Economic Highlights

New Delhi, 8 March 2013

19 m Job Losses

INDIA’S DEMOGRAPHIC DEFICIT

By Shivaji Sarkar

India is not only having a jobless growth, it is also losing out on employing its people. The agriculture sector lost almost 14 million jobs, according to the Planning Commission and the Economic Survey. Likewise, the manufacturing sector, which should have absorbed this excess labour force, is itself gasping for breath. It is estimated to have lost about five million jobs in just a little over five years.

With GDP growth shrinking to about 4.5 per cent in 2012-13, it may see more difficult days. Rising inflation, falling investment and more people out of jobs might lead to untold miseries for the Indian economy. Indeed, the demographic dividend has become the demographic deficit in India’s growth story.

With the Government’s conscious policy of removing people from the agriculture sector, mass migration from rural India continues unabated. The farm sector employed 258.93 million people in 2004-05, when the UPA Government took over. In 2010 the figures dropped to 244.85 million.

The Economic Survey laments that still 58.2 per cent, i.e. 70 crore people are employed in the farm sector that has “only 14 per cent contribution to the GDP”. But latest figures reveal that the manufacturing sector has been stagnating at 16 per cent. Simply put it means it cannot absorb additional hands.

The country is witness to another queer development. The National Sample Survey Organisation (NSSO) 2009-10 survey reveals that the labour force participation rate (LFPR) – persons willing to work - has come down to 400 per 1000 from 430 in 2004-05. It has particularly declined among the rural women, which may suggest a bias against them. 

Importantly, the Economic Survey surmises that more people, particularly rural females, are opting for education and skill development. It seeks to connect the trend to the rising number of students. From 20.5 per cent in 1993-94 it went up to 24.3 in 2004-05 and up to 26 per cent in 2009-10. But so has the population. And, therefore, the surmise seems far from reality. Additionally, the Economic Survey accepts that “employment growth in the second half of the decade has been modest”. It also states that 137 million females in 2009-10 “opted” not to work so as “to continue education”.

If the figures are accepted as authentic, then the actual number of jobless would be much higher than estimated. If and when these 137 million join the queue for job search, what would be its impact has too not been assessed.

The premise that the rural employment scheme, MNREGA has reduced migration is also being contradicted. If the rural people are migrating in such numbers, it calls for a review of the policy dimensions. It is not only an issue of priorities but one of how the country is losing its revenue without solving its problems. If the MNREGA Rs 30000-crore allocation is withdrawn, the country would be in deep crisis. The number of jobless would multiply. And let us keep in mind that MNREGA even otherwise gives only partial employment.

Migration of agriculture labour and the “unwillingness of women to join the workforce” also raise the question of sheer efficacy of MNREGA. In many areas, it is not considered prestigious to seek MNREGA work and therefore, the sociological profile of the scheme needs a review.

Further, the so-called experts’ views in the Government that a large section of the people is going for more skill development is also suspect. The displaced agricultural people as is evident have not got jobs in manufacturing. They apparently have gone to the low-paying construction sector, which has seen 44.04 million being employed in 2010 up from 26.2 million in 2005. This means that there is employment of more deskilled people rather than skilled. The big question is whether this pace will continue in 2012-13. 

A slowdown has been noticed in this sector along with infrastructure. The McKinsey report estimates that India could suffer a GDP loss of $200 billion, around 10 per cent of GDP, during the 12^th Plan till 2017. In terms of annualized growth it would imply a loss of 1.1 per cent. It says fewer infrastructure projects have been awarded during the 11^th Plan. Average rate is 70 per cent of the planned rate. Government data suggest that 60 per cent of the projects are plagued by time and cost over-runs. In other words, the projects are suffering because of high inflation and not so efficient execution norms.

Its fall-out again is on job creation. The delayed projects or those mired by problems in the public –private partnership (PPP) has also led to quagmire. It simply means not many jobs would be created even in the next five years.

The Planning Commission is not oblivious to the growing difficulties. There will be around 63.5 million new job seekers till 2016, in the age group of 23-35 years. The vulnerabilities will increase as the number of job seekers increase with rise in population as also further shrinkage in agriculture.

The country’s chief economist Raghuram Rajan states that India is creating jobs mainly in low productive constructions not in the formal organised sector. Even the services sector, despite higher returns, is not creating jobs. Increased automation, according to industrialist Venugopal Dhoot, has lowered demand for labour in manufacturing.

The Plan panel estimates 70 million more jobs have to be created to maintain the growth pace. Till the end of 12^th Plan it is estimated there would be 183 million more job seekers. It means even with additional jobs more than half of them would remain jobless in 2017.

Solutions are not difficult but may not be easy. These have to come with a change in outlook. Investment in industry has to increase manifold and the neglect in the agriculture sector has to end. Rather it has to be given a massive boost so that it can absorb the 70 crore people dependant on it.

Additionally, industry is highly capital intensive. However, the corporate sector, despite a high cash balance, has cut investment of Rs 90,000 crore because of uncertain market situations, low consumer demand, inflation and policy bottleneck. This apart, Government investments are mired by delayed decisions, search of right policy option and a terrified bureaucracy owing to high-pitch campaign against corruption. Another reason is the increase in Government expenditure leading to cut in Plan investments.

The hackneyed policy approach of the past 20 years, since 1991, has to end. The trickle-down theory has failed. Stock markets could not create jobs. The finance sector is entering a phase of crisis. The new public sector jobs are being created only in police and security services – a non-productive activity.

If employment is not generated deterioration in law and order is but natural. To counter it with additional police force leads to oppression, discontent, social conflict and corruption. This further leads to job loss.

If jobs are to be created – essential for ensuring growth – the economy has to be looked at afresh. The State is becoming too oppressive for realizing high taxes and scaring every employer away. Jobs can be created, consumption can be increased and investment can flow if there are people-friendly approaches and the bureaucracy stops looking at every investor with suspicion with a view to extracting its pound of flesh. Why can’t this be done? --- INFA

(Copyright, India News and Feature Alliance)