How can we grow any faster if there is no output gap?

A survey conducted by the Reserve Bank in 6 metropolitan cities showed that consumer confidence in India fell to 91.1 in November from 95.5 in September, both values indicating negative sentiment. Confidence for the next 12 months, although positive, fell to 114.7 from 118.8 in September. These are the lowest levels in 4 years showing people are despondent about employment prospects. If consumers lack confidence they will hesitate to spend. Britannia, which derives 70% of its sales from biscuits, said that demand is sluggish, especially in rural areas. In a country of 1.3 billion people, where 27.71% of the people are between 1 and 14 years of age, one would expect sale of biscuits to be immune from changes in economic cycles. A few days back the RBI left policy rate unchanged at 6%, raising the possibility of higher retail inflation. Apparently, "The output gap and the pace at which it will close has been the main difference of opinion between the proponents of a cut in policy rates and those that desire a pause within the monetary policy committee (MPC)," wrote A Iyer. The 'output gap' is the gap between actual output and potential output in an economy and as such is linked to GDP growth and unemployment rate. If the economy is growing strongly unemployment will be low and the gap will narrow, while if the economy is sluggish the gap will widen. In 2016 a paper from the RBI suggested that output growth had fallen from 7.2% to 6.7% but the government was adamant that it was as high as 8%. That being the case why is the government exerting pressure on the RBI to reduce policy rates, especially since the Minister for Labour and Employment told parliament that unemployment had risen a smidgen, from 3.4% in 2013-14 to 3.7% in 2015-16. Any figure of unemployment less than 5% is considered full employment so a figure of 3.7% would denote an extremely tight labor situation which should lead to a very low output gap and a rise in wages. However, to be called employed in India you need to work for just 30 days a year. Unemployment rate among women is said to be 8.7%, when only 27% of women are in employment, the rate has been declining since reaching a high of 36.9% in 2005. The government is a victim of its own hype, wrote M Sharma, having boasted about GDP growth increasing from 5.7% in the first quarter to 6.3% in the second. This is not high enough to generate jobs but not low enough for the RBI to cut rates. Even more worrying is the decline in the rate of export growth, given that global growth has accelerated and we have an excess of labor, wrote A Kapoor and C Yadav. Previous governor of RBI, C Rangarajan has some words of advice for the government on how to revive the economy. But how? If there is no unemployment there is no output gap and hence no potential for increasing growth. That is the mystery of India.