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BRP Bhaskar: A worrisome job scenario
September 06, 2016
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Exclusive to The Gulf Today

With the working population rising rapidly and job opportunities lagging behind, India, which has replaced China as the world’s fastest growing economy, is in the most challenging phase of its developmental effort.

According to the latest UN projections, India’s population will outstrip China’s by 2022, six years earlier than previously calculated. While China has to contend with an ageing population, India, theoretically, has an advantage over it by virtue of its larger working population. But to take advantage of the demographic situation, it has to improve its ability to create jobs.

Currently an estimated one million people enter the workforce each month. The rate of job creation, which has always been short of the requirement, is now declining. A recent official survey revealed that eight labour-intensive industries, including textiles, garments, BPO, metals and automobiles, created only 135,000 jobs last year. They had created 490,000 jobs the previous year.

A study of the performance of more than 1,000 companies by a private rating agency also showed that the job creation rate was falling. Together these companies created only 12,760 jobs last year as against 188,371 in the previous year. The manufacturing sector companies recorded a 5.2 per cent decline in job growth. In the previous year there was a 3.2 per cent growth.

Three industries account for the bulk of employment in the organised sector. They are manufacturing (40 per cent), banking (23 per cent) and information technology (18 per cent). Prime Minister Narendra Modi’s ambitious goal of creating 250 million jobs over a 10-year period cannot be reached unless they generate more jobs.

Some analysts have suggested that studies based on the performance of companies may not reflect the true position as industries are increasingly outsourcing certain types of jobs. But, according to the official survey, there was a decline in contractual jobs also last year.

The dismal situation revealed by the studies has prompted critics to taunt the Prime Minister with questions like “Where are the promised jobs, Mr. Modi?” The fact is that low job creation has been a feature of India’s economic development even before Modi’s time. Between 1991 and 2013, India recorded an average annual growth of 6.5 per cent but did not create enough jobs to attract even half of those entering the labour market.

Modi’s expectation that increased flow of foreign direct investment and his Make in India programme will boost job creation has not materialised. About 60 per cent of the FDI is in the form of private equity investment, which may fetch the investor a decent return but does not necessarily result in job creation. The Make in India programme requires skilled labour for manufacturing and high-end services. Skilled workers form only two per cent of India’s labour force.

Medium, small and micro enterprises are the backbone of the industrial sector. There are about 40 million such units and they employ about 100 million people, making them the largest provider of jobs. Falling exports and difficulties in obtaining timely credit hamper their ability to play a bigger role.

Official and unofficial studies limited to the organised sector do not give a full picture of the job situation. More than 90 per cent of the country’s working people are in the unorganised sector where wages are low and underemployment is widespread.

Although China has fallen behind India in the rate of growth of the economy, it is still ahead in job creation. According to Human Resources Minister Yin Weimin, China created more than 13 million new jobs for urban residents last year. However, the pace of job creation is slowing. The target for this year is only 10 million new urban jobs.

China’s major problem on the job front now is the rehabilitation of 1.8 million workers who are expected to be laid off by state-owned coal and steel plants as the economy switches from the investment-led model to one that relies on domestic consumption, services and innovation.

Interestingly, Arvind Panagariya, Vice-Chairman of the Niti Ayog, which has taken over the functions of the erstwhile Planning Commission, senses an opportunity for India in the Chinese downturn. He believes the high wage levels in that country will tempt manufacturers of certain items like textile and footwear to view India as an attractive alternative location.

Amartya Sen, the economist, has pointed out that India is trying to become a global economic power with an uneducated and unhealthy labour force, which has never been done before and never will be done in the future either. Clearly the government has to do more to realise its goal.

The author is a political analyst of reckoning.

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