Jobless In India

The CMIE (Centre for Monitoring Indian Economy) report forecasts the unemployment rate in India as of July 2019 at 7.8%, with urban India at 8.2%, and rural India at 7.6%. The states of Haryana, Jammu & Kashmir, Jaharkhand, Tripura and New Delhi recorded the highest rate of unemployment as of June 2019. Of course, such a dismal state of affairs has led to much debate over the last few months about the employment scenario in India. Add to this, reports of the slowing economic growth and we saw people from all walks of life across India voice their disapproval. However, Minister of Finance & Corporate Affairs, Nirmala Sitharaman, made a statement at the Rajya Sabha recently stating that demonetisation had no significant impact on the Indian economy. Also, we are still the fastest growing economy at over 7% especially, when compared to the United States and China. 

I spoke to Sujoy Chakravarty, Professor of Economics at the Centre for Economic Studies and Planning, Jawaharlal Nehru University about measures to be taken to mitigate the job crisis in India. Here’s what he said,

“The main problem is the slowing demand for industrial goods (lowering exports and production). This in turn leads to lower employment, lower incomes and even less demand, leading to lower production, etc. The other problem is AI / automation which has led to layoffs in the more advanced manufacturing environments (such as auto/high tech).

Finally the agrarian crisis is still on and the MSME sector has caved in. So these people have no spending power and demand less goods to consume, and further slow the economy down leading to even more unemployment.

I don't think the government can do much about exports. It can try to cut the repo rate in order to stimulate investment but this may be inflationary and have no guarantee of higher employment. Nor can it do much about the job losses in sectors where there is deployment of automation/AI. It can however, try to revive small businesses and industries producing more low tech goods for domestic consumption by reviving small industries. This could be done by giving them some tax holidays and making NBFCs more viable. 

Of course, rural incomes need to be supported. So work programs like MGNREGA and other such programs may offer some temporary rural livelihood boosts. The PM may also emphasise on transfers and subsidies with gas, electricity etc that his party have been doing post-election. Of course, agriculture needs to be boosted as an employment alternative.” 

I asked Professor Chakravarty about boosting the Tourism and Hospitality sector and looking at it as a source of employment, since India already has an advantage in this area. Of course, we would need to work on safety and cleanliness across the nation to complement the activities of the Tourism and Hospitality sector. 

“Yes, some greenfield areas have to be considered and one of them could be Tourism. We have had a services boom in the early 2000s and maybe Tourism can be the next one? The only problem is that services growth is often really variable and altering from year to year. So it is not the most stable way to boost the economy. Plus it has fallouts on the environment which in turn affects the future state of the Tourism industry. But this may be a viable greenfield area for employment generation.”

Dr. Ajit Ranade, President and Chief Economist , Aditya Birla Group said “The economy is not creating adequate jobs, and that is a big concern. We need more than 10 million new jobs to be created every year for many years to come. That means we also need to create more than one lakh new enterprises every year. That puts the focus on ease of creating, doing and closing business. This should be a big policy focus. We also need to particularly focus on labour intensive sectors, both in manufacturing and services. These include textile, construction, agriculture and agro-processing and tourism. Jobs are created by both the public and private sectors. More than ninety percent of the workforce is in the informal, unregistered sector, of which the bulk is in agriculture. As an immediate imperative the government can seeks ways to fill up the 2 million vacancies for posts which have been sanctioned and approved. This will need some fiscal allocation. We also need to be prepared for jobs in the future, through skilling and apprenticeship, since lot of the existing manufacturing jobs are in danger of being eliminated through automation and robotics. One big area for job growth potential is also in para-medical and health sector.”

In June, Prime Minister Narendra Modi set up a Cabinet Committee on Employment & Skill Development and one on Investment and Growth to monitor the situation and come up with effective solutions. In addition to PM Modi, the committee on Employment & Skill Development comprises, ten other members including Rajnath Singh -Minister of Defence, Amit Shah- Minister of Home Affairs, Nirmala Sitharaman -Minister of Finance & Corporate Affairs, whereas, the committee on Investment and Growth comprises five members including, Nitin Gadkari- Minister of Road Transport & Highways, Minister of Micro, Small and Medium Enterprises and Amit Shah- Minister of Home Affairs. It is believed that the findings of these committees could inform the union budget to be presented tomorrow. 

We of course believe in and hope for the best from the budget and will bring you the details tomorrow.