<p>On account of a baby boom during the mid-1980s, 12 million young people were joining the labour force per annum (pa) between 1999-2000 and 2004-5 (based on NSSO figures). As the access to education expanded rapidly through the noughties, the young started joining/remaining in education. Hence, entrants to the labour force fell sharply to 2 million pa between 2004-5 and 2011-12, just when the economy and hence job growth was booming; 7.5 million per annum new non-agricultural jobs were created over that period. Since then better-educated youth started joining the labour force, looking for work.</p>.<p>India may well be the world’s fastest growing large economy, yet compared to the dream run of the noughties, now investment is lower, as is credit offtake, capacity utilization in industry, plant load factor, and agricultural growth. Therefore, it is hardly surprising that job growth is low as well (hence the unemployment rate of 6.1%, the highest in 45 years).</p>.<p>Only in modern services have jobs been growing – that is the organized sector, regular jobs – but most of the young are still not well-educated enough to capture those jobs. Hence, the crisis now in the fastest growing economy is that it is still generating too few jobs when the entrants into the labour force have increased.</p>.<p>In India’s highly segmented labour market, one can still discern at least three demographic groups that are in urgent need of jobs: A growing number of better-educated youth; uneducated agricultural workers who wish to leave agricultural distress behind; and young women (who too are better educated than ever before).</p>.<p>High growth is not enough, it is the pattern of growth that is the problem. Among many dimensions of this problem is the fact that in the quarter century since economic reforms began, manufacturing has not been the leading sector driving growth. Manufacturing should drive productivity in the whole economy. Services cannot do this, as they, by definition, ‘service’ the distribution of produced goods.</p>.<p>So what can policy-makers do to revive job growth (other than investing more in infrastructure)?</p>.<p><strong>Industrial and trade policy needed</strong></p>.<p>For 20 years after economic reforms began in 1991 there was no National Manufacturing Policy until 2011, and the Policy, when it came in 2011, was not even implemented. When the 12th Plan (with the first mention of Industrial Policy since 1991) became public, the UPA government had gone into policy paralysis. Not only did tariffs come down too fast in the 1990s, but what has damaged manufacturing is inverted duty structures.</p>.<p>Department of Industrial Policy and Promotion has finally prepared an industrial policy document (but not made it public). However, it is essential that trade policy is consistent with such an industrial policy. Otherwise, the two may work at cross-purposes. This is precisely what has happened since the early 2000s.</p>.<p>Excessive imports have been decimating Indian manufacturing, thanks to an inverted duty structure (IDS). An IDS implies a higher duty on intermediate goods compared to final finished goods with the latter often enjoying concessional customs duty. As a result, domestic manufacturers needing imported intermediates face high tariffs leading to higher raw material cost at home. This has been pointed out by FICCI to the Tariff Commission each year since 2012, for aluminium, steel, chemicals, capital goods, and electronics since the last 12-15 years. The government has only take some action in the matter.</p>.<p>A robust machine tools and capital goods manufacturing sector in India was killed as a result. Similarly, an incipient electronic hardware industry did not thrive under this regime. This must be corrected (without going in the opposite direction of autarky of the pre-1991 era). The automobiles sector in India faced no inverted duty structure and has thrived in the last 10 years. India today is one of the largest producers of vehicles of several kinds in the world. In sum, manufacturing growth will generate regular jobs for educated youth directly and indirectly.</p>.<p> <br /><strong>Special packages for labour-intensive industries to create jobs</strong></p>.<p>Labour intensive manufacturing sectors such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments account for 50 per cent of India’s manufacturing jobs. The apparel and garments sector has received a package from the Government of India roughly two years back. The leather sector too received special incentives in the last year. But the garments sector was badly impacted by the sudden demonetisation and has not recovered. The leather sector has also suffered severely due to the cow slaughter ban. The other labour intensive sectors have, in any case, been ignored.</p>.<p><strong>Cluster development to support job creation in MSMEs</strong></p>.<p>Most micro small and medium enterprises (MSMEs) lost jobs on a large scale due to demonetisation. Most of the unorganised sector employment is in micro, small and medium enterprises, which tend to be concentrated in specific geographic locations. There are 1,400 modern industry clusters in India and an additional 4,000 traditional product manufacturing clusters, like handloom, handicraft and other traditional single-product group clusters. There is a cluster development programme (CDP) of the Ministry of MSMEs as well as the Ministry of Textiles, which is poorly funded and could be better designed as well.</p>.<p>But the MSME total annual budget for all programmes, including cluster development, is under Rs 1000 crore. Spread across 5000 plus clusters, that is quite inadequate to result in a successful transformation in MSMEs located in clusters. Improved CDP could improve productivity in clusters, enabling them to grow and generate more jobs in mofussil towns and villages around them.</p>.<p><strong>Aligning Urban Development with manufacturing clusters to create jobs</strong></p>.<p>The Ministry of Urban Development (MOUD) has a program called AMRUT, aimed at improving infrastructure for small towns. Infrastructure investment by the government always creates many jobs. But the MOUD program does not take into account whether the infrastructure investment under this program is taking place in towns which have clusters of unorganised sector economic activities. Hence an engagement between MOUDs and MSME is necessary to ensure that this happens. It will attract more investment to industrial clusters, which is where most non-agricultural jobs are.</p>.<p><strong>Young women and jobs</strong></p>.<p>Young women are losing out in jobs, or those with increasing education cant find them, despite having gotten higher levels of education in the last 10 years. Secondary enrolment rose in India from 58% to 85% in a matter of 5 years (2010-2015) and even more since 2015, with gender parity. Skilling close to clusters (which is where the jobs are), rather than through standalone vocational training providers, is likely to be more successful. The problem with skilling programmes has been low placement after skilling is completed. The availability of jobs close to where the skilling is conducted will also enhance the demand for skilling.</p>.<p><strong>Public investment in health, education, police and judiciary </strong></p>.<p>Public investment in the health sector has remained at 1.15% of GDP even in the last three years, despite the announcement of a National Health Policy at the beginning of 2017. The policy indicates that expenditure on health will rise to 2.5% of GDP only by 2025. There are sanctioned posts that remain unfilled. Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased faster and not as late as 2025. Preventive and public health have always been the responsibility of government in all countries. More government expenditure in health means more jobs in government and better health outcomes.</p>.<p>Government schools also have such poor quality that parents are voting with their feet by spending money on private schools, whether or not the poor parents can afford it. The number of teachers required especially at Secondary and the Higher Secondary Level is very high, especially in science and maths. Many new government jobs can be provided if more young people could be trained specially to become teachers for science and math at the Secondary and the Higher Secondary Level.</p>.<p>The same applies to the police and the judiciary. While the number of para-military forces continues to grow, state governments are not filling even sanctioned posts in the police and in the judiciary (at all levels there are vacancies). More police and a larger judiciary can both reduce crime as well as speed up the process of justice for the ordinary citizen.</p>.<p>(Santosh Mehrotra is Professor of Economics and Chairman, Centre for Labour, Jawaharlal Nehru University)</p>
<p>On account of a baby boom during the mid-1980s, 12 million young people were joining the labour force per annum (pa) between 1999-2000 and 2004-5 (based on NSSO figures). As the access to education expanded rapidly through the noughties, the young started joining/remaining in education. Hence, entrants to the labour force fell sharply to 2 million pa between 2004-5 and 2011-12, just when the economy and hence job growth was booming; 7.5 million per annum new non-agricultural jobs were created over that period. Since then better-educated youth started joining the labour force, looking for work.</p>.<p>India may well be the world’s fastest growing large economy, yet compared to the dream run of the noughties, now investment is lower, as is credit offtake, capacity utilization in industry, plant load factor, and agricultural growth. Therefore, it is hardly surprising that job growth is low as well (hence the unemployment rate of 6.1%, the highest in 45 years).</p>.<p>Only in modern services have jobs been growing – that is the organized sector, regular jobs – but most of the young are still not well-educated enough to capture those jobs. Hence, the crisis now in the fastest growing economy is that it is still generating too few jobs when the entrants into the labour force have increased.</p>.<p>In India’s highly segmented labour market, one can still discern at least three demographic groups that are in urgent need of jobs: A growing number of better-educated youth; uneducated agricultural workers who wish to leave agricultural distress behind; and young women (who too are better educated than ever before).</p>.<p>High growth is not enough, it is the pattern of growth that is the problem. Among many dimensions of this problem is the fact that in the quarter century since economic reforms began, manufacturing has not been the leading sector driving growth. Manufacturing should drive productivity in the whole economy. Services cannot do this, as they, by definition, ‘service’ the distribution of produced goods.</p>.<p>So what can policy-makers do to revive job growth (other than investing more in infrastructure)?</p>.<p><strong>Industrial and trade policy needed</strong></p>.<p>For 20 years after economic reforms began in 1991 there was no National Manufacturing Policy until 2011, and the Policy, when it came in 2011, was not even implemented. When the 12th Plan (with the first mention of Industrial Policy since 1991) became public, the UPA government had gone into policy paralysis. Not only did tariffs come down too fast in the 1990s, but what has damaged manufacturing is inverted duty structures.</p>.<p>Department of Industrial Policy and Promotion has finally prepared an industrial policy document (but not made it public). However, it is essential that trade policy is consistent with such an industrial policy. Otherwise, the two may work at cross-purposes. This is precisely what has happened since the early 2000s.</p>.<p>Excessive imports have been decimating Indian manufacturing, thanks to an inverted duty structure (IDS). An IDS implies a higher duty on intermediate goods compared to final finished goods with the latter often enjoying concessional customs duty. As a result, domestic manufacturers needing imported intermediates face high tariffs leading to higher raw material cost at home. This has been pointed out by FICCI to the Tariff Commission each year since 2012, for aluminium, steel, chemicals, capital goods, and electronics since the last 12-15 years. The government has only take some action in the matter.</p>.<p>A robust machine tools and capital goods manufacturing sector in India was killed as a result. Similarly, an incipient electronic hardware industry did not thrive under this regime. This must be corrected (without going in the opposite direction of autarky of the pre-1991 era). The automobiles sector in India faced no inverted duty structure and has thrived in the last 10 years. India today is one of the largest producers of vehicles of several kinds in the world. In sum, manufacturing growth will generate regular jobs for educated youth directly and indirectly.</p>.<p> <br /><strong>Special packages for labour-intensive industries to create jobs</strong></p>.<p>Labour intensive manufacturing sectors such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments account for 50 per cent of India’s manufacturing jobs. The apparel and garments sector has received a package from the Government of India roughly two years back. The leather sector too received special incentives in the last year. But the garments sector was badly impacted by the sudden demonetisation and has not recovered. The leather sector has also suffered severely due to the cow slaughter ban. The other labour intensive sectors have, in any case, been ignored.</p>.<p><strong>Cluster development to support job creation in MSMEs</strong></p>.<p>Most micro small and medium enterprises (MSMEs) lost jobs on a large scale due to demonetisation. Most of the unorganised sector employment is in micro, small and medium enterprises, which tend to be concentrated in specific geographic locations. There are 1,400 modern industry clusters in India and an additional 4,000 traditional product manufacturing clusters, like handloom, handicraft and other traditional single-product group clusters. There is a cluster development programme (CDP) of the Ministry of MSMEs as well as the Ministry of Textiles, which is poorly funded and could be better designed as well.</p>.<p>But the MSME total annual budget for all programmes, including cluster development, is under Rs 1000 crore. Spread across 5000 plus clusters, that is quite inadequate to result in a successful transformation in MSMEs located in clusters. Improved CDP could improve productivity in clusters, enabling them to grow and generate more jobs in mofussil towns and villages around them.</p>.<p><strong>Aligning Urban Development with manufacturing clusters to create jobs</strong></p>.<p>The Ministry of Urban Development (MOUD) has a program called AMRUT, aimed at improving infrastructure for small towns. Infrastructure investment by the government always creates many jobs. But the MOUD program does not take into account whether the infrastructure investment under this program is taking place in towns which have clusters of unorganised sector economic activities. Hence an engagement between MOUDs and MSME is necessary to ensure that this happens. It will attract more investment to industrial clusters, which is where most non-agricultural jobs are.</p>.<p><strong>Young women and jobs</strong></p>.<p>Young women are losing out in jobs, or those with increasing education cant find them, despite having gotten higher levels of education in the last 10 years. Secondary enrolment rose in India from 58% to 85% in a matter of 5 years (2010-2015) and even more since 2015, with gender parity. Skilling close to clusters (which is where the jobs are), rather than through standalone vocational training providers, is likely to be more successful. The problem with skilling programmes has been low placement after skilling is completed. The availability of jobs close to where the skilling is conducted will also enhance the demand for skilling.</p>.<p><strong>Public investment in health, education, police and judiciary </strong></p>.<p>Public investment in the health sector has remained at 1.15% of GDP even in the last three years, despite the announcement of a National Health Policy at the beginning of 2017. The policy indicates that expenditure on health will rise to 2.5% of GDP only by 2025. There are sanctioned posts that remain unfilled. Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased faster and not as late as 2025. Preventive and public health have always been the responsibility of government in all countries. More government expenditure in health means more jobs in government and better health outcomes.</p>.<p>Government schools also have such poor quality that parents are voting with their feet by spending money on private schools, whether or not the poor parents can afford it. The number of teachers required especially at Secondary and the Higher Secondary Level is very high, especially in science and maths. Many new government jobs can be provided if more young people could be trained specially to become teachers for science and math at the Secondary and the Higher Secondary Level.</p>.<p>The same applies to the police and the judiciary. While the number of para-military forces continues to grow, state governments are not filling even sanctioned posts in the police and in the judiciary (at all levels there are vacancies). More police and a larger judiciary can both reduce crime as well as speed up the process of justice for the ordinary citizen.</p>.<p>(Santosh Mehrotra is Professor of Economics and Chairman, Centre for Labour, Jawaharlal Nehru University)</p>