Press coverage of appeal for emergency measures:
Read in the Deccan Herald
India is dealing with a serious crisis of employment despite achieving higher than global average rates of GDP growth consistently for many years. The crisis has many dimensions, some of which are low real wage growth, a proliferation of insecure jobs, high rates of unemployment among the educated youth, and low and falling labour force participation rates, particularly among women. Some of these problems are not unique to India. For example, jobless growth, stagnant real wages, and rising insecurity are global phenomena.
In India, in addition to rising unemployment among the higher educated, less educated workers have also seen job losses and reduced work opportunities since 2016. Five million men left the workforce between 2016 and 2018. Although no direct causal relationship can be established based only on these trends, the beginning of the decline in jobs coincided with demonetisation in November 2016.
These are findings by the recently released ‘State of Working India 2019’ which examines employment trends since 2016. Together with ‘State of Working India, 2018’, which analysed the long-run trends in the Indian labour market, the reports reveal a crisis-hit, precarious employment situation.
Over the past two decades, rising aspirations and education levels among the youth have coincided with declining public employment and weak creation of decent jobs in the formal private sector. In the last two years, the shocks of demonetisation and the introduction of the Goods and Services Tax have also affected employment in the informal sector.
What is the way forward? First, we need to understand the nature of the crisis clearly, and second, we need to address it simultaneously on many fronts. Both these are doable given our current resources and institutional capacities. We need to move beyond the recent controversy over the release of official employment data. It merely indicates that there is now a fully established politics of unemployment in India.
The ‘State of Working India, 2019’ report analysed trends in the Indian labour market, but most of it, is concerned with policy ideas for employment generation. A running theme in the report is the importance of public goods and public action. For example, addressing the crisis of the quality of public goods in our towns through an urban employment guarantee scheme.
India has been a leader in this respect thanks to the Mahatma Gandhi National Rural Employment Guarantee Act, the MGNREGA. An urban employment guarantee scheme will provide employment within city or town limits to all those who ask for it and thereby provide services to all residents, build our civic infrastructure, and restore the urban commons.
The programme can provide 100 days of guaranteed work at Rs 500 a day for a variety of works and 150 contiguous days of training-and-apprenticeship at a stipend of Rs 13,000 per month for educated youth. Such a programme will cost between 1.7 per cent to 2.7 per cent of GDP and will create work for 30-50 million people.
This is a huge spend by any standard but it can result in spin off benefits like raising productivity, stimulating the economy via increased demand, arresting or reversing the effects of climate change, and empowering urban local bodies. Continuing the theme of public action, it is time for India to stop underinvesting in basic social services. Indians spend much more out-of-pocket on healthcare and education than citizens of other comparable countries.
A bold public commitment to a universal basic services programme will have the dual effect of supplying quality services while creating good jobs. A key condition for this is an investment in improved and increased public provision of healthcare, education, housing, security, transport, and utilities.
This includes filling existing vacancies in the system, expansion of capacity, as well as regularising various forms of contract and ‘volunteer’ workers (such as ASHA and anganwadi workers). A well-executed UBS would go a long way in restoring public goods to their rightful place in society, creating millions of good jobs in the process.
Employment-oriented public policy is vital at the macroeconomic level as well. India’s experience with industrial and trade policy (licensing, reservations, permits, subsidies, tariffs, and so on) during the planning years was mixed at best. Recent decades have seen hostility to such policy measures across the globe, barring a few such as tax breaks or the creation of special economic zones.
On the other hand, we know that strategic trade and industrial policy have played a key role in all the successful examples of industrialisation across the world. Even researchers at the International Monetary Fund, an organisation that has been a leading advocate of dismantling the pre-liberalisation era policy structures, have recently written about the importance of industrial policy. The new challenges of the fourth industrial revolution can only be met by a new industrial policy for the 21st century.
Finally, no public action on the ground or at the policy level will succeed if Central, State or local governments are starved of resources. We need to believe in the governments’ ability to deliver public goods and services, and we need to hold them accountable. Indeed, there are many successful examples of public action in healthcare, education, nutrition, industrial promotion and other areas.
These deserve greater recognition. But calls for greater government spending are often met with concerns over the fiscal deficits and public debt. While some of the concerns are legitimate, history and empirical analysis show that many of the fears are either unfounded or overblown. Focusing on the fiscal deficit to the detriment of employment generation and public goods creation is dangerous.
There are major misconceptions about India’s fiscal policy, government debt and fiscal sustainability that are belied by India’s own experience since the 1980s, and there is ample space for fiscal expansion. Such expansion can pay for itself if it invests in building capacities, raising productivity, and improving the quality of life.
India is at a crucial juncture in its economic development where timely public investment and public policy can reap huge rewards. At the same time, being in denial about the current realities and missing this window of opportunity can have large negative consequences in social and economic terms.
Amit-Basole is a faculty member at Azim Premji University, Bangalore and lead author of the State of Working India report.
अमित बसोले, राजेंद्रन नारायणन
From Prabhat Khabar
साल 2019 के आम चुनाव में रोजगार का अभाव सबसे मुख्य मुद्दा बनता नजर आ रहा है. पिछले कुछ महीनों से बेरोजगारी की समस्या और इससे संबंधित आंकड़े लगातार आ रहे हैं. केंद्र सरकार ने 2015 के बाद बेरोजगारी दर के आंकड़े जारी नहीं किये हैं.
साल 2017 में स्थापित आवधिक श्रम बल सर्वेक्षण की रिपोर्ट तैयार होने के बावजूद इसे प्रकाशित नहीं किया गया. बिजनेस स्टैंडर्ड में इस रिपोर्ट के कुछ आंकड़ों के आने पर पता चला कि 2017-18 में बेरोजगारी दर बढ़कर 45 साल में सबसे अधिक 6.1 प्रतिशत हो गयी है. शहरों में यह और अधिक 7.8 हो चुकी है. उच्च शिक्षितों में यह दर बढ़कर 20 प्रतिशत हो गयी है. हर पांच शिक्षित युवा में एक बेरोजगार है. भारत के लिए यह बहुत चिंताजनक विषय है. कम आय वाले असंगठित और अनियमित रोजगार की समस्या तो है ही.
एक तरफ जहां बेरोजगारी और असुरक्षित, असंगठित रोजगार की समस्या तीव्र रूप ले रही है, वहीं दूसरी तरफ शहरों में सार्वजनिक सेवाओं का सख्त अभाव दिखता है और पर्यावरण की स्थिति भी बिगड़ती जा रही है. क्या इन समस्याओं का एक साथ कोई हल निकल सकता है? शहरी रोजगार गारंटी योजना के जरिये यह मुमकिन है.
करीब एक दशक पहले पूरे देश में मनरेगा लागू करने के बाद भारत ने, सीमित रूप में ही सही, रोजगार की गारंटी का सिद्धांत स्वीकार कर लिया.
पिछले कुछ सालों में मनरेगा में बजट की कमी और तीव्र केंद्रीकरण के चलते मजदूरों को लगातार लंबित भुगतान और कम मजदूरी जैसी परेशानियों को झेलना पड़ा है. फिर भी, मनरेगा ने गरीबों की आय बढ़ाने, गावों में लोकतांत्रिक ढांचे को मजबूत करने, लैंगिक व जाति-आधारित गैरबराबरी घटाने, पर्यावरण सुधारने तथा कुआं-तालाब जैसे सामूहिक संसाधनों को सुदृढ़ करने में सफलता पायी है. साथ ही, ग्रामसभा को सक्षम करके अति गरीब नागरिकों की लोकतांत्रिक ढांचे में उम्मीद जगाने में मनरेगा का बड़ा योगदान हो सकता है.
शहरी रोजगार गारंटी योजना कुछ हद तक मनरेगा से प्रेरित हो सकती है, लेकिन इसे शहर के अनुकूल एक अलग रूप लेना होगा. एक ऐसी ही योजना के बारे में अजीम प्रेमजी विश्वविद्यालय स्थित सेंटर फॉर सस्टेनेबल एम्प्लॉयमेंट ने प्रकाशित की है. सुझाव यह है कि शुरुआत में यह योजना दस लाख से कम आबादी वाले छोटे शहरों में लागू की जा सकती है.
भारत में तकरीबन 4,000 ऐसे छोटे शहर हैं. कई प्रकार के कार्य इस योजना के अंतर्गत किये जा सकते हैं. जैसे, साधारण लोक-निर्माण कार्य यानी सड़क, फूटपाथ, पुल अदि का निर्माण और मरम्मत, शहरी पर्यावरण सुधार यानी नदी, तालाब, जंगल, बंजर जमीन और अन्य सार्वजनिक जगहों का कायाकल्प, देखभाल, सफाई, वृक्षारोपण, पार्क और अन्य हरित जगहों का निर्माण, शहरी कृषि और ऐसे कई अन्य काम इस योजना में सुझाये गये हैं.
गावों के मुकाबले शहरों में भिन्न-भिन्न हुनर वाले और उच्च शिक्षा प्राप्त लोग अधिक होते हैं, इसलिए योजना में इसका ख्याल रखा गया है. इसके अंतर्गत दिहाड़ी मजदूरों से लेकर मिस्त्री, इलेक्ट्रिशियन, प्लंबर, पेंटर, कारपेंटर और अन्य कई कुशल कारीगरों के लिए काम का प्रावधान है. शहर का कोई भी नागरिक साल में सौ दिन का काम पा सकता है, जिसके लिए 500 रुपये रोज की दर सुझायी गयी है. इसे हर साल महंगाई के हिसाब से बढ़ाया जायेगा.
उच्च शिक्षित बेरोजगार युवा सार्वजनिक अस्पताल, विद्यालय, दफ्तर आदि में अप्रेंटिस (हेल्पर या इंटर्नशिप) का काम पा सकते हैं. साथ ही पर्यावरण और सार्वजनिक सेवाओं की स्थिति का सर्वेक्षण करना, इससे संबंधित लिखा-पढ़ी का काम और अन्य निगरानी तथा प्रशासनिक कामों में भी उनकी भागीदारी हो सकती है. हर बेरोजगार उच्च शिक्षित युवा को साल में करीब पांच महीने यह काम मिल सकता है.
इन कामों के लिए प्रति माह 13,000 वेतन मिलेगा. इस तरह शहरी बेरोजगार युवाओं को काम का अनुभव मिलेगा, कौशल बढ़ाने का मौका मिलेगा, योजना में भागीदारी का सर्टिफिकेट भी मिलेगा, जिसके आधार पर निजी क्षेत्र में नौकरी मिलने में भी आसानी हो सकती है.
छोटे शहरों में नगर पंचायतें और नगर पालिका आदि आर्थिक व अन्य संसाधनों के अभाव का सामना करती रहती हैं. इस योजना के जरिये इन संस्थाओं में भी जान फूंकी जा सकती है. शहरी रोजगार गारंटी के तहत जो लोग काम करेंगे, वे नगर पालिका के नियमित स्टाफ की जगह नहीं ले सकते और न ही रिक्त स्थान भर सकते हैं, लेकिन उनके काम में मदद जरूर कर सकते हैं. प्रस्तावित योजना लगभग तीन से पांच करोड़ लोगों को लाभ पहुंचा सकती है. इस योजना में कुल खर्च सकल घरेलू उत्पाद का 1.7 से 2.7 प्रतिशत तक होगा, ऐसा अनुमान है.
पारदर्शिता और जवाबदेही को ध्यान में रखते हुए सूचना अधिकार कानून की धारा-4 का पालन होगा. हर वार्ड में, साल में कम-से-कम चार बार सामाजिक अंकेक्षण और जन-सुनवाई के जरिये लोगों द्वारा प्रशासन और विधायकों पर निगरानी रखने का प्रस्ताव है. इसमें शिकायत निवारण के कानून को लागू करने का प्रस्ताव भी है, जिससे आम आदमी का मनोबल बढ़ेगा और उसकी लोकतांत्रिक भागीदारी में उन्नति होगी.
राजनीति में आज जब ‘न्यूनतम आय’ का सवाल गरमाया हुआ है, यही मौका है कि रोजगार गारंटी के जरिये आय की गारंटी की बात हो और रोजगार गारंटी का सिद्धांत शहरों में भी लागू किया जाये.
Mathew Idiculla, Rajendran Narayanan, Amit Basole
From The Hindu
India is in the midst of a massive jobs crisis. The unemployment rate has reached a 45-year high (6.1%) in 2017-18 as per leaked data from the Periodic Labour Force Survey (PLFS) report of the National Sample Survey Office (NSSO). According to the PLFS report, the unemployment problem is especially aggravated in India’s cities and towns. Aside from unemployment, low wages and precarity continue to be widespread. In urban India the majority of the population continues to work in the informal sector. Hence, India cannot ignore the crisis of urban employment.
Reviving India’s towns
Both State and Central governments tend to treat towns as “engines of growth” for the economy rather than spaces where thousands toil to make a living. Programmes such as the Swarna Jayanti Shahari Rozgar Yojana (1997) that included an urban wage employment component have made way for those focussed on skilling and entrepreneurship.
India’s small and medium towns are particularly ignored in the State’s urban imagination. As per Census 2011, India has 4,041 cities and towns with an urban local body (ULB) in the form of a Municipal Corporation, Municipal Council or Nagar Panchayat. However, national-level urban programmes such as the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) only benefit a fraction of them. Most ULBs are struggling to carry out basic functions because of a lack of financial and human capacity. Further, with untrammelled urbanisation, they are facing more challenges due to the degradation of urban ecological commons.
Hence, we need new ways to promote the sustainable development of India’s small and medium towns. In the context of the present employment crises, it is worthwhile considering to introduce an employment guarantee programme in urban areas. Along with addressing the concerns of underemployment and unemployment, such a programme can bring in much-needed public investment in towns to improve the quality of urban infrastructure and services, restoring urban commons, skilling urban youth and increasing the capacity of ULBs.
The idea of an urban employment programme is gaining traction in political and policy debates. According to multiple reports, it could be a key agenda of a possible Common Minimum Programme of the Opposition parties for the 2019 general election. In Madhya Pradesh, the new State government has launched the “Yuva Swabhiman Yojana” which provides employment for both skilled and unskilled workers among urban youth.
What shape an urban employment guarantee programme should take can be widely debated. We have offered one proposition in the policy brief “Strengthening Towns through Sustainable Employment” (https://bit.ly/2utJlL0), which was published recently by the Centre for Sustainable Employment, Azim Premji University. Such a programme would give urban residents a statutory right to work and thereby ensure the right to life guaranteed under Article 21 of the Constitution. To make it truly demand-driven, we have proposed that the ULB receives funds from the Centre and the State at the beginning of each financial year so that funds are available locally. Wages would be disbursed in a decentralised manner at the local ULB.
Given the State’s relative neglect of small and medium towns and to avoid migration to big cities, such a programme can cover all ULBs with a population less than 1 million. Since it is an urban programme, it should have a wider scope than the the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA); this would provide employment for a variety of works for people with a range of skills and education levels. We emphasise that it would not come at the expense of MGNREGA but rather the two would go hand-in-hand.
Urban informal workers with limited formal education would benefit from this programme. They can undertake standard public works such as building and maintenance of roads, footpaths and bridges for a guaranteed 100 days in a year, at ₹500 a day. We have also proposed a new set of “green jobs” which include the creation, restoration/rejuvenation, and maintenance of urban commons such as green spaces and parks, forested or woody areas, degraded or waste land, and water bodies. Further, a set of jobs that will cater to the “care deficit” in towns by providing child-care as well as care for the elderly and the disabled to the urban working class have been included.
Skilling and apprenticeship
Another novel aspect is the creation of a skilling and apprenticeship programme for unemployed youth with higher education who can sign up for a contiguous period of 150 days (five months), at ₹13,000 a month for five months to assist with administrative functions in municipal offices, government schools, or public health centres, and for the monitoring, measurement, or evaluation of environmental parameters.
While the first category of work is aimed at providing additional employment opportunities and raising incomes for those in low-wage informal work, the second category is to provide educated youth experience and skills that they can build-on further. We estimate that such a programme will cost between 1.7-2.7% of GDP per year depending on design, and can provide work opportunities to around 30-50 million workers. In light of the 74th Amendment, this programme should be administered by the ULB in a participatory manner by involving ward committees.
Our proposal provides strong transparency and accountability structures — proactive disclosure of information based on Section 4 of the RTI Act, proactive measures through mandatory periodic social audits, public hearing and reactive measures through a “Right to Timely Grievance Redressal” for workers.
An urban employment guarantee programme not only improves incomes of workers but also has multiplier effects on the economy. It will boost local demand in small towns, improve public infrastructure and services, spur entrepreneurship, build skills of workers and create a shared sense of public goods. Hence, the time is ripe for an employment guarantee programme in urban India.
Amit Basole and Rajendran Narayanan work at Azim Premji University, Bangalore. Mathew Idiculla is a consultant with the Centre for Sustainable Employment
The past few weeks, building up to the interim budget, have been exciting for observers as well as participants of economic policy making. First, some version of a “universal basic income” (UBI) seems imminent in the budget. Second, there has been much drama around employment statistics, with reports being withheld by the government and leaked to the press.
Let us take UBI first. Even a few years ago, this type of a policy would have seemed unlikely to be implemented in India. It is on the front-burner today because of a combination of factors. First, what is being proposed is not a truly “universal” income transfer, but rather a targeted one, on the basis of occupation or income level. This makes the idea politically as well as fiscally more feasible. Some have proposed a national version of the popular Telangana scheme, Rythu Bandhu, that transfers Rs 4,000 per acre per season to all landed agricultural households.
Others have proposed an income transfer to the bottom 75% of the rural population, whether possessing land or not. The second factor that is responsible for the popularity of such a policy is rising rural distress arising from droughts and a collapse in farm incomes. The third factor is worry over joblessness or rising unemployment. And finally, of course it is crucial that farm distress and unemployment are rising in an election year, forcing the government to do something bold and big on the welfare front.
On unemployment, the government has had a difficult time not only because jobs have been scarce, but also because data on jobs has been scarce. The last published government statistics on the national employment-unemployment situation are from 2015 (the 5th round of the Labour Bureau survey). For the three subsequent years, which saw two large policy interventions —demonetisation and the introduction of Goods and Services Tax (GST) —nationally representative survey data is not available.
Two surveys have been conducted during this period, the 6th round of the Labour Bureau in 2016-2017 and the new Periodic Labour Force Survey (PLFS) in 2017-2018. However, results, despite being ready, have not been made public for either survey. Instead, estimates of job creation in the public domain have been based on the Employee Provident Fund Organisation (EPFO) and other similar databases, which only cover a small portion of the Indian workforce. These showed job creation, but the numbers were not indicative of the economy as a whole.
After much uncertainty as to what was going on, the headline unemployment numbers from both household surveys were leaked to the press. And they spell bad news for the government. As per the PLFS, in 2017-2018 the unemployment rate stood at a 45-year high of 6.1 percent.
The numbers were particularly high among the youth and the educated. These numbers, at least in trend if not level, are consistent with the findings of the private surveys conducted by the Centre for Monitoring the Indian Economy. The CMIE numbers indicate a steady fall in net employment in the economy as a whole from 2016 to 2018. This means that, on balance, more jobs or employment opportunities were destroyed over this period than were created.
Clearly, both rural distress and unemployment (particularly among educated youth) are urgent problems. If it is implemented well and last-mile delivery problems are sorted out (a big if), directed income transfer or a basic income programme would have the effect of alleviating immediate distress and bolstering aggregate demand. Of course, it is possible that the policy will be accompanied by a cut in other subsidies, so the net effect may be smaller.
However, the larger point is that, as with farm loan waivers, such a policy does not fix the underlying problems. We need a bold policy vision that can create non-farm jobs and raise incomes. This is a far more difficult proposition than instituting an income transfer programme.
There are several ideas out there on what should be done, and many more should come. I will outline one here. It draws on the fact that just as there is an unprecedented crisis of joblessness, there are also unprecedented opportunities for job creation. The last two decades have seen a dramatic divergence between the quality of private and public goods in our economy. As malls, mobiles, and motorcycles have flourished, our streets, schools and sanitation have suffered. This is a result of underinvestment over the decades. Restoring as well as creating much-needed public goods for India’s future must be made our priority.
Cleaning lakes, greening commons, paving footpaths, running trains, teaching children, caring for the sick, building houses, are jobs that need to be done. These jobs require a range of skills and education levels. Fortunately for us, many of them are harder to mechanise and need humans to do them. They are also hard to substitute with imports and must be performed locally. But they do need a big commitment of fiscal resources. We cannot pay anganwadi workers a regular government wage or hire the teachers and doctors we need, or build the parks we want and clean the streets without spending public money. But if we do spend, then we will be repaid many times over, not only due to increased demand and multiplier effects, but also because such investments will increase productivity, and more importantly the quality of life in India’s cities and villages. Is it too much to expect this year’s budget to kickstart this process?
The question of jobs and employment has been one of the most dominant economic issues of 2018. It is likely to be a central issue in the 2019 elections as well. In our recently released report, State of Working India (SWI) 2018, we have highlighted a concerning rise in the rate of unemployment in the country. In developing countries like India, unemployment is generally low because the majority of the labour force cannot afford to be unemployed, instead they take up any casual work that they can find or they employ themselves (self-employed) in some small business or other. But over the past few years, India’s unemployment rate has been steadily rising from around 3 per cent in 2011 to 5 per cent in 2015 to 7 percent in late 2018. This is unprecedented.
The nature of India’s labour force is changing rapidly. Young people are acquiring more education and entering the labour force with graduate degrees. Graduates and post-graduates now constitute 15 per cent of India’s labour force. In 2004 this number was only 6 per cent. It will continue to rise. These youngsters are not satisfied with just any type of work of a casual or self-employed nature. They want regular salaried work that pays at least the minimum central government salary. But the Indian economy is not generating such jobs in adequate amounts. As of the latest available government data from 2015, regular salaried workers account for only 17 per cent of the workforce. 82 per cent of male and 92 per cent of female workers earn Rs. 10,000 a month or less. Since graduates aspire to better jobs, they are three times more likely to be unemployed compared to the overall average. The widespread protests all over the country demanding more reservations in the public sector are a symptom of this problem.
The economic factors behind this lack of job creation are well known. The sectors that have shown rapid GDP growth, such as IT-BPO, real estate, or financial services, are not those that create a lot of jobs. Sectors that can create a lot of good jobs, such as manufacturing, have experienced extensive mechanisation and a rapid rise in insecure employment (contract work, trainees, etc). With agriculture in crisis, this is also not an attractive option for youth in rural areas. Low-wage service work and construction jobs are the only ones to be easily found.
To deal with this problem we need good, up-to-date information. But instead, 2018 saw a lot of confusion on job creation numbers due to lack of official data on employment. Three years have now passed without clarity on how many jobs have been created on net, i.e. accounting for job creation as well as job destruction in all the sectors of the economy. This is because the government has not released data for 2016-2017 and 2017-2018. Instead many claims of job creation have been made on the basis of enrollments in provident fund and pension schemes, as well as MUDRA loans, and other government schemes. But since these schemes cover only a small fraction of the total labour force, they do not paint a complete picture. Household surveys are essential for such a picture.
Currently, the Mumbai-based Centre for Monitoring the Indian Economy is the only available survey data source since 2016. RTIs filed by us reveal that official survey data for 2017-2018 is available and will be released soon. One hopes that this will be in time for a debate over the government’s performance before the elections.
To sum up, unemployment among the educated youth, low wages among those who do have work, and lack of timely data are major problems we need to address urgently.
In SWI 2018, we have suggested that a “National Employment Policy” is needed. I end with a few ideas for such a policy.
1. A Universal Basic Services (UBS) programme that expands public investment in education, health, housing, public transport and safety. This will create good jobs in addition to addressing the shortfall in the provisioning of public goods.
2. A National Urban Employment Guarantee Programme that offers work opportunities particularly in the small towns and peri-urban areas. Such a programme will necessarily differ in details from NREGA, but will be in the same spirit. Workers employed in this programme can contribute to the creation of public infrastructure such as roads, sanitation, urban greening and rejuvenation of the rapidly degrading urban environment.
3. Fiscal policy (at central, state, local levels) is central to employment generation and welfare. We need to reorient fiscal policy towards employment rather than international credit-ratings, and stop making the fiscal deficit a policy target.
4. A new data architecture based on household and business surveys, time-use surveys, and administrative sources (such as EPFO and GST databases).
(Amit Basole is Associate Professor of Economics and Head, Centre for Sustainable Employment at Azim Premji University)
Published in Prabhat Khabar.
It seems that nearly every day, our media carries stories of concern about the employment situation in India. The stories include accounts of a desire for jobs that is not being met, the vast over-subscription of government jobs, the falling labor force participation of women, the diminishing opportunities for decent employment in rural India, or massive migration to cities in search of remunerative employment. Other stories focus on the quality of employment being created, often precarious and without dignity. A recent poll by the Bill and Melinda Gates Foundation and Ipsos finds that unemployment is the number one cause of worry both of youth and adults in the country, and this concern is higher than in any other county polled.
At the same time, India is one of the fastest growing countries in the world. Growth has led to impressive gains in poverty reduction. It also has a vibrant democratic society as well as a large pool of capable and young people, who are increasingly healthier and more educated. It is better placed than other countries around the world in trying to generate meaningful and sustainable employment for these reasons. The concern over job creation is also widely shared by all political parties. But for a whole host of reasons, the link between GDP growth and the creation of more and better employment has become much weaker. Both the quantity of jobs and quality of jobs are at issue.
Taking a longer view, historically, the path to a more developed economy has involved the movement of workers from agriculture to non-farm occupations (a la Simon Kuznets) and from informal activities to formal ones (a la Arthur Lewis). For our policy-makers, the main concern continues to be how to support and accelerate the transformation of India from an economy dominated by self-employment and small-scale enterprises to a modern, vibrant one. This concern is further exacerbated in an era when there is increasing automation and less space potentially than there was in decades gone by to create employment through export orientation. There is nothing ‘natural’ about this process. It requires a clear vision and a judicious mix of industrial and trade policies that implement it, for example, by tying import substitution to export promotion, and protection from foreign competition alongside fostering of domestic competition. It also requires changes in the political economy with land reforms, a favourable international climate in the form of export markets and geo-political stability.
In a new report, the State of Working India, we take stock of both the long-run process of structural change as well as more recent developments in quantity and quality of employment, using primarily official government sources. While there are many nuances, some basic facts appear unequivocal.
First, even as GDP growth rates have risen, the relationship between growth and employment generation has become weaker over time. GDP growth has accelerated to 7 per cent, but employment growth has slowed to 1 per cent or even less. On the one hand, this could be a welcome development in so far as it reflects productivity growth. But it is also a problem in so far as the demographics suggest the need for larger employment growth to accommodate those entering the labor force. In addition to the new entrants, jobs are also needed for who want to leave agriculture. Recall that just under half of the workforce is still in this sector which produces less than 20 per cent of the national income.
Second, historically, under-employment and low wages, and not open unemployment, have been the key issues. But a new feature of the economy is a high rate of open unemployment, which is now over 5 per cent overall, and a much higher 16 per cent for youth and the higher educated as of 2015. The increase in unemployment is clearly visible all across India, but is particularly severe in the northern states. If one is optimistic, this may represent a temporary skill mismatch, as more educated and aspirational youth are willing to wait for a job rather than accept a less desirable one. On the other hand, given concerns about the quality of education, this may not be a temporary phenomenon and might require intervention.
Third, around 100 million workers are either employed in very poor quality jobs or are out of the labour force because of the unavailability of work. These are ‘surplus workers’ available to be pulled into the economy if jobs can be created. Another estimate of the surplus workforce, that can be more productively employed elsewhere, is the percentage of those employed in unorganised petty services such as retail, domestic work, and so on. As of 2016, this is estimated to be 78 million.
Fourth, despite a steady rise in wages, the levels are still low. Between 2010 and 2015, real wages grew at 2 per cent per annum for organised manufacturing, 4 per cent for unorganised manufacturing, 5 per cent for unorganised services, and 7 per cent for agriculture (for the last, growth has collapsed since 2015). Since 2000, real wages have grown at around 3-4 per cent in most sectors, with the exception of agriculture. Despite this, nationally, 67 per cent of households reported monthly earnings of only up to Rs. 10,000 in 2015. In comparison, the minimum salary recommended by the Seventh Central Pay Commission (CPC) is Rs. 18,000 per month. This suggests that a large majority of Indians are not being paid what may be termed a living wage, and it explains the intense hunger for government jobs.
Fifth, the Indian economy remains heavily gender and caste segregated. Women workers earn anywhere between 30 and 80 per cent of male workers’ earnings depending on the occupation and industry in which they work. Women are severely under-represented among senior officers, legislators and managers as well as in well-paying industries such as Finance. SC as well as ST groups are over-represented in low-paying occupations and severely under-represented in the high-paying occupations, a clear indication of the enduring power of caste-based segregation in India.
What is to be done? India will continue to transform and face the challenges of a world with fewer ‘standard’ options such as export-oriented industrialization (given a much larger number of more productive competitors). It is important, then, to have a clear national employment policy, one that can build on the progress achieved thus far, but that also takes the issue head on. Expansion of employment guarantee, certification of skills acquired on-the-job, a universal basic services programme, innovative industrial policies, and learning from the experiences of the states, can all be part of this effort. And of course, a willingness to use the public purse for these actions is necessary. But this is not enough. Such a policy will need to integrate crucial considerations of social equity and ecological sustainability into its structure. For our country, in the 21st century, Lewis and Kuznets, the theoreticians of structural change, have to meet the ideas of Ambedkar and Gandhi.
(Amit Basole and Arjun Jayadev teach Economics at Azim Premji University.)
The latest banking scam, this time in the Punjab National Bank to the tune of INR 11,000 crores, is yet another reminder of just how well the Indian economy is being managed in the interests of the super-wealthy. Over the years, and particularly during the boom years of the 2000s, when employment growth was negligible and “jobless growth” became a commonly used phrase, India’s corporate elite, including some of its best-known business houses, went on a borrowing spree. They borrowed from private and public sector banks, they borrowed domestically and abroad. It is now clear that many of these loans were never intended to be repaid. The public sector banks, in particular, issued thousands of crores worth of loans without due diligence or even with active collaboration in the fraud.
Starting in the early years of this decade, the Reserve Bank of India itself was under pressure to do something about the building problem and started forcing public sector banks to reveal how many such loans were on their books. This is when the true extent of the problem, long-festering, started becoming apparent.
As per the recent estimates, there are around INR 10 lakh crores worth of bad loans in the Indian banking system. This number will likely rise. To gain a sense of proportion this is around 7% of India’s GDP. The entire union budget for this year was INR 24.42 lakh crores and the fiscal deficit was around 6.2 lakh crores. This year’s MGNREGA budget is INR 55,000 crores.
The amount of money borrowed by India’s wealthy citizens in connivance with its officials with no intention of ever repaying it is larger than the amount that the union government spends on health, education, food and fuel subsidies, agriculture, rural and urban development, combined.
But this is not the end of the bad news for the country’s ordinary citizens who still struggle for small amounts of credit to run their businesses and households. First, it is not known how much of this massive borrowing became a useful investment in the economy and how much was converted into unproductive foreign and domestic assets, as well as luxury consumption.
If the Nirav Modi case is any indication, then we may expect more the latter than the former. Second, not only have we paid once in the form of the opportunity cost of these loans, i.e. the alternative uses to which we could have put this credit, we are paying for it a second time in the form of the budget outlays on what is called bank recapitalisation. This is where the government uses its tax revenue to replace bad assets (loans that will never be repaid) with good ones. This allocation for the current budget was INR 2.11 lakh crores, larger than the allocation for many crucial development programs.
National outrage has understandably followed the latest revelations. But sadly, as expected, this has given the proponents of bank privatisation another excuse to push their agenda. Since the vast majority of bad loans in the banking system are on the books of the public sector banks, the solution seems simple. Privatise them. Make them subject to market discipline and such corruption and negligence will not occur. But this argument appealing to the power of the market to discipline finance can only be convincing to those who have been asleep through the 2008 financial crisis. The cronyism, corruption, conflicts of interest, and open fraud that were the hallmark of this crisis are very well-documented. That very few high profile convictions resulted is a testament to the power of the finance lobby in the United States and elsewhere than to the lack of evidence.
What makes us think that the equally, if not more, compromised Indian institutional climate will respond any better under a largely private banking sector than a public one? Privatisation of banks does not alter the fact that 1% of the richest Indians control nearly 60% of its wealth. Further, a private banking system is not the same as a competitive one. The US has the former, but no one would mistake it for the latter.
The PSU banks have to be reformed is clear. But “reform” is not a synonym for “privatise.” What we urgently need is public, accountable, and functional finance.
The country’s permanently credit-starved micro, small and medium sector, including agriculture, can truly transform this economy if supported well. Their individual credit requirements are not high, but they are large in numbers. Such a situation is ideal for a distributed public banking system. The current high-handedness and lack of accountability in public banking is not an excuse to privatise it. It is an excuse to make it accountable locally. Something we have never attempted seriously. Banking performs the crucial function of linking savers with borrowers, those with capital to those who can use it. Further, having the power to create money by making loans, banks are endowed with one of the most powerful tools of development. There is no argument for making this incredible power beholden to elite interests. There is every argument for making it as decentralised and distributed as possible.
But what about the bad loans? Here too the choice is clear; whether to pursue those who stole the money and to retrieve it, or to pay for our theft ourselves. The answer should be obvious.