Why India's world-beating growth is not enough to end its deep jobs drought

The world’s fastest growing major economy isn’t growing nearly fast enough.

That may seem like an absurd description for India, an economy the International Monetary Fund expects to expand 7.3 percent in the fiscal year through March 2019 and 7.5 percent in the next. Yet the reality is that even at its current pace, India is having trouble creating enough new jobs for its massive workforce or enough wealth to broaden its middle class.

With its demographic tailwind and massive developmental needs, Asia’s third-biggest economy should be growing at double-digit rates. Holding India back are glacial economic reforms, a fragile banking sector, rigid labor laws and a spotty educational system that imparts limited skills to the 12 million young people who enter the job market each year.

Prime Minister Narendra Modi is trying to address these challenges. He’s introduced a nationwide consumption tax, an insolvency code for companies and a program to boost domestic manufacturing under his signature Make in India campaign.

Yet analysts generally agree that more needs to be done to open up the economy, attract foreign capital and generate the kind of wealth and business opportunities that has broadened the middle class in China, whose $12.2 trillion economy is more than four times as big as India’s ($2.6 trillion).