Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) based their campaign for the recent national elections on India's considerable economic growth.

Since Modi assumed office in 2014, GDP per capita has climbed from around $5,000 to more than $7,500.

India’s GDP growth reached 8.4 percent for the fiscal year ending in March, making it the fastest-growing major economy globally.

However, the economy also presents less favorable data, such as high unemployment, which increased to 8.1 percent in April from 7.4 percent in March.

This statistic, along with rising inflation, is seen as a significant factor in the BJP's underwhelming performance. The party secured 240 seats, far fewer than the previous 303 and below the 273 needed for independent governance.

Modi has formed a government with help from National Democratic Alliance partners. This reliance on smaller parties marks a shift for a leader who previously enjoyed outright majorities.

“This situation is unusual for Prime Minister Modi,” Vina Nadjibulla, VP of research and strategy at the Asia Pacific Foundation of Canada, told Al Jazeera.

“It partly explains why the markets reacted as they did,” Nadjibulla added, referencing the sharp drop in Indian stock markets post-election.

Investors are worried Modi might struggle to implement reforms needed to address high unemployment.

Despite strong GDP growth, almost half of India’s population works in the less productive agricultural sector. This share increased during Modi’s second term, from 42.5 percent in 2018-19 to 45.8 percent in 2022-23, according to an Oxford Economics report.

Young people, in particular, face high unemployment – the youth jobless rate was about 10 times higher than the adult rate in 2022-23, said the report.

Michael Kugelman of the Wilson Center mentioned it’s “ironic” that India's strong growth has come at the cost of economic stability for the lower classes.

In its third term, the Modi government must find ways to support poorer Indians beyond just building infrastructure, stated Kugelman.

“The economic agenda will be very ambitious,” he said.

Manufacturing vs Services Job

India has heavily promoted manufacturing to create jobs and attract global brands amid US-China trade tensions.

The “Make in India” campaign has done little to create jobs for those still engaged in agriculture.

The government’s focus has largely been on promoting high value-added yet less labor-intensive sectors like electronics, according to Alexandra Hermann, Oxford Economics lead economist.

Additionally, a lack of significant reforms in land and labor rules, cited by experts, has hindered major investments needed to expand manufacturing.

Despite having large parliamentary majorities, the Modi government has not made significant progress in these areas. However, coalition partners might now assist in implementing necessary reforms as they will benefit all voters.

“Coordination with state governments is essential, and coalition partners, being regional parties, will have significant influence. This could be beneficial for Modi and the BJP,” Kugelman stated.

Currently, India’s growth has been driven by services rather than manufacturing. Continued growth in the service sector will require improvements in human capital, Hermann stated.

“Raising human capital levels broadly will be key for inclusive and sustainable growth in the medium-to-long-term,” she said.

Despite having top universities in technology and management, primary and secondary education quality remains low, making the labor force relatively unskilled. The BJP’s manifesto fell short of committing to higher education spending, Hermann observed.

Kugelman agreed.

“The fastest-growing sectors are in services, but the labor force isn’t equipped for those roles, creating a significant mismatch,” he added.

‘Conditions for Private Investment’

Ajay Shah, an economist in Mumbai, highlighted that GDP growth and job creation mainly depend on private investment.

Private investment has not performed well since 2009 or 2011, depending on the metrics, so economic policy should create conditions favorable for such investments, Shah told Al Jazeera.

Excessive central planning has been a reason for the lack of success, Shah added.

“This creates policy risks. Government actions become unpredictable, introducing risk for private investors,” he explained.

Shah hopes the incoming coalition will be positioned better to address these challenges.

“There are more checks and balances,” he remarked.