The job crisis in India is a major electoral challenge for the Modi government. But the next government, irrespective of the composition, will not have it easy either.
- India has lost over 11 million jobs in 2018 alone, belying the Modi government’s promise of adding 1 crore jobs every year.
- The government is in a dock over the leaked NSSO survey, which estimates unemployment rate to be the highest in 45 years.
- While the Modi government has instituted some major reforms, it has been unable to address the challenges of skilling and job creation.
- The dual shocks of GST and Demonetisation have further exacerbated the problem to alarming levels
In the run-up to elections, opposition parties have picked on the present jobs crisis to target the Modi government. During his victorious campaign in 2014, Narendra Modi had promised creation of over 1 crore jobs every year, implying 8.4 lakh jobs per month.
The government has been firmly on the backfoot with respect to this promise. In the recently announced Interim Budget, the central government announced major SOPs for the middle class, farmers and workers in the unorganised sector. But the government has not really addressed the criticism on jobs, besides a 10% additional quota for economically weaker sections, which needs to pass the Supreme Court.
A LEAKED SURVEY, PERPLEXING STATISTICS
The Modi government found itself in the midst of a major controversy due to the leaked draft NSSO survey, which estimated unemployment in 2017-18 at a 45-year high of 6.1%. This is nearly thrice the figure of 2.2% in 2011-12.
Labour force participation (percentage of people in the 16-64 age group seeking employment) has also fallen over the years from 43% in 2004-05 to 39.5% in 2011-12 and 36.9% in 2017-18.
For youth in the 15-29 years age group, unemployment has increased from 8.1% to 18.7% for males, and from 13.1% to 27.2% for females. CMIE has shown that India lost around 11 million jobs in 2018.
Even the EPFO data that the government cites has fallen short of the promise. The payroll data released in January 2019 showed an average monthly job creation of 4.9 lakh. Meanwhile the crisis of jobs creation continues to grow, with 10-12 million Indians entering the workforce every year.
It is indeed confounding that this kind of situation should emerge in an economy that is witnessing a strong GDP growth rate of over 7%. As economist Swaminathan Aiyar points out, this could only mean a miraculous increase in productivity, bit if that was so, exports would not have stagnated. Both investment and bank credit have grown slowly, as India Inc is still in the midst of a painful deleveraging cycle, and banks are trying to offload their NPA burden.
IS IT ALL MODINOMICS?
The Modi government, to its credit, has been instrumental in instituting some very significant reforms to enhance ease of doing business. It introduced the GST, the Insolvency & Bankruptcy Code, instituted Direct Benefit Transfer and brought India’s ‘Ease of Doing Business’ ranking from 142 in 2014 to 77 in 2018.
There were two major aberrations though, which are responsible for the extent of the jobs crisis in India today. The first of them was Demonetisation in 2016, wherein the Modi government rendered Rs 500 and Rs 1,000 notes invalid overnight. It was touted as a panacea against India’s black economy, which would help bring in digitisation.
However, the decision, which impacted around 86% of the currency in circulation, has hit the informal economy instead, which was extremely dependent on cash dealings. Lots of small scale units cut jobs or shut down altogether. The government’s perspective that it was a surgery being performed on a healthy body (Indian economy) has proved to be misplaced.
GST, on the other hand, is indeed the largest tax reform in India since independence. However the implementation of GST remains a work in progress, and the teething troubles have added to the peril for small and medium enterprises.
Meanwhile, with respect to the Modi government’s schemes for generating employment, there is still a huge gap between expressed intent and implementation. The Pradhan Mantri Kaushal Vikas Yojana announced in 2015 had promised skill training to 40 crore people by 2022. But between February 2016 and November 2018, the scheme gave certification to around 33.93 lakh people, with 10.09 lakh getting employment. To add to that, there are also reports of bogus enrolments to avail government subsidy. And the scheme is looking at conventional sectors rather than new age ones like construction, electronics, financial services, etc.
Even Make in India has not spurred the desired impact on the MSME sector in terms of job growth. In fact, MSMEs in manufacturing and exports saw job losses ranging from 24%-35% over the last four years.
NO EASY ANSWERS
Considering the data and trends across sectors, it is clear that job creation would not count among the achievements of the Modi government over the past five years. Unfortunately, the opposite is closer to the truth, and that could indeed prove expensive for the BJP in the coming elections.
The Modi government cannot be blamed for biting the bullet on GST, even though the implementation and tax slabs have been questioned. Going forward, the stabilisation of GST will make things smoother, and get more enterprises to the formal sector. However, this may only serve to stem the decline, while India needs to be creating new jobs as well.
Going beyond political considerations, the new government needs to address the unemployment situation on a war footing in collaboration with state governments. Government schemes to boost industry need to be reviewed for their impact on job creation, especially in the new age sectors. It must not be forgotten that new technologies like AI are expected to create a major disruption in job markets over the coming decade, and India is still far from ready.