Where are the Jobs?

Biz@India

May 2018

Although India is touted to be one of the fastest growing economies in the world, the nation is not generating enough jobs. The grim scenario is likely to worsen despite high voltage political rhetoric.

Employment creation is a promise that figures in most election manifestos of political parties across the globe. Political parties in India are no different – they recycle the pledge of job creation every five years ahead of every general election. The ruling Bhartiya Janata Party (BJP) secured a massive political mandate in the 2014 general elections on the development plank – Sabka Saath, Sabka Vikas (Development for All).

Prime Minister Narendra Modi swept to power by promising India’s poor and middle class the restoration of dignity, after years of swelling inequality with massive job creation as central to his political pitch. Four years later, Modi and his ultra nationalist right wing party and their affiliates are more keen to indulge in the politics of cow protection, cash ban and imposition of Goods and Service Tax (GST) even as the burden of Non Performing Assets (NPA) of its financial institutions have touched the USD 10 trillion mark.

Yet, there is no visible slowdown on BJP’s inflated rhetoric. Instead Modi and his government are a long way way from creating 10 million jobs in India. With less than a year to go before the general elections in May 2019, the disarrayed and disunited opposition has found a new political loophole in the failed promises of the Modi government.

Rahul Gandhi, heir-apparent to the main opposition Indian National Congress, was quick to seize the point. In a speech at the University of California, Berkeley, on September 11 last year, he said, “If India cannot give the millions of people entering the job market employment, anger will increase, and it has the potential to derail what has been built so far.” He added for good measure, “That will be catastrophic for India and the world beyond it.” Gandhi is the son, grandson and great-grandson of previous prime ministers. He could well be Modi’s direct opponent in the general elections of 2019.

A Global Challenge

Unemployment is fast emerging as a global scourge. According to the World Employment and Social Outlook – Trends 2018, global unemployment rate has been stabilising after a rise in 2016.In developing countries though, progress in reducing working poverty is too slow to keep up with the expanding labour force. The number of workers living in extreme poverty is expected to remain stubbornly above 114 million for the coming year, affecting 40 pc of all employed people in 2018, explains the report.

Joblessness on the Rise

The Centre for Monitoring Indian Economy (CMIE), a think-tank that tracks business and economic data, estimated in February this year that there are whopping 35 million unemployed Indians seeking jobs now – the highest since October 2016. The situation is only set to worsen in the coming months. Half a million seekers enter the Indian job market every month. So the point is, are there enough jobs in India?

Out and Down on Job Front

The Indian farm sector, which produces merely 12 pc of the gross domestic product, employs 46 pc of the country’s workforce. In view of poor job opportunities, the youth try to hang on to agriculture for a handto-mouth subsistence.

Then there is the issue of Micro, Small and Medium Enterprises (MSMEs), which is the backbone of the Indian economy. This sector contributes around 8 pc of Gross Domestic Product (GDP), 40 pc of exports and around 45 pc of manufacturing output. It consists of 40 million units and provides employment to over 120 million. The factors keeping the sector down are myriad laws, archaic regulations and a corrupt bureaucracy. Consequently, enterprises prefer not to scale and remain small. Add to that India’s manufacturing sector that is still grappling with the impact of the demonetisation shocker of 2016, and a poorly planned rollout of Goods and Services Tax (GST) in 2017. The sector has been sluggish for a long time now. Consequently during the last two years, India’s consumer confidence has plummeted, construction has slowed down, factories have shut down and unemployment has gone up. Thus, Indian business has showed little appetite for recruitment.

Poor Global Manufacturing Base

The principle question here is this: why has India not been able to generate enough jobs during the last four years? There are half a dozen factors that impede India’s rise as a global manufacturing base despite the fact that the country is among the most favoured Foreign Direct Investment (FDI) destinations.

A report authored by Tanvee Gupta Jain and Edward Teathe (economists, UBS Investment Bank) is upbeat about the inflow of FDI into India. “We expect annual FDI inflows to India to rise further to around USD 75 billion over the next five years. We believe India will be increasingly recognised as a favoured FDI destination if growth is accompanied by continued structural reforms,” UBS said in a research note.

Another factor short-circuiting employment generation in India is poor private investment in new enterprises. According to estimates in the United Nations (UN) Economic and Social Commission for Asia and the Pacific’s (ESCAP) flagship publication, the Economic and Social Survey of Asia, has noted that private investment is expected to revive as the corporate sector adjusts to GST, infrastructure spending increases and corporate and bank balance sheets improve with government support. The manufacturing sector has also been held back mainly due to poor infrastructure, bureaucratic red tape and restrictive labour laws.

Skill Mission Disaster

With USD 1.77 billion funding from federal government, Prime Minister Modi’s favourite skill development programme has turned into a disaster. Called the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), it set for itself a rather ambitious target of training 10 million youth spanning a period of four years, 2016 to 2020. However, so far it has trained 4.13 million people in the past three years. Dharmendra Pradhan, minister for skill development, told Rajya Sabha (upper house of India’s Parliament) in March this year that only 615,000 trained people have secured jobs. That is a placement rate of a measly 15 pc.

On a Hiring Spree

Massive employment opportunities are also created in India by the federal and state governments. Unlike many economies, Indian governments employ around 21 million staff to run its mammoth machinery, flagship schemes and services.

India’s craze for government jobs stems from social security, pension after retirement, health scheme and better social standing. This can be attested by millions of job applications for a few hundred vacancies every year. About 30 million people applied for less than 90,000 positions in India’s state-run railways and there were 200,000 applications for 1,167 jobs of police constables in Mumbai (west India).

Central Indian state Madhya Pradesh’s chief minister Shivraj Singh Chouhan announced 100,000 jobs for youth in various government departments. It would be instructive to remember that the three-time chief minister is facing a strong anti-incumbency, with the opposition Congress emerging stronger in the state ahead of assembly polls scheduled for later this year. With these announcements, ruling parties across India inflate their political claims of providing jobs. Shockingly, however, even those well qualified and armed with a degree in engineering often apply for constable or clerical jobs. It is another sordid tale of how these recruitments are mired in scams and is susceptible to question paper leaks through bribery.

Missing Data

In April this year, prime minister Narendra Modi for the first time did what no prime minister has ever done before: he went on a hunger strike to protest against the opposition paralysing proceedings in the Parliament. Such desperation could well be the result of Modi losing his popularity, as he has failed to deliver on several electoral promises, including job creation. Instead he and his men are trying to weave a new political narrative around the lack of data or missing data.

For instance, the minister of state for civil aviation, Jayant Sinha, asserted that millions of jobs are being created due to government’s initiatives and many sectors have not even been covered while compiling such data. “It’s not about jobs, it’s about data… the fact is we are not identifying all jobs happening in the country,” he said. Defending the Modi government, Sinha wrote in the leading national daily, The Times of India: “A dubious narrative is currently being circulated: where are the missing jobs? Actually, the truth is quite different: where is the missing data about jobs? India lacks consistent, accurate, high frequency data on job creation.” Sinha, a former venture capitalist, went on to point out how an Employees’ Provident Fund Organisation (EPFO) study shows that six to seven million jobs are being created through the EPFO.

The Modi government also asserts that the Pradhan Mantri Mudra Yojana (PMMY) has disbursed around USD 60 billion worth of loans to about 100 million people, which is a micro-entrepreneurship, self-employment and productive enterprise. The PMMY is a flagship scheme of the Government of India to ‘fund the unfunded’ by bringing such enterprises to the formal financial system and extending affordable credit to them. According to Sinha, due to improper data picking, many jobs are not even covered when it comes to compiling job data.

“Ola and Uber are employing close to a million self-employing drivers, which no data has picked up. There is tremendous amount of job-creation upsurge in the country. But, it is not happening in traditional economy, as is application to the rest of the world. It’s happening in the new economy, and entrepreneurship,” Sinha claimed.

New Employment Data

India’s premier government think-tank NITI Aayog will come out with data set starting in October 2018 based on the national survey for household on employment creation. According to NITI Aayog’s vice-chairman Rajiv Kumar, this information will be markedly different from the Labour Bureau’s survey on employment numbers and will be published every quarter. It also plans to sync this data with other sources of formal employment such as the EPFO and with bodies like the Institute of Chartered Accountants of India and Institute of Cost Accountants of India.

Job Maze Ahead

In a report titled Jobless Growth? released in April, the World Bank said that to keep employment rates constant, India needs to create eight million jobs per year as it adds 1.3 million to the working-age population every month. Employment data from EPFO and the National Pension System (NPS), the state-run social security organisation, showed that India added 3.46 million people to the formal workforce between September 2017 and February 2018. But it is unclear if these are new or formalisation of existing informal employment due to factors such as implementation of GST.

In the coming months, more data on job creation will be published. Yet again, political parties will make promises of eradicating poverty, inequality and unemployment. Meanwhile, will millions of youth join the working force or the army of unemployed? Or would they continue to get caught in the vicious cycle of arguments and counter-arguments! The moot question, however, remains: where are the jobs? Everybody wants to know – and for good reason.