Gazing into the crystal ball of India’s job crisis

Published: July 10, 2018 - 15:08

Four years after coming to power, the BJP-led government is struggling to fulfil its promise of creating 1 crore jobs. With the next elections a year away, the crisis has the potential to change the politics of the country in a far deeper way than understood

Three hours away from national capital Delhi, where the dust never seems to settle down, is the majestic Tijara Fort. Overlooking the hot plains of the Mewat region that straddles the states of Rajasthan and Haryana, Tijara is more about its glorious past than about its dismal present and uncertain future.

Recently, a government think tank declared the nearby district of Mewat as one of the most backward districts of the country. From here the journey to attain Sustainable Development Goals (SDGs) seems very distant. In Tijara as well as in the nearby areas, there is rampant unemployment aggravated by shrinking agriculture and a slowing manufacturing sector.

Therefore, it was pertinent that on a sunny May 6 when a fierce dust storm was swirling in the sun-baked plains below the Tijara Fort, Friedrich-Ebert-Stiftung (FES) and Hardnews Magazine organised a conclave in the interiors of the Fort to understand the looming crisis over the future of jobs and how they will impact the politics of India in 2019.

The context of the discussion was the disturbing and unsettling realisation that job creation for a 12-million-strong youth population entering the labour force every year is less than a million. When the Bharatiya Janata Party (BJP) government came to power in 2014, one of the issues that propelled Prime Minister Narendra Modi to a thumping victory was the promise of providing 1 crore jobs to the young, who voted because they did not want to live off the dole. But four years since, the figures paint a dismal picture.

Is India clocking a 7 percent growth?

A presentation by FES’ Sehaj Malik that set the tone for the discussion not just reiterated the need for a commensurate high growth rate that would provide jobs to the youth but also placed focus on healthcare and education, the two crucial factors that determine the quality of human capital a country possesses.

Since India is at the peak of its demographic dividend and is the second-most populous country of the world, it faces the indomitable challenge of creating jobs for the 12 million youth entering the country’s work force every year. According to an International Labour Organisation (ILO) study, titled World Employment and Social Outlook 2018, the rate of unemployment will hover at 3.5 percent this year with more unemployed people joining this number. In this scenario, the government’s claim that the economy is clocking a 7 percent growth has given rise to the concept of a ‘jobless growth,’ a situation where growth in the economy is not accompanied with job creation.

However, an alternative opinion also exists on the matter that questions the matrix employed to arrive at the 7 percent figure. Nitin Sethi, a Senior Associate Editor with Business Standard and a keen observer of the political economy over several years, debunked the claim that India was witnessing a 7 percent growth. “If one goes over the previous matrix of growth, India is at best clocking three and a half or four percent growth, which does sit comfortably with one percent job growth,” according to him.

The aftermath of demonetisation and GST

While numbers can be tampered with, the situation on the ground bears testament to the reality. In the past three years, the country has been subjected to two major policy decisions that have affected the resilience of its economy: demonetisation of large currency notes and a unified GST. Resultantly, many sectors have not revived and jobs have failed to return.

While presenting job trends, Hitesh Oberoi, Managing Director and CEO of that has accounts of 70,000 companies, said that the boom in employment starting in the beginning of 2000s and continuing till 2007-08 was led largely by the IT sector, until it stopped one fine day. The Lehman Bank went under, its collections went into negative and since then major sectors that provided employment, like cement and infra, have not recovered, even though the services sector is back on track.

The owner of a medium-scale electrical appliances factory, Vimal Gupta, delved into his own experience and claimed that poor implementation of GST led to job losses. Part of the problem was also compounded by the fact that for a long time, there was widespread confusion over how the new tax regimen will be implemented.

The services sector and the advent of automation

The playing field in the telecom sector, on the other hand, has been disrupted with the entry of certain players that have monopolised the sector, offering freebies to consumers in order to keep them coming. Anupam Vasudev, former director of Aircel, noted, “Capital needs to be preserved. There is no need for so many players in telecom. A large number of players means that multiplier effect is missing in the industry. The speed of change and capabilities is very fast today.” A report published in a leading English daily said that the telecom sector is said to lose 1,50,000 direct and indirect jobs in the coming years and is burdened by astronomical debts to the tune of Rs 8 lakh crores because of offering services to customers at inordinately low costs.

The services sector, too, has taken a hit with the advent of automation, a phenomenon by which a lot of roles that were earlier performed by people will be performed by Artificial Intelligence (AI) in the future. According to a report by McKinsey and NASSCOM, titled Perspective 2025: Shaping the Digital Revolution, when automaton kicks off, more than half of the IT workforce will cease to exist.

Re-skilling is key

In this context, Dr Avik Sarkar, (Officer on Special Duty at NITI Aayog) who watches AI and digital impact on the economy, and Kiran Bhatti, a senior research fellow with Centre for Policy Research, raised the moot point of placing the focus on aligning education with skilling and also, re-skilling every two years. However, the question that one can now raise is where does the buck stop and who is responsible for re-skilling the existing labour force?

Madhav Lal, Former Secretary, MSME, and Executive Director of ISB Mohali, cited the example of the National Skill Development Authority to explain how, despite good intentions, the government’s plan of re-skilling youth hasn’t really taken off. He said that the body was conceived as a private-public partnership with 50-50 equity. The government was willing to invest 500 crores and the total capital had to be 1,000 crores. “However, while the government chipped in with 500 crores, only 5 crores came from the private sector,” he pointed out. The sentiment was echoed by Harish Kumar too, who served as former head of small-scale industries’ corporation. He said that despite best intentions, government schemes have failed to make an impact because they have not been implemented well. “We need to improve manufacturing potential without which jobs will be a problem,” Kumar remarked.

A political solution to job crisis

The government in Delhi is cognizant of the job crisis, but it is struggling to find an easy solution to it as the issue of unemployment gets enmeshed with identity politics. Massive protests have taken place in various states of the country — by Jats in western UP, Patels in Gujarat and Marathas in Maharashtra — all demanding reservations in jobs and educational institutions. All these people traditionally belong to agrarian communities and occupy the middle rungs in the caste hierarchy in India. For long they had materially benefited from the green revolution of the early 1960s and felt little need for government jobs. However, with the agriculture sector becoming unprofitable and families staring at mounting debts, these communities have taken to the streets to demand either scrapping of reservations for the disadvantaged castes and if that is not possible, then they are asking for similar privileges for themselves. The unrest is a manifestation of the growing anxieties in the well-off castes about their future.

The matter gains more significance with just a year to go for the next General Elections. Several studies and surveys are trying to assess the Modi government’s performance in the last four years. And the opinion is massively divided, with several experts terming India’s jobless growth a myth, while others contest the claim. It is being said that the government too is busy mapping the invisible jobs created by it so that it can make a case before the voters. The scarcity of jobs has the potential to change the politics of the country in a far deeper way than understood.

The takeaway for both Hardnews and FES from Tijara was that the job crisis is becoming too serious to be ignored by the government, which needs to increase public spending to revive the infrastructure and the MSME sectors that have been the mainstay of job creation in India. In addition, as summed up by FES’ head of India office, Patrick Reuther, there is a need to bring in investment to improve efficiency, productivity, education, skilling and healthcare — a variety of factors that are responsible for determining the quality of human resources. There is also a need to revive the local economy which has the potential to create a wide range of jobs. A revival of local economies can resist unnecessary automation as well as large retail, which is speedily entering the economy and could threaten millions of mom and pop stores. To prevent that, local governments will have to ring-fence their economies in a manner that jobs are not threatened by big retail companies. Besides, there is a need to democratise new technologies, re-skill the human capital and nurture it so that new opportunities arise out of these new technologies. Last, but not the least, any conversation about AI cannot be complete without placing emphasis on ‘inclusiveness.’