Authors: Lisa Jani and Ankita Singh with inputs from Pranav Gupta
The gloom surrounding the Indian economy was rightly predicted by the former Finance Minister Yashwant Sinha, who once stated that Prime Minister Manmohan Singh was an overrated economist and an underrated politician. He might not be too far off the mark as the current Prime Minister is what most would call a one-time wonder as he has been credited with liberalising the economy back in 1991 but lacks far-sightedness.
In his report dated June 21 June, 2013, for the Hindustan Times, aptly titled ‘NDA created more jobs than the UPA did’, Chetan Chauhan writes “The NDA Government, during its six years of rule was able to create more jobs than the UPA did in eight years, indicating that the UPA’s ‘high growth’ regime did not create sufficient jobs.” The fast-sinking boat that is the Indian economy, is a far cry from the flourishing and growing one that the NDA handed over to the UPA. Under Prime Minister Atal Bihari Vajpayee-led NDA, during 1999-2004, 60.7 million jobs were created while UPA Government, during 2004-2009, created only 2.7 million jobs. (Data source: National Sample Survey Office).
Sushma Swaraj enumerates NDA Government’s achievements in the Parliament
If it were not enough to panic about, data revealed by NSSO about the diminishing presence of women in the workforce is all the more worrying. Women’s labour force participation rate (LFPR or the proportion of labour force to total population) fell from 29.4 per cent in 2004-05 to 23.3 per cent in 2009-10 and then even lower to 22.5 per cent in 2011-12. If fewer women are joining the labour force, even fewer are being employed. The worker participation rate (WPR or workforce to population) fell from 28.7 per cent in 2004-05 to 22.8 per cent in 2009-10 and then even lower to 21.9 per cent in 2011-12.
These figures are unsettling as India adds 12 million people to the work force each year. The time when India should have been reaping the benefits of ‘demographic dividend’ has turned into a period of crisis as high unemployment is causing rise in social unrest.
The drop in the employment opportunities continued during the second tenure of the UPA Government too. 17.8 million jobs of total 27.7 million created were added in the rural India in the form of casual jobs. The service sector witnessed an increase of only 8.6 million jobs 2005 onwards. The share of manufacturing in the total employment declined to 11.4 per cent in 2010.
At a time when China successfully absorbed 150 million people from agriculture to the manufacturing sector and thereby increased its share in world trade to 15 per cent, India contributed merely 1.4 per cent to world trade. Also as per the Economic Survey for 2012-2013, prepared by India’s chief economist Raghuram Rajan India is creating jobs mainly in low-productivity sectors and not in high-productivity sectors like manufacturing.
The number of unemployed rose from 9.8 million in January 2010 to 10.8 million in January 2012. The number of unemployed Indians had gone up by 10.2 per cent. The claim by the Government that it has created 13.9 million jobs since 2010 does not offer much to cheer about as the quality of jobs created is poor and are mostly in the construction sector. Also the employment intensity which is the measure of the number of employed people per lakh of the real GDP declined to 1.05 between 2005 and 2010. In the preceding five years it was 1.7.
The Institute of Applied Manpower Research, which is a think tank of the Planning Commission, in a recently published research paper, warns against sustainability of the migration of labour from agriculture to construction stating, “Undoubtedly, construction driven by significant expansion of infrastructure investment during the 11th five-year-plan has helped in absorbing surplus workers from agriculture sector. However, ensuring decent employment for those moving out of agriculture remains a big challenge.” It indeed is worrisome when taken into consideration the fact that in India 93 per cent informal workers form part of the total workforce in comparison to other developing nations.
In addition to that, the International Labour Organisation, in a May 2013 research, points out that the declining economy is having an adverse affect on the employment scenario in India. India saw a decline in the labour force participation rate from 40 per cent in 2009-10 to 39.5 per cent in 2011-12. This suggests that the lack of job opportunities is forcing people to study longer or simply drop out of the job market.
The reports from industry body ASSOCHAM also suggests that job generation in India has plummeted by 14.1 per cent from October-March 2011-12 to 2012-13. During October-March 2011-2012 3.17 lakh jobs were created while during October-March 2012-13 only 2.72 lakh jobs were created. The data was collected by tracking job portals like timesjobs.com, naukri.com, monster.com, shine.com and jobs advertised in national and local newspapers across over 50 cities in India.
The survey also focused on the percentage of decline in job creation that was observed in the main sectors like textiles (50 per cent), logistics (41 per cent), IT/hardware (40.2 per cent), FMCG (40.2 per cent) and engineering (40 per cent). What aggravates the situation further are the freebie schemes being doled out by the UPA regime in order to please its vote-banks in the rural heartlands of the country. Not only do such schemes create larger fiscal deficits but they also result in an unfavourable tax regime.
It is important that to make the economic growth inclusive, the Indian Government should provide growth opportunities to the manufacturing sector and improve quality of public education with the focus on building relevant skills to eliminate the problem of unemployment and labour shortage. Also the regulations need to be simplified so there is greater flexibility in hiring. This is a better solution to ensure inclusive growth rather than relying on subsidies and redistribution of resources.
However, the UPA Government under the leadership of Prime Minister Manmohan Singh did not take into account governance, regulatory and administrative reforms, all of which go a long way in contributing towards the overall growth of the economy, as is pointed out by Manish Sabharwal in his article dated June 17, 2012, for The Economic Times. While the BJP-led NDA helped the economy climb strength to strength in spite of all the hurdles, the UPA has nearly brought it down to its knees.
The gloom might be here to stay for a while if we go by the words of Rahul Bajaj, Chairman Baja Auto, who, in his letter to shareholders in the company’s annual report 2012-13 hit out at the UPA Government and blamed it for the slowdown in the economy and mentions that despite him being optimistic, he does not see signs of substantial recovery in the near future. This sorry state of the Indian economy has badly affected the creation of jobs in the country.