IMF Board Lauds India's Labour Market Reforms, Calls For Steering Workforce Away from Agriculture
The board said that India's real GDP is expected to grow at 6.6% in fiscal 2025-2026 before moderating to 6.2% in fiscal 2026-2027, this is assuming that the 50% tariff imposed on India by the US.
India's recent labour market reforms have received a thumbs from the board of International Monetary Fund (IMF), which sees the measures as productivity booster.
"The IMF board welcomed the recent labor market reforms and encouraged the authorities to enhance human capital and female labor force participation, continue with the public investment push, and strengthen the business environment," stated the global financial body's Article IV Consultation report released on Wednesday.
The report stated that the new labour codes introduced by the Centre could see improvement in productivity. However, it flagged the increasing gap between agriculture and the other parts of the economy, and called for reallocation of the workforce towards manufacturing and services.
"As of fiscal 2022-2023, the output of an additional worker in services was more than four times that of a worker in agriculture, conditional on comparable education levels," the IMF report said.
Citing the fact that 40% of workers are employed in agriculture, the board said that output gains would be "substantial" if allocation of labour is improved through transitioning agricultural jobs towards manufacturing and services.
