Unemployment In India Is A Big Problem Amongst Surging GDP Figures

Prime Minister Narendra Modi handed out another 77,000 appointment letters for prized and secure government jobs at his latest Rozgar Mela, taking the total of such appointments to approximately 3 lakhs.

However, the figure is not at the promised 10 lakh jobs, and unemployment continues to be a major problem in India. Even 10 lakh government jobs would not meet the considerable supply-demand mismatch.

The situation gives a degree of sustenance to the Communist charge of jobless growth, though the government is doing all in its power to cope with this massive challenge. Most developed countries deal with employment with a small and static population. And even then they have high unemployment rates, soaring inflation, and low or negative GDP growth.

India has grown and prospered despite a constantly increasing population, with millions added every year, mostly at the bottom of the pyramid. Things are infinitely better for all Indians since the economy began to be unshackled and incentivised from 1991. There are literally no shortages of anything that plagued the Socialist era. With a population four times as large as it was at independence in 1947, there are no food shortages, even though, for the first time in 15 years, orders have gone out to prevent hoarding of grain.

The government sector has historically seen huge over-employment during the Congress government and UPA years that followed a ruinous Socialist policy bent on redistributing wealth, but succeeding only in redistributing poverty. This resulted in massive inefficiencies and a bloated salary bill.

Industry was locked up under the Licence-Permit Raj, inflation was sometimes in double digits, GDP was quite tiny, with failing grades of growth at 1 or 2 percent per annum. Even in 2013, India was called a fragile economy, one of the ‘fragile five’, by the IMF and World Bank, and it is now cited as a ‘beacon of light’.

Those in the Opposition that cry out for greater government employment to fill what they call ‘empty seats’ in 2023, refuse to take this fiscal responsibility into account. They also promote the ‘freebie’ culture with scant respect for the effect it has on the balancing of revenue and expenditure to the maximum extent possible.

The latest populist hue and cry was raised with regard to the rapidly modernising railways, when the Balasore accident took place in Odisha. The accusation was that the Indian Railways is deliberately understaffed under the Modi government. However, it was probably intentional sabotage per the investigating agencies that resulted in the three train crash.

It must be noted that the Indian Railways, the main means of long-distance travel for the millions of poor and middle-class people, has come a long way in the past nine years. It was in a situation of near collapse in 2014. The Indian Railway network is not only transformed in scope now, expanded, electrified, and modernised, but it is also beginning to become profitable. Wagons and engines manufactured in India are being exported all over the world.

The total employed Indian workforce in the December 2022 quarter stood at 440.3 million with 11 million people entering the ranks of the employed. However, because of a fall in labour demand, 51% of this, or 5.6 million people were laid off, taking the total of the unemployed (but able and willing) to 36.1 million. The figures at the end of March 2023 are somewhat less robust.

These statistics are as per the Centre for Monitoring Indian Economy (CMIE). They are by no means comprehensive, and reflect only the data captured by them. Indian statistics are not only unreliable but chronically back-dated.

There is much urging to become self-employed and entrepreneurial on the part of the Modi government, so that such people who start and grow enterprises can themselves become employers. The number of the self-employed stood at  a modest but not inconsiderable 333 million in 2021. Have the Start Ups and grassroots enterprises become employment powerhouses in the last nine years? Not quite, but several, notably, have sprouted and survived.

The real problem for the world’s most populous country with 1.42 billion people, is that India’s number of employed is not rising in the context of its increasing working-age population. According to CMIE chief Mahesh Vyas, India’s workforce has not grown from a little over 400 million in the last five years. Only 40% of those age 15 years or above present themselves for work. The other 60% prefer to continue as dependents. This latter fact raises a plethora of questions too.

Earlier, it was common belief that the agriculture sector, that accounted for 18.3 % of GDP in 2022-23, absorbed 60% of the labour. But with increased mechanisation,(every benefit brings its own problems), and smaller holdings of land, many of the landless are either under-employed, providing services in the rural sector, or going off to the city in search of work.

In the cities, which now include not just the megapolises and metros, but B and C category large towns, the biggest employer of this migrant labour was, and still is, the housing and office construction sector. This sector constitutes about 8.2% GDP or Rs. 670,778 crores (US$131 billion), at factor cost 2011-12. The sector is expected to reach $1.4 trillion by 2025. It works across 250 sub-sectors from sanitary-ware to steel, cement, tiles and so on with linkages across sectors.

It could contribute much more, given the near endless demand, and with government encouragement. The construction sector, albeit in a smaller economy, was booming in 2011-12, before the Modi government cracked down on black money.  But it seems to be powering on once more. With dynamic shares of the GDP for all sectors, $1.4 trillion probably represents about 15%, but how much of infrastructure is included in the figure?

A second factor for its relative stagnation was frequent shut downs caused by a ban on construction in this labour-intensive sector due to dust pollution concerns. This also affected the relentless infrastructure development, but to a lesser extent, as it is mainly government led, and it can’t be bullied as easily.

But the stop-start nature of this pollution monitoring intervention adversely affected the migrant labour population working on the housing and offices, and dependent mainly on daily wages.

Most manufacturing today, that accounts for 16% of the employment figures, is also heavily mechanised and uses fewer people. As more and more companies are diversifying their manufacturing away from China, India has been registering a growth in manufacturing and consequent employment. This often also involves the MSME sector as outside suppliers. It also means more foreign direct investment (FDI), and more foreign exchange reserves currently reckoned at $ 595 billion.

The government’s thrust on Aatmanirbhar in defence and other manufacturing has also resulted in new employment opportunities. There is a concerted effort to take up the contribution of the manufacturing sector, at 13.98% in 2021, and 17% in 2022, to 25% of GDP by 2030. The GDP itself should be in the region of $ 10 trillion by then.

This is contrasted with the $ 3.75 trillion GDP today, putting India as the 5^th largest major economy in the world. The per capita income of Indians, very low because of the gargantuan population, though doubled recently, is also expected nevertheless to double once again by 2030.

By then India will have become the third largest major economy in the world, any time after 2028.

At present the biggest share of GDP is represented by the service economy at over 50%, and this sector also employs 23% of the working population.  

If the goal is zero percent unemployment it can come only via an expansion off practically every sector of the economy. With the use of Artificial Intelligence (AI) it should be possible to capture statistics in real-time in due course, a lacuna that has plagued our planners, working, almost always with faulty data.

Education and Healthcare must play a stellar role in the quality of the workforce which must be properly skilled and energetic in order to deliver the correct level of productivity.

While more and more women are joining the workforce, including aviation and the military, this trend needs to grow exponentially, so that a good half of the population can contribute their energy and talent. This towards the national objective of becoming and staying a developed country, despite our massive numbers in population.

It is turning the population to advantage, as we go towards 1.70 billion people, before beginning to decline in numbers post 2050, that will determine our future destiny. The fact that we shall have a young population between the ages of 15 and 35 till then, puts us at a basic advantage to China, Japan and the West, who all have ageing populations, and in most cases, declining numbers due to negative birth rates.

It is true that the absolute unemployment figures are in excess of 20% now even as most statistics narrow down the field to obscure this stark fact.

But, with the kind of effort being put in to transform and create new infrastructure including dedicated freight corridors in the Railways, Vande Bharat and Bullet trains, many new and other expanded airports, waterways, highways, ports - not only will the logistic costs come down to half, at about 7%, under the government’s Gati Shakti programme, but exports will continue to grow exponentially, creating yet another dynamic employment head.

It was reported at 21.4% of GDP in 2021, according to the World Bank, which is already fairly impressive. It is expected to touch $1.6 trillion in fiscal 2022 before dipping in 2023 due to depressed foreign economies. India’s export basket is now fairly diversified and includes services and machinery apart from agricultural exports. That the export figure is over 40% of GDP is noteworthy.

In terms of the crucial 2024 general election, the considerable and persistent unemployment around the country made up of those seeking jobs actively and others just loitering around looking for trouble, will be used as a potent Opposition plank. But the growth of sectors in trillions of dollars and the upward trajectory in employment will help.

Unlike the holistic approach taken by the Modi government towards all-round development of the economy, the Leftist approach would quite happily sacrifice growth for votes and blatantly bribe the citizen.

Fortunately, the Opposition is far from united. It may have a weapon in current absolute unemployment numbers, which it attempts to assuage with   promises, mostly unkept, of cash doles.

The Modi government has been big on welfare of a productive nature, such as housing and housing loans, gas and water connections, toilets, free rations, rural roads and infrastructure, electricity, direct benefits via bank accounts and Aadhar.

So, sowing disaffection on unemployment is unlikely to be enough to carry the Opposition into power.

(1,796 words)

June 14^th, 2023

For: Firstpost/News18.com

Gautam Mukherjee