India “clearly has a problem” figuring out new drivers for its economic growth even as its economy expands at a fast pace, JPMorgan’s Jahangir Aziz said, following the country’s union budget. 

“If you look at India over the last two years post the pandemic, recorded growth has been strong. But if you look at the drivers of growth, it’s essentially these two: Public infrastructure and services export,” Aziz, chief emerging markets economist at JPM, told CNBC’s “Street Signs Asia” on Tuesday. 

The country’s finance minister on Tuesday said capital expenditure for fiscal year 2025 will be 11.11 trillion Indian rupees ($133.9 billion) — or 3.4% of GDP — backing India’s ambitions to enhance its physical and digital infrastructure as it strives to become a developed nation by 2047.

According to estimates by the Ministry of Commerce and Industry, India’s services exports will likely hit $30.3 billion in June, compared with $27.8 billion in the same month last year. 

“Services export is sort of stabilizing at a high level, it isn’t growing as fast as it was a couple years back,” Aziz said, adding that the government should focus on increasing private investments and boosting consumption.

“It is going to be very difficult for India to keep sustaining the 6% to 7% growth rate just on public infrastructure and on services export … The question is, can India broaden its growth drivers to consumption, but more importantly private investment? We haven’t seen that happen in a long, long time.” 

India’s chief economic advisor V Anantha Nageswaran said Monday that the economy is expected to grow at 6.5% to 7% in financial year 2025, lower than the Reserve Bank of India’s 7.2% growth forecast.

According to the International Monetary Fund’s latest World Economic Outlook, the country’s growth is predicted to decline to 6.5% in 2025.

Although India’s large youth population is steering the country toward becoming the world’s third largest consumer market by 2027, consumption is unlikely to increase if high unemployment stands in the way, warned Raghuram Rajan, professor at the University of Chicago Booth School and former governor of the Reserve Bank of India. 

The country’s unemployment rate climbed to 9.2% in June, from 7% the month before, according to the Centre for Monitoring Indian Economy.

“You’ve seen consumption growth relatively tepid over the last few quarters, and unless people feel more confident that they have jobs, that they are well paying jobs, you are going to see that be a drag on growth,” Rajan said.

He questioned the employment initiatives such as pledging to train 2 million young people over five years, and providing a month’s worth of wages of about 15,000 rupees ($179) to first-time employees entering the workforce, announced in Tuesday’s budget.

“Are they of the magnitude that India requires given the enormous concerns about joblessness?”