ECONOMIC HIGHLIGHTS                                          

New Delhi, 29 November 2007

Creating More Jobs

URGENT NEED FOR STRATEGY

By Dr. Vinod Mehta

(Former Research Director ICSSR

The UPA Government after assuming power four years ago had promised to create more jobs under the Common Minimum Programme (CMP). It is a year and a half to go for the general elections but the UPA Government has yet to redeem this promise. 

Specially against the backdrop that the jobs and the job opportunities have not grown in the past four years other than in ICT and to some extent in the manufacturing sector. There has also not been much job creation in the rural sector.

Generally speaking, the increase in the level of investment generates more jobs in the country, but it does not guarantee generation of more jobs on its own.  Moreover, in a vast country like India, job opportunities need to be created evenly all over especially in the rural areas with a view to check undesirable migration to cities. 

The time, however, is ripe to devise strategies, both at the local level as well as the national level, which lead to creation of more jobs without resulting in mass migration of population from the village/towns to large cities. The manufacturing sector is growing and the rate of growth is around 11 per cent. Many economists are of the view that we can sustain this growth rate in the coming years.

It is common knowledge that 74 per cent of the population lives in rural areas and 26 per cent in the urban areas. In urban areas the problem of unemployment is not acute but it is serious mainly in rural areas. 

The sheer size of the urban population in metropolitan cities like Delhi, Mumbai, Kolkata and Chennai provide many job opportunities, especially in the unorganized sector. There is so much demand for various kinds of labour and services that anyone looking for a job can find some work even if it may not be to one’s liking. The labour that migrates to these areas is bound to find some work. It is a different matter that the unregulated migrations leads to many problems in the urban areas like the emergence of slums, increase in the crime rate etc.

Therefore, the real challenge of generating employment is in smaller towns and villages where the size of the population is so small that there are hardly any opportunities for generating remunerative employment. Setting up of factories or small businesses does not make any economic sense.

Since there are no factories or workshops in these areas the demand for labour is almost nil. Again, the total population of the area is so small that it does also not make any economic sense to provide services or generate some kind of a work in these areas.

According to the census figures out of a total number of 5,88,781 villages, 2,90,093 villages i.e. about 50 per cent have a population less than 1,000. The number of villages having a population between 1,000-2,000 is 1,14,395; the number of villages with a population between 2,000-5,000 is 62,915; for villages with a population between 5,000-10,000, the number is 10,597 and the number of villages with over 10,000 population is 2,779. It means that for 70 per cent of the villages the size of the population is less than 2,000.

What impact can it have on employment generation?  For one, you cannot make massive investments as it would not be able to reap any economies of scale. It will not be able to supply the required skilled or semi-skilled labour. The demand for services from the villagers will not be enough to provide job opportunities. This means that the demand factor will also not work. Thus, there will be almost nil opportunities for the young people of these villages to find jobs even in the unorganized sector. This problem is acute in the North East.

In other countries of the world the rural population is small while the urban population is very large; less than 25 per cent of the population is in rural areas. A large number of jobs are being created in these countries in the service sector followed by the manufacturing sector. (Even though some of the services are being outsourced by these countries, it has also been noticed that some of the affected employees are also migrating to the developing countries.)

Therefore, the employment opportunities are relatively more in these countries than in a country like India where the population is overwhelmingly rural. It is a sheer challenge how to generate employment in areas where the population is less than 2000.

Clearly, the Government will have to have some kind of a strategy to generate employment in these villages in the coming years. One of the ways to overcome this situation would be to club these villages into viable economic zones on the basis of some economic criteria before making investment in these areas. Most of the activities may be centred around food processing of various agricultural products including milk and milk products and smaller workshops, production units etc.

For instance, the Government can help these villages to start food processing and marketing cooperatives, small repair and maintenance workshops to attend to repair of mechanical equipments, set up cold storages etc., which in turn will raise employment opportunities for the local people both in the organized as well as the unorganized sector.

The second equally important point is to link all these villages with towns and metropolitan cities with all-weather good quality roads. This will help the rural people from these villages to take their products to nearby towns and metropolitan cities where there is a market for them.

Good roads can facilitate the to and fro movement of labour on a daily basis to nearby towns where they are bound to find some work.  Once these villages are linked by good roads many of the companies in the private sector may find it economical to procure their raw materials or outsource their work from these places. They may even come forward to set up small units.

Besides, large scale investment does not mean that one puts big money and sets up bigger projects. Large scale investment also means that one spreads out investment all over and help people to engage in meaningful economic activity.

The food-for-work programme is not just enough. What is needed is gainful employment on a sustained basis. This requires the Government to ensure easy movement of agricultural and other products from one place to another and easy to-and-fro movement of labour from the village to nearby towns.

In the long run, however, the emphasis will have to shift from the creation of jobs in the agricultural sector to creation of jobs in the service and the manufacturing sectors. The experience of developed countries shows that more jobs are created in the non-agricultural sector. 

It has been noticed by the Indian economists that the country’s service sector is expanding very fast. This defies the experience of other developed countries. Be that as it may, the creation of jobs in the rural sector can at best be a medium term solution to the unemployment problem; the emphasis will have to be on the creation of jobs in the manufacturing sector in the long run. ---- INFA

(Copyright India News & Feature Alliance)