The fate of Prime Minister Narendra Modi in 2019 will arguably depend on just one factor: his ability to create jobs and livelihood opportunities for the youth. If he succeeds in this, the youth of India will happily reward him with a second term. If he fails, then he will almost certainly be a one term prime minister. The challenge is enormous. The Indian economy needs to create 10 million new jobs every year.
The established wisdom is that it would be foolhardy to depend on the organized sector- read large companies-to do the job. Data seems to support this. Of the more than 500 million Indians who are in the workforce, just about 40 million or less than 10% have jobs in the organized sector. Accurate data on jobs is very hard to find in India. But whatever is available seems to suggest that big companies have been creating no more than half a million new jobs a year in recent times. That is just 5% of what is needed. It seems the onus is on the tens of thousands of small enterprises in the unorganized sector to rescue the Indian economy. This also partly explains the contempt pundits leaning left have for large companies
There is some truth in this. India has adopted labor laws that actively encourage large companies to adopt capital intensive, rather than labor intensive methods of production. Our counterproductive labor laws are also the reason why multinational brands ranging from Apple to Nike do not have manufacturing facilities in India. Then there is the global trend towards automated manufacturing facilities. A new "factory" to make one million cars a year may employ just a few thousand people directly. Ditto for a new factory to manufacture 10 million smart phones in a year.
But this where the myth making begins. Large companies and large factories do not directly employ too many people. But they do create an ecosystem that creates many times the number of jobs they directly create. Just look at the auto and telecom sectors to understand how this works.
The auto industry is dominated by about a dozen "large" companies. But the number of new jobs they create for every new car manufactured is far more than we sometimes envisage. Each new car needs components, often manufactured in small auto components companies that employ a lot of people. Car seat covers create new jobs. Each new car leads to more job opportunities in retail banking, insurance and showroom sectors. Indirectly, each new car leads to more jobs in service stations and the hundreds of thousands of "garages" that dot India. So let's no say "so what" when large companies like Maruti, Honda, Hero, GM and Ford announce they are investing in existing or new factories to make 2 million more cars.
The same holds true for the telecom sector. Mobile services and handset manufacturing are dominated by no more than 10 players each. Directly, they don't employ too many people. But each new mobile connection and each new handset manufactured creates job opportunities in allied sectors. Just imagine the number of young Indians who have a livelihood opportunity today by learning how to repair mobile phones.
Large companies in the organized sector may not directly create millions of new jobs. But they do form the basis for millions of new jobs. It would be worthwhile to remember this basic fact!
