Aftermath of a hasty demonetisation and GST

Arun Jaitley delivering the keynote address, at the India Economic forum (PC: PIB)

Consequent to demonetisation and the hasty implementation of the Goods and Services Tax (GST), unemployment is rising fast in India. Worried, the Narendra Modi Government is seriously studying all the economic indicators and is likely to present a stimulus package soon to revive growth with an eye on the 2019 General Elections.

On May 16, 2014, Narendra Damodardas Modi got the most coveted job in the country. He became the Prime Minister of a large population of 1.3 billion plus! Three years later, millions of Indians are jobless. They are down and out. Thousands of Indians are joining the ranks of the unemployed on a daily basis. Ahead of the 2014 General Elections, the BJP had promised to create 10 million jobs annually, in addition to new avenues of skill development, and also to establish equality and dignity. Three years later, these promises remain unfulfilled. Dreams have turned into dust.

Why joblessness?

There are half a dozen factors responsible for India facing rising unemployment.

Growth decline

There has been a drop in GDP. GDP growth has fallen for six consecutive quarters, dipping to a three-year low of 5.7 pc in the April-June quarter. With this, India lost the fastest growing economy tag to China for the second straight quarter. If the GDP growth declines further, it could further fuel unemployment.

Drop in factory output

Index of Industrial Production or IIP measures the growth of various sectors in an economy, such as mineral mining, electricity, and manufacturing. In April-July 2017, the overall IIP grew by a mere 1.7 pc, while manufacturing IIP grew by only 1.3 pc.

Fall in exports

The global slowdown has compressed demand for services and merchandise exports across the world. Compared with USD 314.4 billion in export earnings for India in 2013-2014, India could manage only USD 196.6 billion in exports in 2015-2016. This accounts for a massive slide of 37 pc. Besides, the decision to ban high-value currency notes and hasty implementation of GST has taken the sheen off Indian businesses, especially the small and medium enterprises. The Small and Medium Scale Enterprises (SMSE) sector is the second highest source of employment after agriculture, employing 55 million in 26 million units. This sector contributes to 40 pc of India’s exports.

Dwindling job growth

According to the Labour Ministry, job growth has not taken off with unemployment rising to five percent during 2015-16, compared with 4.9 pc in 2013-14. Quarterly surveys by the Ministry revealed that only 0.135 million additional jobs were created in January-December 2015, down from 0.90 million in 2011, given that nearly 12-13 million enter the workforce every year, jobs are available for one percent of this estimate.

Likely to Worsen

The situation is only likely to become worse warn job-market observers. TeamLease Services— a firm specialising in employment solutions— has cautioned that the job market is further expected to fall by 30–40 pc in the manufacturing sector compared to last year. This raises questions on the success of the ‘Make In India’ scheme, a flagship programme of the Modi government aimed at creating jobs and making India a global manufacturing hub.

Worse, of the candidates trained by the National Skill Development Corporation in 2016–17, only 48.4 pc candidates got jobs, while merely 46.9 pc landed jobs in 2015-2016. Employment remains a concern even after skill training!

Other economic parameters are not encouraging either. Data released by the Reserve Bank of India last week showed that the Current Account Deficit has swelled to USD 14.3 billion, or 2.4 pc of the gross domestic product (GDP), in the June quarter, from USD 0.4 billion a year ago.

These declining numbers do not bode well for Modi and his team, with just 18 months to go for the 2019 General Elections. In fact, this can fuel disarrayed opposition. The Rashtriya Swayemsevak Sangh has cautioned that there is a shift of public mood over the Modi government’s performance.

Stimulus package

No wonder Finance Minister Arun Jaitley has huddled up with his team in search of a solution and is finalising a package of measures, which may include steps to speed up growth, generate employment, lift exports and step up investments in infrastructure.

“The government will take measures necessary to boost the economy”, Jaitley told reporters after a crucial cabinet meeting chaired by Prime Minister Narendra Modi last week.

However, he did not spell out the details. “I am not in a position to announce it in the press conference. I will be consulting the Prime Minister. When we decide, you will come to know,” he added. Let us wait and watch how Jaitley shakes the Indian economy out of slumber!

Let us wait and watch how Jaitley shakes the Indian economy out of slumber!