By Manali Joshi
World Bank, in its draft of Systematic Country Diagnostic (SCD) for India, said that if it wants to join the global middle-class by 2047, the most urgent priority for India should be to create regular salaried jobs with growing earnings rather than self-employed undertakings. In the meanwhile, Prime Minister Narendra Modi recently said that youth in ‘New India’ are not job-seekers but aspire to become entrepreneurs, which clearly shows the glaring gap in understanding the real need of the hour. The World Bank has said that with an ever-increasing number of the working population, the need of the hour is regular salaried jobs.
Methodology of SCD
The SCD is an analytical exercise that the World Bank conducts in all countries. It analyses and articulates as to what are the most important opportunities and challenges in that country’s environment to eliminate extreme poverty and to boost shared prosperity. According to the group, it is extremely difficult to formulate SCD for India as there is no single narrative that can capture the diversity, complexity, and challenges of this magnificent country.
According to data, between 2005 and 2012, over 13 million people entered the working age, while only 3 million jobs were created. The data clearly indicates the gap in supply and demand for the jobs. The statistics corroborate what the World Bank said in its draft. Such a huge job deficit in the country has the capability of turning a country with great demographic potential into a country with a demographic curse, which will prove more detrimental for the posterity.
The World Bank argues that it is not just the number of jobs that are to be increased but also the types of jobs. It said that while agriculture is still home to nearly half the workforce, output-per-worker is less than half of the economy’s average. It also pointed out that in sectors like construction and retail, job creation was higher but output-per-worker and labour-productivity are low.
The present state of India
For the past decade, India has been classified as a lower-middle income country and aspires to move a step up in the global prosperity ladder. Income, being dependent on employment directly, helps us to understand the country’s position with respect to the creation of employment. The low-income and high-income countries are determined by comparing the real per capita GDP with that of the US. If it is less than 5% of that in the US, in terms of purchasing parity; the country is classified as a low-income country. Lower-middle-income countries fall in the range of 5-15% and upper-middle income countries are those with 15-35%.
In the present time, according to the Economic Survey 2017-18, India is classified in the category of lower middle-income country. However, its per capita income is growing at a rate of 6.5% per year; India will reach upper-middle-income status by the mid-to-late 2020s. This clearly shows that India has a long way to go and the rise in income will only take place if the government and other private sectors work towards creating jobs.
Which sectors in India can promise large employment opportunities?
According to the draft, the World Bank Group said that the public sector has the potential of being the largest provider of jobs, as it currently employs only 5% of workers. The World Bank said, “Reforms in land and labour markets in India would pay high dividends and help unshackle Indian businesses”. The group said that for the proliferation of employment, one of the greatest contributors can be land markets. Well-functioning land markets with clearly defined property rights, a reliable land registry, and predictable processes for investment and changes in land-use can incentivise more and more businesses to invest in such large-scale long-term projects, in turn creating huge employment opportunities for a lot of people.
Secondly, flexible labour markets that facilitate the reallocation of workers in response to market conditions can also prove to be important for productivity and job growth. The existing stringent labour regulations create a segmented labour market with a high level of protection for a very small fraction of workers in jobs and high barriers for the entry of other workers into the protected segment of the formal labour market. Hence, if such stringent regulations are removed, it will provide more scope for employment generation, according to the analysis made in the report.
Status of the major initiatives introduced by the government
After Mr Modi got elected as the Prime Minister, he started various schemes and plans with an aim of creating employment and boosting entrepreneurship mostly through start-ups. The Start-up Action Plan started by him promised 1.8 million jobs by 2020, of which only 40,000 jobs are created from 5,300 Department of Industrial Policy & Promotion approved start-ups; which seems far less than the goal aimed. Moreover, out of these entrepreneurship undertakings, only 75 entrepreneurs received ₹337.02 crore funding out of the earmarked ₹10,000 crore fund. If 2016 saw 6,000 start-ups, the first nine months of 2017 saw only 800 upstarts, according to start-up tracker Tracxn.
Still, the government is taking comfort in the fact that it is encouraging self-employment under multiple schemes like Mudra. According to Modi, in the past three years, 97.5 million people were given unsecured loans aggregating ₹4 lakh crore. Of this, 30 million were new entrepreneurs. The spotlight on informal sector is sensible, as over 80% of the workforce is crowded in the unorganised sector. Meanwhile, jobs higher up the skill ladder are also not doing particularly well. In the past two years, India has seen unprecedented layoffs in the IT sector, and the hiring prospects are going to be bad until the first quarter of 2018. And then there is the potential impact of artificial intelligence on relatively low-end service sector jobs.
Pressing need for a holistic approach
At a time when the Labour Force Participation Rate (LFPR) has been steadily going down (from 63.7% in 2012-13 to 55.6% in 2015-16), it indicates youth, including females, have enrolled in formal higher education suggesting that the economy has to be ready to offer young people jobs, estimated to be around 1 million every month. Now that the tenure of Mr Modi is about to end, job creation, Modi’s biggest agenda, remains unfulfilled. Thus, in order to make amends, Mr Modi has asked the government think-tank Niti Aayog to submit an action plan to improve employment, particularly in agriculture and manufacturing. However, it still remains a distant dream due to many reasons. Firstly, declining labour force participation as stated above and secondly, a limited portion (only 5%) of the current workforce being equipped with the skills to take up any secondary or tertiary employment are the prominent reasons. Hence, the government has to take a holistic view of the matter instead of restricting itself to entrepreneurship-oriented approach in order to address the need of the hour in an efficient manner.
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