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Can someone explain just how India’s annual budget could be so casual about a raging job crisis?

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Can someone explain just how India’s annual budget could be so casual about a raging job crisis?
Jayati Ghosh6 minutes ago
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Reuters/Stephen Lam

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Unbelievable but true: There is nothing—repeat, nothing at all—in Piyush Goyal’s interim budget to deal with India’s festering jobs crisis.

This is crazy since a lack of employment (especially for the young) and the problems in agriculture have emerged as the two biggest issues in the Indian economy and society today. It is also politically tone deaf since the government should really have been on the back foot on this one, as its suppression of official jobs data (the National Sample Service Organisation Survey of 2017-18) cleared by the National Statistical Commission, had just been exposed.

Under the circumstances, it was only to be expected that there would be some measures to tackle the problems of open unemployment and poor quality jobs—or at least some lip service to this—in the interim finance minister’s budget speech. Remarkably, Goyal chose to brazen it out, only referring periodically to how different policies are bound to create more jobs, but never proposing any strategy to revive employment.

For example, a simple and obvious thing to do would be to fill up all vacancies in central government employment—currently around 2.4 million. But the budget estimates do not suggest that an expansion of that order in occupied posts is even being considered.

Instead, there is the promise of an income transfer scheme for farmers (but so poorly thought through that it may backfire and will not solve the problems of Indian agriculture). Then there are some income-tax sops to the middle classes (though these are also too limited in scope to have much effect on aggregate demand just now). There was no evidence of any fresh or even systematic thinking on the issue of job creation.

The most important direct intervention—and one that has become even more urgent and necessary given the severe drought now affecting at least eight states—is under the Mahatma Gandhi National Rural Employment Guarantee Act. The Modi government never really liked this programme, and despite words to the contrary, has actually sought to starve it of funds over the past few years. Even though it is legally a demand-driven programme for which funds must be provided when work is demanded, the reality has been quite different and the programme has been limited by central allocations.

Each year, the amount provided by the centre to the state governments has fallen well below requirement, and the amount has been carried over to the next financial year, so that each year begins with a large deficit of spending that has not been funded. The current year was no different, and so the budget allocation was well below the requirement since it included around Rs15,000 crore of money owed to the state governments. By early December, the full amount of the budget outlay of Rs55,000 crore had already been spent. The revised estimates include only a further Rs6,084 crore increase, suggesting that the centre will not provide any more money to states for this programme in the remaining part of the financial year.

This leads to cutbacks in the programme, as well as huge arrears in wage payments that lead to workers getting disheartened and losing interest. This has implications well beyond the welfare of potential workers on the programme. It loses the potential for significant positive multiplier effects from such spending, which could have the impact of reviving the rural economy. Indeed, the only positive thing to be said for the planned income transfer to small and marginal farmers is also that: It will lead to some increase in aggregate demand and provide a stimulus to rural economic activity.

Other employment-oriented programmes of this government that were trumpeted with much fanfare earlier are now being quietly shelved or provided such little money that they could not possibly make much difference. The money spent on “jobs and skill development” was only Rs6,830 crore, but in any case, the record of the skill development mission has been pathetic so far.

The most shocking is the spending on the much-hyped schemes to encourage self-employment like MUDRA, Stand Up India, and StartUp India, which government spokespersons regularly refer to as great examples of the prime minister’s “vision.” The total budgetary spending on all such schemes taken together under the credit guarantee funds of the finance ministry is only Rs515 crore for 2018-19, less than half of the budgeted allocation of Rs1,020 which is itself a paltry amount. And the future allocation for these schemes is also only Rs515 crore, suggesting that the government also doesn’t really think they will amount to much.

This is a huge issue because it turns out that the job crisis is even more dire than many of us had suspected. The Business Standard newspaper’s report on the suppressed NSSO survey reveals a grim story of falling labour force participation rates and rising unemployment rates—suggesting quite dramatic adverse changes in the labour market. Indeed, the data point to a 2.7 percentage point decline in aggregate work participation rates from 39.4% in 2011-12 to 36.7% in 2017-18, an unprecedented shift in a period of supposedly rapid income growth. Meanwhile, unemployment rates among the youth (between 15 and 29 years) have surged to extremely high levels, including for educated young people. Overall, open unemployment numbers increased from around 11 million in 2011-12 to 31 million 2017-18—an increase of 20 million mostly young jobless people in just six years!

This confirms the employment crisis revealed in surveys by private organisations. The All India Manufacturers’ Organisation estimated that in December 2018 that 3.5 million jobs had been lost since 2016. A study by Centre for Monitoring the Indian Economy suggested that 11 million jobs were lost in 2018 alone.

Instead of trying to address the problem, government spokespersons stubbornly persist in claiming that all is well on the employment front. The only problem, they say, is that data do not capture the terrific employment dynamism indicated by the expansion of taxi-hailing apps Uber and Ola, e-trading platforms like Amazon and Flipkart, and others. Ministers now suggest that the employment survey must be wrong because the GDP has been growing so fast. But unfortunately, the GDP figures themselves are no longer credible after the latest revisions, which have made the year of demonetisation that of the fastest growth in the past decade.

It is surprising that a government with its back to the wall on the employment front can afford to be so casual about even being seen to do something about it. Perhaps it is hoping that the employment creation in the form of gau rakshaks (cow protectors), love jihad vigilantes, and others of that ilk will be enough to create the political momentum required to carry it through the elections.
 
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NSSO data confirms India's jobs crisis: Unemployment at 45-year high of 6.1%, way out is to make economy grow
Presentation of data on the Indian economy which is outside the purview of the Reserve Bank of India (RBI) has become quite opaque of late especially with the back series of the gross domestic report (GDP) with 2011-12 base. Employment is even more controversial as the data is amorphous as information outside the Annual Reports of companies is at best a proxy for the real world.

The Centre for Monitoring Indian Economy (CMIE)-Employees' Provident Fund Organisation (EPFO) debate has become contentious as it has taken a political angle. Jobs are created when the economy grows and if there is a slowdown, it is but natural that the rate of growth in job creation will slow down. However, it becomes a political ego-scoring point to always contend that jobs growth is steady. Therefore, the EPFO data is being touted as being the right way forward.

However, the increase in registrations comes along with the laws which have been changed wherein the Goods and Services Tax (GST)-compliant enterprises which have entered into the organised stream have to follow rules and enroll their employees. Therefore, people shifting from private EPFOs to the state EPFOs or getting in for the first time are not new employees but existing workers who now have cover.

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Representational image. Reuters

The National Sample Survey Office (NSSO) data, which is probably the more authentic source based on sample surveys, has become controversial (and not made public) because the results were not acceptable which has caused some resignations from the National Statistical Commission. This being the case, the results which have been procured by Business Standard and quoted are significant. It does reveal that the unemployment rate was at an all-time high of 6.1 percent in 2017-18.

The Business Standard report has focused on the unemployment rates among men and women youth in both urban and rural areas, which does require an explanation as it is quite deep-rooted and scary. The report says that male youth had unemployment rate of 17.4 percent and 18.7 percent in rural and urban areas, while women youth had rates of 13.6 percent and 27.2 percent respectively in 2017-18. These numbers cause considerable discomfort. This is more so as we talk a lot of the demographic dividend in the country which is taken as an asset for the future.

The contrary view was that if jobs are not created, then there is high probability of this becoming a demographic liability where the unemployed become a social issue. These numbers suggest the same.

The rise in unemployment rate can be traced to various factors. First, farming has become very unattractive given the vicissitudes of the monsoon and government policy. A bad monsoon means lower crop output and income leading to farmer indebtedness and at the extreme, suicides. A good crop leads to prices coming down and with an ineffective minimum support price (MSP), farmers’ income tend to come down again leading to the same set of problems. Therefore, the children of farmers would rather not do farming and move over to the urban areas or look for jobs in the non-agricultural space. In a way, the disguised unemployment which was earlier there with excess hands working on a piece of land has officially become unemployed.

Second, with GST coming in, there has been an upheaval in the small and medium-sized enterprises (SME) space which was a major absorber of labour all through the years especially in rural areas. With forced recognition and opaqueness of processes, there has been unsettling of several self-employed leading to distress. Considering that this came on the back of demonetisation, it was but natural that this class got affected the most as business went down.

Third, migration to urban areas has resulted in more jobs in the real estate construction sector which takes in unskilled labour. This has been the trend in the past. Now, 2017-18 was a year when Real Estate (Regulation and Development) Act, 2016 (RERA) was enforced post-demonetisation and there was a perceptible slowdown in the real estate sector, especially commercial and non-affordable housing projects. The stock of inventory tended to increase which slowed down the pace of new projects. This, combined with slow pace of growth in private infrastructure, meant that these jobs also became scarce. Therefore, the intake of labour was restricted.

Fourth, the youth of today also has aspiration and often are unwilling to take on low-skill jobs once they have a recognised degree. However, given that the economy is not growing at the desired pace of 8 percent-plus in the last three years; demand for labour has been restricted to the higher-end—engineers, management graduates and other professionally qualified personnel. This makes a basic degree irrelevant for employment and while local laws ensure there is employment in super markets and e-commerce businesses, migratory labour is not within the perimeter.

It is, hence, not surprising that data has been put out at various points of time of qualified students applying for unskilled labour in the Railways or for state jobs. There are just not enough openings available when the economy has slowed down. Also, the rather stringent labour laws have ensured that companies have moved towards technology which will always be a challenge in a labour surplus economy. Rather than get into issues of not being able to lower staff strength when the business slows down, technology substitution helps such companies tide over difficult times.

Further, the quality of education needs to be addressed. While we do take a lot of credit in attaining numbers of school enrolment or even higher education, the quality of education in the public space is inadequate which puts students at a disadvantage. Further, those students from a vernacular background will find openings only in the self-employed or government spaces. The latter is also economising on head count which makes future absorption a challenge.

Therefore, the problem of unemployment is very serious and the only way to go ahead is to make the economy grow which happens gradually over time. It will be a constant struggle until such time the youth is able to get absorbed in the system. This is the real situation and needs to be accepted.

(The writer is Chief Economist, Care Ratings)

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Updated Date: Jan 31, 2019 23:01:19 IST
 
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This guy suffers from an very Severe OCD regarding India ,must be tedious enough to start a thread every 5 min .
 
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This guy suffers from an very Severe OCD regarding India ,must be tedious enough to start a thread every 5 min .

I have to post a lot of articles because a LOT is happening in India right now. Don't you think India deserves the attention?
 
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2.4 million vacant posts are huge... even just filling these post will largely help unemployed youngsters. I dont know whats the love for this strategy, we also have some 170K vacant posts in just Federal domain. Which for the provinces is even more. Every institute will blame its incompetency on “lack of workforce” but then will not advertise posts.


Also, India should try (if its not doing currently) a National internship program just like Musharaf did in Pakistan...
 
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