India’s Job Creation Data not Reflective of Good Times

Prime Minister Narendra Modi’s promise of ‘good days’ that underpinned his 2013 election campaign is premised on moving India away from its dole-and-entitlement development model to one that empowers youth by generating large-scale employment. In that context, recently released employment figures from the country’s Labour Bureau are alarming.

Prime Minister Narendra Modi’s promise of ‘good days’ that underpinned his 2013 election campaign is premised on moving India away from its dole-and-entitlement development model to one that empowers youth by generating large-scale employment. In that context, recently released employment figures from the country’s Labour Bureau are alarming.

The Bureau’s data show that employment generation in eight labour intensive sectors — textiles, garments, leather, jewellery, business outsourcing, handlooms, metals and automobiles — amounted to a mere 135,000 jobs during 2015, compared to 490,000 the previous year and a much larger 1.25 million in 2009. Worse still, employment in these eight sectors actually declined in the last quarter of 2015.

This must surely be worrying news for those observers who never tire of celebrating India’s demographic dividend. More than any other feature of the economy, employment generation will be the key to Modi’s electoral prospects — and indeed to social peace and stability in India.

Senior Indian National Congress politician Tarun Gogoi, himself in the midst of a tough electoral battle, was quick to jump on the Labour Bureau’s dismal statistics and chastised the government for the lowest job generation in seven years.

The recent caste-based protests in Gujarat and Haryana states are symptomatic of rising unrest among the ‘neo-middle class’, who are undoubtedly disappointed with current employment trends. News from management and engineering colleges about flagging levels of student offtake by industry is also disconcerting.

According to some estimates, approximately 15 million jobs were created between 2005 and 2012, leaving a backlog of nearly 50 million unemployed youth in those seven years. This situation will be aggravated over the next 10 years when another 80 million people will join the workforce.

Given declining exports, stagnant foreign tourist arrivals and persistent weakness in private investment, employment prospects do not look bright.

This trend must be reversed. To begin with, policymakers must get a clear picture of emerging employment trends. In the absence of up-to-date official data on the rate of unemployment — a thoroughly unacceptable state of affairs — we need to look at other estimates.

Two such estimates are available, albeit from private corporate sources. The Monster Employment Index for March 2016, a measure of online job demand published by the popular employment portal, rose by a whopping 42 percent, reflecting buoyant prospects for fresh hiring by key service industries.

The Employment Outlook Report put out by recruitment firm Team Lease for the second half of the 2015–16 financial year also contains positive news. Of 616 employers surveyed, 93 percent expected to generate net employment during that period. According to this report, the employment cycle may well have turned the corner for the better.

However, the catch is that manufacturing remains one of the lagging sectors. In addition, we have no idea of the scale of employment that will be generated. The large majority of new jobs are expected in big cities, with regional cities and rural areas showing very sluggish and virtually stagnant employment prospects.

This trend will aggravate regional inequality and the two-speed economy, with the usual deleterious consequences, including rising and often unbearable pressure on infrastructure in a handful of large cities alongside persistent backwardness in large swathes of the country. This should be unacceptable as it goes against the government’s goal of inclusive growth.

Thankfully, India’s 2016–17 budget included for the first time some direct fiscal measures for employment expansion. The Stand-Up India and Start-Up India programs, launched in the first quarter of 2016, show the government is cognisant of the issue.

But Start-Up’s focus is predominantly on the low employment intensive IT sector while Stand-Up caters largely to artisans and family units in the local and informal economy. These schemes are not going to suffice. The former will simply not generate the sheer numbers of jobs required, while the latter will not create the formal sector jobs that young Indians now aspire to.

More needs to be done urgently. Improving official rhetoric is a good starting point. Fatalistic talk of the economy’s supposed inability to generate the needed jobs must be firmly discouraged and debunked.

It would be useful if Indian political leaders, government economic honchos and party spokespeople desisted from preening about India’s high GDP growth rate and instead focused on giving out good news on fresh employment generation in their regions and sectors. That will engage young job seekers and make the government look both credible and empathetic to the genuine concerns of the public.

There has to be greater government focus on export-oriented industries, small- and medium-enterprises and agro-processing industries, with their relatively high employment intensities and more robust growth prospects. A special task force that brings together all concerned agencies and departments in pursuit of this critical objective should be immediately constituted. There is no time to lose.

Indian jobseekers still waiting for Modi’s ‘good days’ is republished with permission from East Asia Forum