Where are the Jobs? The story of India’s Jobless Growth

280
Image Courtesy: Hindustan Times

What is jobless growth?

Jobless growth is defined as a phenomenon where the economy of a country grows but its unemployment rate remains stubbornly high. India has been witnessing this paradoxical pattern of economic growth where the economy has been on a sustained growth path but there has not been a commensurate increase in the level of job creation. In most economic growth theories jobs and employment go hand in hand. If there is economic growth it is expected to lead to an increase in employment and if there is an employment increase there would be economic growth as suggested in the famous Okun’s Law of economics. However according to the census data, India’s unemployment rate grew from 6.8 percent in 2001 to 9.8 percent in 2011.

Reasons for Jobless Growth In India

India’s pattern of economic growth has not followed the traditional path of development process i.e from the primary sector to the manufacturing sector and then the tertiary sector (services sector). It directly entered the third stage of growth from the first stage (agriculture). The slow growth of manufacturing is one of the main reasons for the jobless growth. The manufacturing sector is generally perceived to labour intensive and this pattern of economic growth has been the basis of growth for the rise of countries such as China due to which it also led to the export sector oriented industrial growth. Hence the labour intensive manufacturing sector did not become the engine of growth in India and most of the growth was led by the services sector which employs less than 30 percent of the population. Since the manufacturing sector was not developed India remained an import oriented economy and the exports never flourished leading to cheap capital goods from abroad flooding the Indian market. Also, the majority of the people were still employed in the agriculture sector which employs a total of almost 45 percent of the population with less than 15 percent contribution to the GDP. The jobs outside of this sector which got created were in low wage and low productivity sectors such as trade, hotels and restaurants which contribute very less to the GDP. This stagnation in job creation is further compounded by excess rigidity in labour markets and rigid labour regulations due to which employers are not able to create jobs. So they generally adopt capital intensive modes of production rather than following labour intensive processes. Lack of infrastructure development is another impediment to the process of job creation as infrastructure sector creates jobs due its high employment generation potential. Finally, the most important factor which needs critical evaluation is the overall flawed education system which is not contemporary with the changing times and does not equip an individual to be job ready. People do not have the requisite skills and Knowledge to survive in this world where the new age ideas of artificial intelligence and machine learning are doing the rounds. The government has to be held accountable for this backwardness as it has emphasized on a system of education that promotes rote learning rather than knowing the concepts holistically.

Solutions

There are various solutions that are advocated for moving towards an employment friendly regime. The focus should also be on creating quality employment rather than filling it with quantity. One such example is the apparel sector which has the potential of providing employment to around 45 million people according to the Apparel Export Promotion Council estimates. A World Bank report (stitches to riches) has already stated that a 10 percent rise in apparel prices in China could boost India’s employment by at least 1.2 million jobs. Sectors such as agriculture which employ the majority of India’s population need to be holistically developed through enhanced productivity development to stop the mass migration of people out of agriculture. There should be enhanced role of MSMEs as this sector contributes to nearly 40 percent to India’s manufacturing output and employs around 14 crore people. The launching of MUDRA bank to provide credit to the small entrepreneurs is a step in the right direction. Government schemes such as Make in India, Skill India and digital India have been initiated to increase the employment and skill set of the population since the technological progress is expected to lead to skills inability in over 40 percent of the population. The Make in India is specially designed to make India into an attractive global manufacturing hub and transforming the economy. Another important source which needs to be addressed is the data sources on employment and unemployment. At present only the NSSO is the credible data source on this and also this data is not recorded periodically. Also, a majority of the workforce is in the informal sector or is self-employed which this data does not capture. Hence any statistical analysis and estimation without capturing the whole data will give a false analysis of the scenario prevailing.

To conclude, it is a desirable goal to raise economic growth and lead the country to a higher growth path to prosperity but an employment oriented growth strategy is the need of the hour for a country like India where vast majority of population still resides below the poverty line and where the benefits of growth have not been able to reach a large section of the population.