India’s annual budget every year reflects the intention and priorities of the government far above the economic calculations. The budget speech given by the Finance Minister is also examined by seeing how many times the government has mentioned a particular sector or industry or policy issue. By the way, employment has been mentioned thrice in this year’s budget speech.
In the speech, the Finance Minister mentioned that under the efforts that are in the pipeline, 60 lakh jobs can be created in the next five years, i.e. an average of 12 lakh jobs every year. Unfortunately, there is great public sentiment about the lack of employment. However, there is a sense of relief that the government is finally taking cognizance of the employment problem. Roughly one crore, 8 million Indians turn 18 every year, of whom a vast majority enter the workforce. In addition, at least 10 crore people need to move out of the agriculture sector due to low productivity and low wages. The disguised unemployed have to move to more productive non-farm jobs. In the end, about 200 million Indians appear to be involved in what seems to be the jobless pile. These are not in the unemployed labor force participation rate of 42 percent. Labor force participation in India is among the lowest among comparable emerging economies. Every year at least 20 million people need employment in India and it is a goal to provide employment to so many people.
The consequences of a large influx of unemployed youth can prove to be difficult for India’s social fabric. Unless India creates 20 million jobs every year, we will continue to see unrest, demand for reservation, political activism and social disturbances. The answer to jobs is usually straightforward and requires economic growth. Well, the unique economic structure of our country makes it more complicated. To achieve the target of two crore jobs, we need a growth rate of more than 10 percent in Gross Domestic Product (GDP) every year. Right now we are able to provide employment at the rate of 0.1 percent, it should increase manifold. Today, if GDP increases by 10 percent, then employment availability increases by about one percent, obviously, there is a big need to increase employment.
In the last three decades, India has seen a high growth in GDP, but unemployment has also been part of it to a large extent. Deep structural issues, such as labor laws, have made companies capital-intensive in a labor-abundant country.
Creating employment in the manufacturing sector on a large scale is one way, but manufacturing in India has not even started legally. It is blamed on outdated labor laws, non-performing asset crunch, difficulty in doing business. Yes, there have been some improvements in these areas, but much remains to be done. A study by the International Labor Organization predicts that there will be a severe skill shortage in India in the coming years and by 2030, we will have 20 million, 9 million jobs that will not work due to lack of the right skills. Therefore, there is a need for massive emphasis on cooperation in developing skills among Indians. People need to take risk to make them skilled, giving loans so that people can enhance their skills, this can be a great way to skill the country permanently for job preparation.
Due to the large availability of opportunities in the cities, employment is also created. As the current Indian cities are starting to rank among the least livable cities in the world, this is an opportunity for us to build new cities. This is an opportunity to build large cities centered around educational institutions, industrial clusters or large medical or transportation centers. If we build 20-30 new cities with a population of around 80 lakh to one crore, then we will be able to create a large number of new jobs in the construction, maintenance and operation of those cities.
Tourism is also a sector in our country that is criminally neglected in policy making. This sector has immense potential to create jobs, as global experience tells us. It is also necessary to create a very enabling social environment to increase employment, so that women can work with safety and dignity. This can increase the labor force participation rate (WLFPR) of women. The encouragement given to a large sector like the textile industry has created massive employment for women in Bangladesh. About 80 percent of the 40 lakh people working in the textile industry are women. The female labor force participation rate in India is less than 20 percent, while it is 36 percent in Bangladesh. Particularly, each employed or employed woman can create more than one job, as she will need a worker to complete some of the unpaid housework. Women entrepreneurs hire more women. Ease of lending to women entrepreneurs can have a significant impact on employment, and women in particular.
There are also some other ideas or ways to increase employment. We should make treaties with countries suffering from labor shortage. The gig economy, which means contract based temporary employment, is creating jobs but also creating income instability and poor working conditions. Of course, making security arrangements for gig workers will spur growth in this sector. There are other ways to create jobs, but the first step is to acknowledge the magnitude of the problem and think of solutions that do justice to the scale of need.
(with Anupam Manur)