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Jobless growth in India

Kashmir Times. Dated: 5/20/2017 10:36:15 AM

Public spending on development and economic policy should be more attuned to employment generation

The tall claims of the NDA-government do not appear to be translating into generation of employment opportunities in the country during the past three years while public spending has been going up on development schemes. Moreover, the economic policies of the centre formulated till date on various fronts have not resulted in creation of more employment opportunities. Both the aims of the government have not provided any succour to the unemployed people in the country when economic growth was claimed to be on the rise. The economic distress among the common masses appear to have woken up the policy makers from their deep slumber and forced them to re-think on the two serious issues during the past few weeks. Apart from this, changed global scenario has also impacted the Information Technology sector and resulted in laying off jobs by the private companies. The future scenario is also unlikely to improve with the passage of time because of economic slowdown around the world during the past few years. In fact, change in policies of United States of America have also led to cutting down on jobs for the Indian IT companies during the past six months or so. The recent news reports have also suggested that the central government may finally be starting to think seriously about jobs. Chief Economic Adviser Arvind Subramaniam recently pointed to the need to achieve higher economic growth, in the range of 8 percent to 10 percent, to solve the problem of jobless growth. In particular, he flagged the underperformance of the IT, construction and agricultural sectors, which earlier served as huge job-creators for the economy. It is worth noting that India added just 1.35 lakh jobs in eight labour-intensive sectors in 2015, compared to the 9.3 lakh jobs that were created in 2011, according to Labour Bureau figures. The rate of unemployment grew steadily from 3.8 percent in 2011-12 to 5 percent in the financial year 2015-16. Union Labour and Employment Ministry has downplayed the gloomy job situation as being a temporary phase. The ministry's focus instead is on the new National Employment Policy which would be released later this year and focus on shifting jobs from the informal to the formal sector. NITI Aayog too has dismissed concerns over jobless growth, saying the real problem is underemployment rather than unemployment. However, this month the central government set up a high-level task force headed by NITI Aayog Vice-Chairman Arvind Panagariya to obtain reliable data on employment trends to support policy-making.
Under the given circumstances, the focus on jobs is important because of impending unrest among the educated youth in the country. However, higher economic growth alone will not solve the problem of jobs. Jobs can be created when growth comes from the transition of labour from informal sectors like agriculture to the more formal manufacturing and service sectors. Such extensive growth, however, runs the risk of stagnation once the available stock of informal labour is exhausted - as some Southeast Asian countries found out the hard way quarter of a century back. On the other hand, growth can come about without any substantial job-creation in the formal sectors of the economy, but through improvements in productivity and manufacturing sector. The growth record of several developed economies even after the modernisation of their labour force explains such intensive growth. India should aim at growth that is driven both by improvements in productivity and modernisation of its labour force - especially since better jobs are crucial to improving the lives of teeming millions, who are employed, indeed underemployed, in low-paying jobs in the agriculture sector. Unfortunately, achieving both those objectives will first require labour reforms - ones that can both boost labour mobility within the formal sector and bring down the barriers businesses face in hiring labour force. But incremental labour reforms alone won't work unless these are combined with a step-up in government spending on asset and job-creating areas such as infrastructure, which in turn inspires private investment, that to in key sectors. Job-creation needs to be an essential axis along which economic and social policies are formulated by the central government. The schemes aimed at providing jobs to rural poor also need to be fine-tuned to extend the benefits to the targeted population.