UNEMPLOYMENT IN INDIA

For a country that is taking such gigantic strides in the midst of the world’s economically powerful nations, India’s persistent inability to create ample employment for its burgeoning population has been an albatross around its neck for far too long. In fact, the charge of ‘jobless growth’ has been levelled against all governments even those which have experienced a period of fast growth. This has largely to do with both the quantity and the quality of employment opportunities available and the general perception that economic liberalisation has augured well only for certain sections of the society, to the exclusion of others.

For most of Asia, the path to economic success lies in shifting from being predominantly agrarian economies to being hotspots of manufacturing. For the smaller East Asian nations, exporting their way out of poverty was the only way of generating employment quickly. China, despite its large population, also chose to first focus on the world market and then turn inwards within decades of its first brush with economic reforms.

India, on the other hand, has the distinction of being a major economy which has made a transition directly from being an agrarian economy to being a service economy. The irony, though, is that even as the service sector contributes a major part to the GDP, it is agriculture that continues to provide around 50% of total employment. So, while it retains all the characteristics of a developing country with surplus labour, India has failed to create enough avenues in the manufacturing sector which is well equipped to employ such a vast pool of unskilled workers.

The story of industrial growth in India is riddled with various experimental policies, some born out of India’s tryst with socialism, others out of sheer political dogma and the entrenchment of vested interests over time. By the time India was forced to liberalise its economy, the world was on the cusp of the IT revolution and it did well to take advantage of it. But the decades of industrial policy that had favoured the creation of a large pool of small manufacturing units, did not allow India to go heavily the manufacturing way. In fact, the service sector in India was destined to become what manufacturing, for a long time was, in China, the employer to a largely semi-skilled cheap labour force doing back-end jobs for multinational companies. The Indian IT sector did shine bright in certain areas, but these were limited to a
small group of highly qualified professionals who found better employment overseas.

But, in the main, the service sector remains a much more skill-heavy sector than manufacturing. So, in the absence of widespread skills and education, it cannot generate enough employment to remove the surplus labour in agriculture.

Of late, there has been a focus on trying to integrate India with the global value chain by attracting Foreign Direct Investment (FDI) so that large scale manufacturing may take root in this country. But attracting FDI is not the same thing as attracting financial flows into the stock markets. It requires significant reforms spanning tax laws to labour laws, which cannot happen overnight or without significant political backlash from vested interests. It also does not make sense to alter the manufacturing landscape entirely to attract MNCs at the cost of small scale industries that we have so laboriously nurtured over the years. For an economy where over 90% of the labour force is employed in the informal sector, small scale industries must continue to enjoy as much focus as large scale industries.

In fact, small scale industries and hence, employment have been hit hard in recent times in the wake of major economic disruptions. Employment in the informal economy has reduced drastically in the wake of demonetisation and the introduction of the Goods and Services Tax (GST). The Periodic Labour Force Survey (PLFS) shows a high unemployment rate of 6.1% for 2017-18. While the current unemployment rate may be due to both structural and cyclical factors, the need for immediate palliative measures for the small and medium scale industries to boost employment, cannot be emphasised enough. They remain the mainstay of employment in urban areas and so must be given adequate support.

Given the size of the labour force in agriculture, it is impossible to imagine that the entire set of employment avenues can be created in industry and services alone. Agriculture needs to undergo a significant transformation to be more productive and to make existing employment gainful. Capital investment in agriculture and allied sectors remains abysmal. Agriculture still remains an exercise primarily intended for subsistence. Commercialisation of agriculture and an expansion in non-farm avenues can lead to productive employment in the rural sector. The current agricultural and rural distress is as much a result of stagnation in agriculture as it is of the economic disruptions mentioned above. This stagnation is due to the lack of incentives for investment and the accumulation of vested interests in the form of traders and middlemen who make agriculture unprofitable and unviable for a majority of the small and marginal farmers. Farm-level employment is also on the decline as is evident from the rising number of rural labourers demanding work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

Another problem with employment in India is the acute regional imbalance in the distribution of opportunities. Such inequalities lead to the need for migration which gives rise to its own set of political and socio-economic ills which prevent the free flow of labour and capital. So, there is a need for an equitable and evenly spread urbanisation. Dependence on a few urban pockets of employment not only skews the balance of economic growth, but also breeds unnecessary violence.

There is a contention among many that the high unemployment rate prevailing now is a result of changes in the nature of the labour force. There has been a drastic fall in the participation rate of the labour force which has led to inflated unemployment figure. An increasing number of young people are entering higher education and so they are not reckoned in the labour force. More and more women choose to stay at home as the cost of employing housekeepers goes up. While all this is true and may be the cause for an inflated unemployment rate, it still goes without saying that the Indian economy is hard placed to generate enough jobs even for the number of people entering its labour force, let alone ensure even a reasonable quality of jobs.

A major indictment of the system is that even a formal education does not guarantee a job with a reasonable degree of fulfilment. In fact, being educated too often acts as a handicap by deterring many from taking menial and unskilled jobs.

So, a major thrust now ought to be on education with a focus on skill development and job creation at its heart. The government has undertaken a number of policy measures to integrate formal education with vocational training. But such training still remains confined to a few select institutions. The government, through its ‘Skill India’ and ‘Start up India’ programmes, is also trying to create a system that would facilitate productive employment.

Many labour law reforms are also on the anvil that seek to balance the need for rationalisation of labour laws and labour security. The labour code on wage bill, the labour code on industrial relations, the labour code on social security and welfare and the labour code on occupational safety are meant to rationalise some 44 odd labour laws so as to enable seamless industrial employment and retrenchment and, at the same time, facilitate labour protection. India, today, stands again at the cusp of a major economic watershed. While India must be ready to take advantage of this fourth industrial revolution, it must also ensure that the benefits of economic growth flow to all and not merely to a select few. To that end, India has to invest heavily in social overheads such as education and health so that it manages to reap the so-called demographic dividend. At the same time, as it facilitates generation of widespread employment in areas spanning agriculture, industry and services, it must also provide for social security for those who are left out of it. In the short run, various government-run programmes like the MGNREGS can be taken up in the urban sector to provide employment, create assets and fuel our way out of the current economic slowdown.

Leave a Reply

Your email address will not be published. Required fields are marked *