India’s Job Creation Challenge

What are the major concerns of Indians today? According to the December issue of Ipsos, the global market research and public opinion specialist, the three burning headaches of urban Indians are unemployment (41%), financial and political corruption (29%) and coronavirus (29%). These are followed by urban Indian worries about crime and violence (25%) and poverty and social inequality (25%). India is one of the 26 countries that feature in Ispos periodic review of citizens’ perception as to whether the things are moving in the “right direction” or “are they off on the wrong track?”

One can always make an issue of the quality and breadth of the survey sample size and how good are interviewers in engaging interviewees in discussions. Whatever that may be, this work of Ispos has won global recognition and there should be no hesitation in accepting that urban unemployment is hitting growing numbers of people across the country as the third Covid-19 wave in the form of mutant Omicron spreads fast. The curse of people going without work and therefore, drying up of their income is being increasingly manifest in rural areas too.

The job data report by the Centre for Monitoring Indian Economy (CMIE) saying unemployment rate in the country touched a four-month high of 7.91% in December comes as confirmation of popular concern of lack of employment opportunities. It will be poor consolation to say that the country had experienced an unemployment rate of 8.3% in August.

According to CMIE, the urban unemployment rate in December rose to 9.30% from 8.21% in the previous month. In rural areas, unemployment rate during the period was up from 6.44% to 7.28%. Remember people living in rural areas constitute close to 70% of the country’s population. This should give an idea of hardships of rural people without ownership of land. CMIE report says new jobs were created in December, but these were far less than people joining the ranks of jobseekers.

“Around 8.3 million additional people were looking for jobs. However, 4 million jobseekers got employment,” says CMIE managing director & CEO Mahesh Vyas. What is happening on the employment front is not surprising against the background of muted economic activity and consumer sentiment downed by Omicron. From an ill-advised demonetisation that badly hit the informal sector and a fairly large part of building construction activities across the country to clumsy rollout of GST, a number of policies were found to be anti-job growth.

State Bank of India says in a recent report that progress of formalisation of the economy has seen the share of informal sector in GDP falling from 52% in 2017-18 to 15-20% in 2020-21.The report has found that ₹130 million crore has come under the formal economy in the last few years. Formalisation is to be welcomed, for it brings increases in output and turnover by firms, which are liable to pay taxes. Cash intensity of the economy will continue to diminish as the government continues to give thrust to cashless transactions, promote digital payments and kisan credit cards and transfer of all kinds of cash benefits to beneficiary bank accounts.

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While all that is good for the economy, the question remains as to what extent job losses in the informal sector have been made good by creation of new jobs in the formal sector. Precise figures are not available. But one can easily guess the privation of people who became redundant in the process of emasculation of informal sector gaining pace since the breakout of Covid-19. No wonder more and more faces of jobless Indians stand frazzled.

The unemployment situation being so critical, New Delhi is pushing profit-making public sector undertakings to take up major capital expenditure programme along with green signalling construction of new highways and other infrastructure projects. At the same time, the banks are encouraged to fund private sector greenfield projects and also its expansion at present operating sites. Infra work is always employment intensive, though not of permanent kind. At the same time, because of high levels of automation and digitisation, investments in manufacturing industries are now generating lesser number of jobs than before.

Let’s consider the ArcelorMittal Nippon Steel (AMNS) announcement to build a massive 24 million tonne (mt) steel plant in Kendrapara district of Orissa (since renamed Odisha) at an investment of over ₹10 million crore. The joint venture company will run the plant permanently employing only 16,000 people. No doubt, the proposed steel plant will create significant indirect employment opportunities several times bigger than direct employment in the mother plant through ancillary and downstream industries and services. But compare the direct employment to be created by AMNS investment at Kendrapara with Tata Steel’s 31,189 people on roll (2020-21 annual report figure). The more than a century old Tata Steel has capacity of 19.6 mt at its three mills at Jamshedpur and Odisha.

Odisha chief minister Naveen Patnaik is aware that the state’s rich endowments of mineral resources, including iron ore, coal, chromite manganese ore and bauxite must not only be used to make primary metals such as steel and aluminium but these must be further value added within the state to generate employment for the local people and revenue for his government. That is why at the prodding of Patnaik, the National Aluminium Company and Vedanta Aluminium are building aluminium parks adjacent to their smelters where small and medium units will get liquid metal to make value added aluminium products.

Vedanta Aluminium CEO Rahul Sharma says his company promoted aluminium park will bring in “investment of at least ₹2,000 crore, create an annual incremental economic value of ₹4,500 crore for the state and generate livelihood for more than 10,000 people.” Steel mills and aluminium refineries and smelters in Odisha are found in areas where tribal population is in majority. Ancillaries linked to mother plants and downstream units for value addition to primary metals create many jobs but they need skilled hands. Here the state – in this case Odisha – will have to build institutions in concerned districts to impart skills to tribal and people belonging to Scheduled Castes and Tribes to be ready to work in factories.

India’s rapidly expanding information technology sector, fintech, which is inviting considerable support from venture capitalists and start-ups mounted on IT are the exceptions where supply of human resources are to fall short of growing requirements for at least the next five years. The country’s largest staffing solutions provider Teamlease says fulltime employee attrition in the technology industry will rise to 22% by March 2022 when attrition in contract staffing will be 49%. Shortages of IT and engineering human resources leading to high rates of job hopping are a global phenomenon that is not going to go away any day soon. At the same time, the problem is manifest more in India and other sourcing countries than destination places such as the US and Europe. In their desperation to retain talents, many Indian employers in IT and e-commerce industries are increasingly resorting to the practice of making better offers to people who have served notice to quit. The practice, however, in many cases is proving counterproductive. With counteroffers in hand, the ones having decided to leave in any case get a handle to strike a better deal with new employers.

The counteroffers could result in demoralisation of performers who are not looking for greener pastures. The competitive bidding game is a no-win practice. Shortages of human resources in the specialised niche sectors call for colleges, universities and IITs to raise capacity to produce larger number of IT experts. At the same time, the IT groups and manufacturing companies digitising their operations will have to have bigger budgets for employee up-skilling.

Union Budget 2020: A Missed Opportunity To Tackle Unemployment

Continued lack of employment opportunities for India’s youth has already led to disaffection among them and that is evident partly from the manner in which student unrest (albeit triggered by the Modi regime’s controversial Citizenship Amendment Act) has spread. Half of India’s 1.3 billion people are below the age of 25. This year, it is expected that the average age of an Indian will be 29 years (for China, it will be 37). As education levels rise for young Indians so do their aspiration for good jobs and better standard of living. If employment rates don’t rise their hopes will not be met.

That could be a ticking time bomb. Many believe the countdown to an explosion has already begun. Educated urban youth in India have readily joined the movement against the Citizenship Act, which is being seen as discriminating against the largest minority community in India, Muslims, who constitute more than 14% of Indians. The youth’s opposition to the Act must be seen holistically. It is a symptom of the greater disaffection that young Indians feel. Even as the number of those who graduate from schools and colleges increases, their prospects of landing desirable jobs have diminished. Before long this could be a problem instead of the demographic dividend that a youthful India could benefit from.

In that context, Finance Minister Nirmala Sitharaman’s Budget has missed a big opportunity. The annual Budget in India has always been a mega economic event in the country. Finance ministers, regardless of which political party they represent, use the exercise, which ought to be a routine balancing of the government’s expenditure and revenue streams, not only as an opportunity to announce the government’s economic policies but also as a podium to offer sops and incentives to different sections of the population—an exercise that is seen as a means to garner electoral support from voters.

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As a consequence, the media hype gets heightened and the Budget’s announcement in Parliament becomes a red-letter day for newspapers, TV channels and other publications. In recent years, as the Indian economy has become less regulated; tax structures have become simplified; and government controls on different economic sectors have loosened, the Budget’s importance has declined. It is no longer an event that offers governments a chance for grandstanding or making big announcements for changing policies or ushering in new economic strategies.

The Indian economy has been ailing in recent months. It is probably at the worst low point that has been witnessed in over a decade. Last year, GDP growth rate slumped to 4.8% from 2018’s 6.8%; prices across many categories of products, including food, rose; and sales of consumer products stagnated. Industries, including automobiles, white goods, and other categories held off investment plans as inventories of unsold products built up. The youth—65% of Indians are under 35—were impacted adversely too as estimates of the unemployment rate rose to nearly 8% at the end of 2019.

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In her Budget, Sitharaman announced a series of incentives—personal income tax cuts; bank deposit insurance; and some infrastructure investments—but none of them were designed specifically to increase the potential for generating more employment. Most of India’s youth are based in rural parts of the country. Nearly 66% of Indians live in villages. And while 44% of Indians are employed in agriculture, the sector accounts for a shade over 15% of GDP. Labour productivity in the sector is low and many Indians are what economists call “disguised unemployed”—that is they work on farms but don’t add anything in terms of incremental output.

In fact, it has been argued that if rural youth, ostensibly working on overcrowded farms, get the opportunity to move to other sectors and find work, the productivity of Indian farms could actually go up. But there lies the rub. Where are those alternative jobs? India’s Prime Minister, Mr Narendra Modi, and some of his ministerial colleagues have often stated that India’s youth have opportunities galore in the informal sector—to be small entrepreneurs who are self-employed. Those are facetious statements, designed more to divert attention from the real problem of unemployment than to alleviate it. Otherwise, how does one explain the phenomenon of post graduates and graduates applying in thousands for menial posts such as that of a government department’s peon or a municipality’s sweeper?

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Yet, there may be a kernel of an idea for employment generation in those statements. If the finance minister, in her Budget, had devised incentives for unemployed youth or other budding entrepreneurs to set up small businesses—through liberal grants of seed capital; subsidised land for building small manufacturing or trading establishments; and facilitation for marketing and distribution of products and services—that could lead to heightened entrepreneurial activities. Such incentives, if properly targeted in the rural and semi-urban parts of the country where agriculture or farm-related enterprises could move the rural sector up the value curve, it could see the blooming of millions of tiny, small, and even medium enterprises. In turn each of these enterprises could generate employment—not on a large industrial scale—but in modest numbers. If a tiny enterprise hires even four or five workers, 10,000 of them could hire 50,000 young people. The multiplier effect of such an initiative is easy to conceive.

To be sure, Mr Modi’s government, in its first term (2014-19) flagged off many well-publicised schemes: Skill India, which was aimed at re-skilling young Indians; and Startup India, aimed at handholding and helping entrepreneurs to set up enterprises. None of these has attained the levels of success that were envisaged or promised. If such programmes are conflated into comprehensive opportunities for fresh Indian graduates from schools and colleges and offered to them as they finish their education, particularly in rural and semi-urban India but also in urban areas, they could not only be opportunities for unconventional employment but also serve to build small enterprises by young entrepreneurs that could further employ other young people.

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Some of this is happening informally. But the need of the hour is for India’s government to formalise such activity and make it a widespread movement. The definition of a budget is to balance spending and earning; but in India, budget-making could also be the opportunity for governments to think out of the box and create something that could address what is perhaps the country’s biggest issue—a burgeoning population of young people but a diminishing prospect of finding employment for them. India’s youthful demography is unique. Nowhere in the world are there as many young people as there are in India. The strategy to find opportunities for them has to be equally unique. The Budget for this year offered a platform that could have been used to do just that. Sadly, that opportunity was missed.

#WhereAreTheJobs – ‘Job Market Is Pathetic’

I work as a journalist with Radio Dwarka (www.radiodwarka.com), India’s first online Community Radio, an initiative by a group of old media hands in Delhi. According to Wikipedia, community radio stations are operated, owned, and influenced by the communities they serve.  They provide a mechanism for enabling individuals, groups, and communities to tell their own stories, to share experiences and, in a media-rich world, to become creators and contributors of media. In short, it is a mini democracy in action, a media service of the people, for the people and by the people.

As a reporter I try to get an in-depth understanding of issues. I have been able to look at people’s confusions, aspirations and fears from close quarters. And in my opinion, our country is in urgent need of a Universal Basic Income. The employment situation doesn’t look that bright to me.

There are various schemes that have been introduced by the current government to skill people and generate employment. The government’s social media machinery has done a good job publicising these schemes. Youngsters from privileged backgrounds, who probably do not need to avail benefits of government schemes want to participate as volunteers wherever possible. However, the schemes should reach the people from the back of beyond, who really need them the most.  

Perhaps the most talked about business loan scheme is the ‘MSME Business Loans in 59 Minutes’.  Financial assistance of upto Rs 1 crore is given to micro, small and medium enterprises that form the backbone of any economy. MSMEs contribute to around 40 percent of the GDP. A time frame of 8-12 days is taken to verify the credentials of the business, but the actual approval or disapproval is given in 59 minutes flat. It saves one from so much stress.

Some day, I would like to start my own initiative –a community radio for my hometown, Gaya. Gaya has numerous stories in its bag apart from the Mahabodhi temple. The world needs to know about us. I keep updating myself about the various ways in which the government is aiding people, who want to work towards their own businesses.

As about voting in the last elections, yes I had voted for the BJP and my vote will again go to the same party.

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#MyVote2019 – ‘Govt Supporting Startups’

I am not an economic expert and thus can only speak for myself. In my opinion, the employment situation has improved, though the recent report released by NSSO (National Sample Survey Organization) says otherwise. Having said that, to form an opinion about matters as serious and as multi-layered as this, one needs to delve deep into the subject.  

I am happy about the fact that the government has increased the taxable income slab to 5 lakh per annum. I understand that it still needs to be passed in the parliament and as of now is only a proposal, but is a good start nonetheless. The ESIC (Employees’ State Insurance Scheme) amendment that came into effect on January 1, 2017, is also a welcome step for those already in the workforce. After the amendment, the wage limit of employees covered under the scheme went up from Rs 15,000 to Rs 21,000. This new move also included insurance cover for family members of employees.

The current government has definitely created a conducive environment for start-ups with the launch of the Start Up India Scheme launched in 2016. I particularly like the fact that the Mudra Banks Scheme (Pradhan Mantri Mudra Yojana) provides micro-finance at low-interest rate loans to entrepreneurs from low socioeconomic backgrounds. This means anybody, who has a great idea, irrespective of their socioeconomic background, can dare to dream and take the leap.

As someone, who would love to start his own enterprise, I love to read about how the government is helping turn ordinary people’s ideas into reality through steps such as, creating a Rs 10,000 crore start- up funding pool; reduction in patent registration fees; improved bankruptcy code, to ensure a 90-day exit window; freedom from mystifying inspections for first three years of operation; freedom from Capital Gain Tax for the first three years of operation; and self-certification compliance.

I have heard about the Skill India campaign launched by Prime Minister Narendra Modi on 15 July 2015 which aims to train over 40 crore people in India in different skills by 2022.

As I mentioned above, even though I currently work as a business analyst, sooner or later I would like to start my own business, or in other words looking forward to being self-employed. Currently I am doing research about what it is that people need, so that my business can help fill the gap in the market.

I did not vote during the last elections, however since 2014 I have begun to take a keen interest in politics and must say I am impressed with the ruling party’s work and would like to vote for them in the upcoming elections.

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