth this quarter, followed by 6.0% and 5.5%. The outlook was largely unchanged from a June poll.

“I think 6.0% to 6.5% is a very achievable and a very conservative forecast for India’s growth trajectory,” Nim added.

World Bank President Ajay Banga recently said the key to India’s growth story is through more jobs as he outlined the opportunity to cash in on the “China Plus One” strategy, a scheme adopted by many companies to build manufacturing units outside of the People’s Republic.

Demand Vs Supply

Asked how the employment situation will change over the coming year, 17 of 25 economists said it will improve slightly.

“The unemployment situation hasn’t improved yet…and the skilling to some extent is also missing. So, there is a gap in terms of the demand versus the supply,” said Radhika Piplani, chief economist at DAM Capital Advisors.

Asked what impact the Production-Linked Incentive (PLI) scheme, designed to attract foreign manufacturers to set up factories in India, would have on the country’s GDP this fiscal year, 21 of 27 economists said it will only increase it modestly.

The remaining six said the PLI scheme, which allocated billions of rupees as incentives from the Union budget in 2023-24, will have no impact.

“All the sectors where PLI has started are seen booming, but the actual impact of it to on-the-ground employment – that is still something which is yet to be seen,” Piplani added.

While India has a lot more ground to cover to replace China as the world’s manufacturing hub, some economists acknowledged the PLI scheme was a step in the right direction.

More economic reforms could bolster the scheme’s prospects and create millions of jobs, they added.

“Manufacturing needs to see strong growth and that is possible only when we…iron out the issues that are preventing fresh investments in the sector,” said Suman Chowdhury, chief economist at Acuite Ratings and Research.

(For other stories from the Reuters global economic poll:)

The credibility of India’s economic statistics has been questioned under the Modi government, and institutions are “under attack” with their autonomy getting eroded, Singh claimed.

The former prime minister said the economy had not yet recovered from ‘man-made blunders’ such as demonetisation.

Former Prime Minister Manmohan Singh on Sunday urged the government to “put aside vendetta politics” and consult with “all sane voices and thinking minds” to save the economy. He expressed concern at the latest economic growth data and blamed “all-round mismanagement” by the Narendra Modi government for the slowdown.

Data released on Friday showed that India’s economic growth rate had slipped to 5% in the April-June quarter, the lowest in over six years. This signals India is in the midst of a prolonged slowdown, Singh said, adding that the country has the potential to grow at a much faster rate. He said the slowdown was a “man-made crisis”.

The slowdown in the manufacturing sector, which grew just 0.6% during the quarter, “makes it very clear that our economy has not yet recovered from the man-made blunders of demonetisation and a hastily implemented” goods and services tax, the Congress leader said in a video statement.

Singh, who is also an economist often credited with historic economic reforms as finance minister in 1991, said that recent Budget announcements and rollbacks had “shaken the confidence of international investors”. The credibility of India’s economic statistics has been questioned under the Modi government, and institutions are “under attack” with their autonomy getting eroded, Singh claimed.

The former prime minister said the resilience of the Reserve Bank of India will be tested after its transfer of Rs. 1.76 lakh crore to the government.

Pointing out other problems with the economy, Singh said domestic demand was depressed, consumption growth was at an 18-month low, and government policies were leading to “massive jobless growth”. “More than 3.5 lakh jobs have been lost in the automobile sector alone,” he said. “There will similarly be large-scale job losses in the informal sector, hurting our most vulnerable workers.”

“There is a gaping hole in tax revenues,” Singh added. “Tax buoyancy remains elusive as businessmen, small and big, are hounded and tax terrorism continues unabated. Investor sentiments are in doldrums. These are not the foundations for economic recovery.”

Singh also spoke about rural distress. “Rural India is in terrible shape,” he said. “Farmers are not receiving adequate prices and rural incomes have declined. The low inflation rate that the Modi government likes to showcase comes at the cost of our farmers and their incomes, by inflicting misery on over 50% of India’s population.”

Singh concluded by saying: “India’s youth, farmers and farm workers, entrepreneurs and the marginalised sections deserve better. India cannot afford to continue down this path.”

Our economy has not recovered from the man made blunders of demonetisation & a hastily implemented GST… I urge the govt to put aside vendetta politics & reach out to all sane voices to steer our economy out of this crisis: Former PM Dr Manmohan Singh #DrSinghOnEconomicCrisis pic.twitter.com/83cBJWHay9

— Congress (@INCIndia) September 1, 2019

Economic slowdown

Since last week, the government has announced a slew of measures to check the economic slowdown. On August 23, Finance Minister Nirmala Sitharaman announced a set of measures to prop up the economy, less than two months after presenting the Union Budget. The Reserve Bank of India announced that it would give the Centre Rs 1.76 lakh crore of its dividend and surplus reserves. On August 30, Sitharaman again addressed a press conference to announce that 10 public sector banks would be merged into four entities.

In the last few months, core sectors such as automobiles, manufacturing and real estate, have witnessed a progressive slowdown in growth due to weakened consumer demand and dearth of investments. Chief Economic Adviser KV Subramanian on Friday attributed the slowdown to domestic and global factors. He added that the government was taking steps to improve the situation.

Article first published on Scroll.