India is indeed the fastest growing large economy in the world; yet with investment low, credit offtake low, capacity utilisation in industry low, agricultural growth low, plant load factor low, it is hardly surprising that job growth is low as well.
Who are in need of Jobs?
In India’s highly segmented labour market, one can still discern at least three demographic groups that are in urgent need of jobs:
- a growing number of better educated youth;
- uneducated agricultural workers who wish to leave agricultural distress behind; and
- young women, who too are better educated than ever before.
- Although growth is relatively high (though slowing for last several quarters), it is the pattern of growth that is the problem.
- Among many dimensions of this problem is the fact that in the quarter century since economic reforms began, it is not manufacturing that has been the leading sector driving growth.
- Manufacturing should drive productivity in the whole economy.
- Services cannot, as services by definition ‘service’ the distribution of produced goods.
Inverted duty structure:
An inverted duty structure has the following features:
- higher duty on intermediate goods compared to final finished goods, with the latter often enjoying concessional customs duty.
- As a result, domestic manufacturers face high tariffs since the last 12-15 years, leading to higher raw material cost at home, emanating from the unfavourable inverted duty structure.
- This was pointed out by FICCI way back in 2014 for aluminium, steel, chemicals, capital goods, electronics.
- This has prevented many manufacturing sectors from growing since economic reforms began.
What can policy-makers do to revive job growth?
- Industrial, trade policy:
- First, an industrial and trade policy is needed. The Department of Industrial Policy and Promotion (DIPP) is finally preparing an industrial policy.
- While the DIPP is preparing the industrial policy document, it is essential that trade policy is consistent with such an industrial policy. Otherwise the two may work at cross purposes and undermine each other’s objectives.
2. Special packages are needed for labour-intensive industries :
- There are a number of labour intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
- The apparel and garments sector received a package from the Government of India roughly a year back.
- The other labour intensive sectors have been ignored.
- The nature of the package will need to be individually designed for each sector defined as quickly as possible.
3. Cluster development:
- There should be cluster development to support job creation in micro, small and medium enterprises (MSMEs).
- Most of the unorganised sector employment is in MSMEs, which tend to be concentrated in specific geographic locations.
- There are 1,350 modern industry clusters in India and an additional 4,000 traditional product manufacturing clusters, like handloom, handicraft and other traditional single product group clusters.
- There is a cluster development programme of the Ministry of MSMEs, which is poorly funded and could be better designed as well.
4. Align urban development with manufacturing clusters:
- The Ministry of Urban Development (MoUD) has a programme called AMRUT (Atal Mission for Rejuvenation and Urban Transformation) aimed at improving infrastructure for small towns.
- Infrastructure investment by the government always creates many jobs. But the programme does not take into account whether the infrastructure investment under it is taking place in towns which have clusters of unorganised sector economic activities.
- Hence an engagement between the Urban Development and MSME Ministries is necessary to ensure that this is happening.
- It will attract more investment to industrial clusters, which is where most non-agricultural jobs are.
5. Focus of women:
- Girls are losing out in jobs, or those with increasing education can’t find them, despite having gotten higher levels of education in the last 10 years.
- Secondary enrolment in the country rose from 58% to 85% in a matter of five years (2010-2015), with gender parity.
- Skilling close to clusters (rather than standalone vocational training providers), which is where the jobs are, is likely to be more successful.
- The problem with skilling programmes has been low placement after skilling is complete.
- The availability of jobs close to where the skilling is conducted will also enhance the demand for skilling.
6. Public investments in health, education, police and judiciary:
- Public investment in the health sector has remained even in the last three years at 1.15% of GDP, despite the creation of the national health policy at the beginning of 2017.
- The policy indicates that expenditure on health will rise to 2.5% of GDP only by 2025.
- Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased faster and not as late as 2025.
- In the absence of greater public expenditure, the private sector in health keeps expanding, which only raises the household costs on health without necessarily improving health outcomes, because the private sector does not spend on preventive and public health measures.
- But the private sector prefers to set up hospitals to cure people after they have become sick rather than prevent them from becoming unhealthy in the first place.
- Preventive and public health have always been in all countries the responsibility of government.
- More government expenditure in health means more jobs in government and better health outcomes.
- Government schools also have such poor quality that parents are voting with their feet by spending money on private schools, whether or not the poor parents can afford it.
- The number of teachers required, at secondary and higher secondary levels, is very high, particularly in science and mathematics. Many new government jobs can be provided if more young people could be trained specially to become teachers for science and mathematics at the secondary and higher secondary levels.
- The same applies to the police and the judiciary. While the number of paramilitary personnel continues to grow, State governments are not filling even sanctioned posts in the policy and in the judiciary (at all levels there are vacancies).
- More police and a larger judiciary can both reduce crime as well as speed up the process of justice for the ordinary citizen.