Despite high growth, where are the jobs?

Jobless growth is a real threat. In the past decade, India's annual GDP growth had been at an average of 7 pc.

A recent report prepared by the consultancy firm PriceWater House for the Confederation of Indian Industry (CII) harps on the usual premise of boosting economic growth as the basis for job creation.

Accordingly, it will still take 20 years to remove unemployment even if India grows at an annual growth rate of 9 per cent.

This is exactly what we were taught in our Economic 101 class. These textbooks have not been updated ever since they were written and prescribed for economic students. The ups and downs witnessed in the past 10 years when economic growth peaked to 9.3 per cent between 2004-05 and 2009-10, and then slid to 5.3 per cent after 2010-11, and in both the periods soaring unemployment, only shows that return to high growth, if it happens, does not automatically translate to job creation.

Jobless growth is a real threat. In the past decade, India’s annual GDP growth had been at an average of 7 per cent. Even between 2005 and 2009 when the average rate of growth was 8.5 to 9.3 per cent, a Planning Commission study shows that 14 crore people
had left agriculture. Normally, those who abandon farming should be joining the manufacturing sector.

But even in the manufacturing sector, 5.3 crore jobs were lost. So, where have these 14 crore people who quit farming and believed to trudge to the cities actually gone? My understanding is that most of these who abandoned agriculture actually stayed back in the village to become landless workers.
This is corroborated with the data coming from the National Sample Survey Organisation.

The NSSO survey indicates that India’s labour force was between 44 crore to 48.4 crore in 2011-12. The lower number indicates people who looked for work every day, while the higher points to those who joined the workforce at some point in the year. This means roughly 2.5 crore people who were looking for jobs remained unemployed.

But more significantly, the NSSO tells us that only 18 per cent of those who got jobs were on a regular wage. The remaining were daily workers or contract labour or self-employed.
In the past 10 years, when growth remained on an average pretty high – exceeding 7 per cent for the 10 year period 2004-2014, only 1.5 crore jobs were created.

In a country where more than 1 crore people join the employment queue every year, more than 15 crore jobs should have been created considering the high growth rate India witnessed. But with only 1.5 crore jobs created in a decade, or a mere 10 per cent of the expectation, the big question remains – will high growth result in more jobs as CII projects?

I think CII is completely off the mark. Its projection of a high growth to create more employment is aimed at seeking more financial sops and perks from the government. Between 2004-2005 and 2014-15, a 10 year period of high economic growth averaging 7 per cent per year, the industry was given tax concessions to the tune of Rs 36 lakh crore.

These tax concessions are listed in the budget documents under the head Revenue Foregone. These massive tax concessions were doled out to the industry on the premise that it will increase industrial activity, increase exports and of course create more jobs.
Interestingly, when India was on a very high growth trajectory between 2004-05 and 2009-2010, industrial production had slumped to minus 7.20 per cent in November 2009. In 2014, the industrial growth in the quarter ending October is at a paltry 2.5 per cent. Manufacturing sector is completely in the dumps.

Exports decline too

The sector has declined showing a growth of only 0.2 per cent in 2013-14, compared to 1.1 per cent growth a year earlier. The story of exports from India is also not cheering enough. By October 2014, exports from India contracted by 5 per cent due to a fall in shipments of engineering goods, gems and jewellery and pharmaceuticals. This has further widened the trade deficit indicating that more and more imports were coming in.

So, if the industrial output has remained sluggish, the exports have not jumped as expected and the high growth has failed to translate into increased job opportunities, the question that needs to be asked is where has the Rs 36 lakh crore incentive that was given to India Inc. gone? It could have been spent on poverty removal.

It’s therefore all a case of misplaced priorities. It is quite obvious that job creation comes in handy to seek massive financial and infrastructure support from the government.   
But strangely, its agriculture, the biggest employer that is on the chopping block. Not forgetting that agriculture employs directly or indirectly some 52 per cent of the population, the entire effort is to move population out of farming and into the cities. Instead, the thrust should be on how to make farming more profitable thereby reducing rural-urban migration.