Jobless growth, a dangerous trend

The recent annual Employment and Unemployment Survey of the Government of India brought out some startling facts about the unemployment scenario in the country.

According to survey, the labour force participation rate nationally is 50% which is much below the potential level, and worse is, female participation is much lower than the male. Of course, it’s a recognised fact that India has been experiencing unemployment problem for quite some time, but no significant improvement has taken place as data suggests further deterioration of the crisis.

Many are convinced that providing enough employment opportunities is not easy especially when half the population is below the age of 25 and will soon enter the job market. This is a huge challenge for the government. In response, the government has taken some important steps by introducing initiatives such as ‘Make in India’, ‘Skill India’ and ‘Start-up India.’

But what the economy has been witnessing is high growth which means there has been almost continuous rise in GDP or India has dramatically scaled up in its growth. But correspondingly, job creation or job growth hasn’t taken place. This led us to believe that currently India witnesses a ‘jobless growth.’

Jobless growth is a dangerous trend because it creates social tension and disharmony. It spreads inequality which may lead to further societal collateral damage. Under such situation what should the government do?

One of the probable reasons for jobless growth in the country is because of automation taking place in most of the economic activities. Sectors like automobi­les, computers, finance, transp­ort etc, are currently witnessing dramatic automation growth.

As a result, employment opportunities are gradually sinking. This survey has also brought out serious decline in employment growth. To add sectors like jewellery which was at one time one of the top export earners for the country, is also witnessing reduction in employment.

In 2016, India’s unemployment rate was 7.97% with rural unemployment at 7.15% and urban unemployment at 9.62%. In rural areas, unemployment figures are lower due to the MGNREGA. In the Union Budget 2017–18, the MGNREGA received Rs 480 billion. While the Act has helped lower the unemployment rates, it has not been able to tackle disguised unemployment/underemployment. And such programmes focus only on unskilled employment.

Of course, the government has in the past taken some major initiatives to create employment among the youth by connecting job seekers to potential employers through the Ministry of Labour and Employment which has launched the National Career Service portal. The portal is a common platform connecting job-seekers, employers, skill providers, placement organisations and counsellors.

Similarly, the government has also initiated the Pradhan Man­tri Kaushal Vikas Yojana — a skill development scheme for which the Ministry of Skill Development and Entrepreneurship has been made the nodal point to help young people learn industry-relevant skills and secure skilled employment.

It looks that these schemes may create potentiality for employability through skill upgrading, but sad story is that one of India’s largest employers of educated youth — the IT sector — has started laying off employees. Companies like Wipro, Cognizant and Infosys have announced that they will downsize.

While there was 8.6% growth in the IT sector in the 2016–17 financial year, jobs only grew by 5%, compared with 6% in 2015–2016. This downward trend is predicted to continue, with a 20%–25% reduction in growth in employment in the IT sector over the next three years.

Human capital

Industry experts blame this on automation, artificial intelligence and stricter visa norms in key markets such as the US, UK and Australia. But this technological advancement may not adversely impact job creation because India can move towards knowledge-based economy by focusing on high-value manufacturing, high end services sectors and enrolment in quality higher education.

The government should make its teaching and academic curricula more employable driven. Human capital can be deve­loped only when investment in education and accessibility to te­rtiary education is guaranteed.

Current disparity in access to higher education leads to unemployment among the youth. Singapore has launched certain programmes to establish partnerships between domestic and foreign universities to promote tertiary education. India could learn from such initiative.

India further needs to reform its archaic labour laws which currently proliferates only contractual jobs instead of permanent employment. Retail is a labour-intensive sector, and foreign investment in retail would create jobs in the both retail and related sectors like apparel manufacturing and logistics.

Similarly, allowing foreign investment in sectors like legal and accountancy services will create employment as more foreign firms move to India. Infrastructure investment can also be utili­sed as an engine for job creation.

Finally, India needs to bargain hard with the USA for easier work visa norms so that pressure of some unempl­oyment which has stated showing can be eased out to an ext­ent. With these new and innovative policies and approaches, the government can handle impending unemployment problem.

(The writer is Professor, Lal Bahadur Shastri Institute of Management, New Delhi)