Will the National Employment Policy be successful despite the stagnant Indian job market?

By Ashish Joshi

India enjoys the status of being one of the largest and fastest growing economies in the world. Traditionally dominated by agriculture, the Indian economy has always been rich in labour. Despite recording a humungous growth in numerous other sectors, the Indian economy has failed to produce sufficient employment opportunities for its people.

A pertinent issue across the country

In the year 2015, India mustered around 1.35 lakh new jobs for the people but in the same year, it added another 10 million people to its available workforce. With the Modi government’s recent bold economic moves accompanied by a global economic slowdown and IT layoffs, the job growth in the last two years has reduced further. As per the United Nations labour report, India will accommodate around 18 million unemployed people in the year 2018.  

Employment creation in eight sectors including agriculture, textiles, and automobiles has been the lowest in the last seven years. According to McKinsey Global Institute, in a four-year period from 2011 to 2015, agricultural jobs reduced by 26 million, while the jobs in non-farm sectors increased by only 33 million.

Another challenge that the government faces is that more than 90 percent of the workforce is employed in the informal sector. Especially when job security and employee incentives are fast becoming a global norm, India has been left far behind because of its significant informal sector that remains without incentives.   

Political intervention or exploiting leverage? 

The Modi government, as a part of its campaign for the 2014 elections, promised 10 million new jobs annually. The projected number was always a campaigning exaggeration, however, on realistic grounds, the government has failed to deliver opportunities even for those people who deserve it the most. Most experts believe that despite the fact that Narendra Modi remains the most popular political brand in the country, growing unemployment can devour his re-election bid in 2019. Signs pointing in this direction can be clearly seen in the recently concluded Gujarat elections, where predominantly non-urban areas of Gujarat, like the Kutch, ended up voting for BJP’s rivals.   

The Centre, in collaboration with NITI Aayog, has thus framed a new sector-wise National Employment Policy in this financial year in its bid to tackle the problem of growing unemployment. The policy is likely to be announced in the upcoming budget, which is the final budget in the current regime of Modi-led BJP government. The initial draft of the policy was formulated under the former UPA government addressing the need for skill development programs across non-farm sectors like construction.

The major thrust of the policy would be to rejuvenate job creation in labour-intensive sectors like textiles and manufacturing by altering labour laws and providing financial benefits to job providers. Another major push under the policy would be to enable and ensure a smooth transition of informal sector jobs into the formal fold to ensure proper working environments, minimum wages and social security for the employed people.

What is the game plan?

“The policy will moot fiscal incentives for employers across labour-intensive sectors to create more jobs as well as employees to get engaged in the organised sector as this would fetch them minimum wages and enough social security”, said a senior government official while addressing media.

The policy has been drafted after long consultations with various ministries after assessing not only the current employment situation but also various other macroeconomic parameters, the demographic environment and sectoral challenges along the way ahead.

Further NITI Aayog has also released a three-year action plan from the fiscal year 2017-18 to 2019-20, to reform India’s labour laws. Current Labour laws are outdated and contribute towards the dominance of jobs having low productivity and low wages. This is one of the primary reasons for India witnessing job growth, primarily in the informal sector, prior to demonetisation. Well drafted and well-executed labour laws would be a huge step in the right direction if the government is to boost job growth in the formal sectors more than the informal ones.  

The centre has been conducting many detailed and ambitious job surveys in the last few years to better understand the problem of unemployment in the country. According to The Economic Times, India had a total of 408.4 million employed people in the country with another 25.9 million looking for jobs in January 2017, but by July 2017, the number of employed people fell down to 405.4 million and the number of job seekers was almost halved to 13.7 million.

Voluntary unemployment—A disturbing phenomenon

As surprising as it may sound, the phenomenon of voluntary unemployment is, in fact, real. This fall is primarily concentrated in the states of Uttar Pradesh, Bihar, Jharkhand and Orissa. These are less developed states with a huge growth in the youth population. In a statement to the media, Mahesh Vyas, the CEO of Centre for Monitoring Indian Economy (CMIE) said that voluntary unemployment might result in India’s demographic dividend turning into a demographic demon. It will be a major headache for India in the coming years as all these youngsters might get involved in unlawful activities, probably leading the economy towards an internal breakdown.

The upcoming policy is definitely a welcome move in the longer run. However, since it will be adopted in the final budget year of the current government, it will not significantly alter the unemployment situation in the country by the 2019 elections. The sorry fact is that such a move has been made after the country has witnessed a period of seven years of stagnancy in the job market, reflecting a lack of vision in the system.

As far as politics is concerned, growing unemployment will be a major concern for BJP in 2019 and a huge opportunity for its rivals. Whether Modi’s brand and promise fade away like Vajpayee’s in 2004 or the people remain patiently on his side remains to be seen.


Featured Image Credits: lecercle on Visual Hunt / CC BY-NC-SA