Rapid job growth that absorbs the huge supply of agricultural labour into its industrial work force is necessary for socio-economic stability in India. Any negative impact on employment resulting in substantial decrease of real earnings and widening income inequality is likely to reduce overall welfare and increase the cost of structural adjustments required, especially in the absence of meaningful social safety nets.
Monetary and prudential measures as responses The outlook for output growth in India has improved in the recent months, particularly with the momentum gained in manufacturing sector. However, persistence of global imbalances and high oil prices with a significant permanent component do pose some risks.