India’s Inflation Dips, But Unemployment Looms

Economic Crossroads: Inflation Falls, Joblessness Rises

India’s economy faces a complex situation. While inflation is under control, unemployment is climbing. This situation highlights the need for a comprehensive approach to economic management, going beyond simply tracking inflation figures.

The Inflation and Unemployment Paradox

May’s inflation rate fell under 3%, which the Indian government considers a success. However, in the same month, the unemployment rate grew. While inflation decreased from 3.2% to 2.8% between April and May, the unemployment rate increased from 5.1% to 5.8% during that period.

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Recent data shows the Indian economy is slowing down. The GDP growth rate dropped from 9.2% in 2023-24 to 6.5% in 2024-25. This trend reflects a broader economic slowdown. The country’s unemployment rate has risen, alongside the drop in GDP growth. According to the World Bank, India’s GDP is projected to grow at 6.3% in fiscal year 2025 (World Bank).

Deeper Dive into the Figures

The decline in GDP growth in 2024-25 was widespread across the economy, with the exception of public administration. Agriculture, however, experienced accelerated growth. This pattern offers a clue to understanding the drop in inflation.

The research suggests that monetary policy, such as the Reserve Bank of India’s (RBI) inflation control methods, may not be the primary driver of these changes. Instead, the relative growth rates of the agricultural and non-agricultural sectors appear to have a more significant impact. The falling food-price inflation affected the overall inflation rate.