Who Is Responsible for India’s Jobless Growth?

The push for structural reforms in the past few years – including unprecedented moves to curb black money, relaxation in FDI norms, introduction of the ripe and ready GST, and digitization of services – has helped improve the credit profile of the country, and thus ease its high-debt burden.

The nation’s progress is also reflected on the charts with the Annual Growth Rate scaling much higher than the forecasted growth rates of more than 7 per cent in the past two quarters. It is only in the first quarter of this year that the growth rate has slowed down to 6.1 per cent.

While most of the indicators of growth, viz., strengthening of rupee, stabilization of inflation and increase in FDIs (foreign direct investments) show an upturn to the realization of the promise of ‘Acche Din’, there remains one that reveals the flip side of the ‘Indian Success Story’- the Employment Data.

A critical analysis of the employment scenario across various sectors shows that India is slowly slipping into a long-lasting phase of jobless growth. By industry, the service sector has been the biggest contributor to the Indian economy’s growth.. Trade, hotels, transport and communication, financing, insurance, real estate, business services and community, and social and personal services account for more than 60 per cent of the country’s GDP. Agriculture, forestry and fishing together constitute around 12 per cent of the output, but employs more than 50 per cent of the labor force. Manufacturing makes a contribution of 15 per cent in the GDP, while construction adds another 8 per cent. Mining, quarrying, electricity, gas and water supply build the remaining 5 per cent (Source: MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION, GOI, update – June 2017).

Competition Pressure

After years of steady, consistent growth, many Indian IT companies have faced massive competitive pressure. This has pushed them towards the trend of ‘cost cutting’ in the past few years. According to the National Association of Software and Services Companies (NASSCOM), the rate at which jobs are generated in the IT industry is terribly lower than the average year-on-year growth of the industry itself. It is, thus, evident that the Indian IT industry, while moving towards greater automation, is fast becoming a job-less proposition.

Skilled yet un-skilled

While most try to corner the Government on the issue, as I recall from the discussion at the Parliamentarian Youth Conclave, held in March at Delhi, ‘growing un-employment’ was a persistent undertone of the questions put forth by the youth delegates to most of the Cabinet Ministers from Shri Prakash Javadekar to Shri Piyush Goel. Addressing the concerns, Shri Prakash Javadekar commented, “.. It is also a result of the youth today looking for high-paying options, rather than a good job. This herd mentality is at the root of this crisis”. Dr Bindeshwar Pathak, Founder of Sulabh International and a celebrated social reformer, also stated, “There is no dearth of jobs for those who really want to work and understand the importance of growing one step at a time”.

The idea-exchange threw light on the fact that the desire for A.C. rooms and bigger cars i.e. materialism, and lack of right mind-set, are among the major reasons of unemployment.

Vijay Anand L V, CEO, skedon.com and recruitment advisor, said, “The needs of the employer and job seekers are moving in the opposite direction these days. Middle men are wanting to loot money in the name of training and development inside the campus. Colleges give the students a namesake campus interview with dummy companies. Students too show little interest in jobs that pay less but promise growth.”

He also shares his concerns on the attitudinal shift in job-seekers and tries to inspire by exemplifying his journey – the struggle he faced – from being a courier boy to a CEO; specifying that there are no shortcuts to success.

According to McKinsey, a digital shift to the Indian economy is estimated to render almost half of the existing Indian workforce unfit for work. The skill mismatch identified, in the next two to three years, shall tag the workforce ‘irrelevant’ to India’s growth story.

Other reasons

  • The disturbing scenario in the IT industry is not the only reason behind India’s job-less growth.
  • Unlike China, labour intensive manufacturing sector did not drive growth in India
  • Rigid labour regulations are a disincentive to job creation by employers in the manufacturing sector (recalling the Maruti Case)
  • Industrial Disputes Act led to a 25 per cent drop in manufacturing sector recruitments (World Bank Report)
  • MSME is mostly looked down upon and also faces multiple bottlenecks from poor access to credit to little learning and development support. This is when the growth potential of MSME is four-fold that of the large firms
  • Government has also failed to encourage job creation by industries in ways like tax exemptions and subsidies

What can be done?

  • Revamping of the education system to skill based education. A scheme like Pradhan Mantri Kaushal Vikas Yojna (PMKVY) is a welcome step but needs constant monitoring
  • Food processing industry is a potential employer and shall be encouraged
  • The contours of the MUDRA scheme shall be expanded to facilitate easy loans to the MSME sector