India’s unemployment rate has been an issue of rising concern. A more or less healthy growth rate has stopped being accompanied by a proportionately healthy job creation rate. This trend of a “jobless growth rate” has worsened with the decreasing rate of job creation, which job growth in key sectors plummeting to eight-year lows in the past two years.
Coupled with the relentless expansion of India’s labour force and population, the scenario is a grave one and, if not addressed immediately, it could set the stage for prolonged social unrest and economic doldrums.
Unemployment and underemployment in India
In its annual household survey conducted by Labour Bureau, it is found that the country’s unemployment rate has risen up to a five-year high of 5% in 2015-16. Joblessness is gripping the Indian economy with each passing year.
The Labour Bureau had earlier measured unemployment stood at 4.9% in 2013-14, 4.7% in 2012-13 and 3.8% in 2011-12.
Among those unemployed, female job seekers are the worst hit as unemployment has sharply climbed to 8.7% , compared to 7.7% in 2013-14, according to the data from the Fifth Annual Employment-Unemployment Survey.
The unemployment rate in rural areas rose to 5.1% in 2015-16 from 4.7% in 2013-14, it declined to 4.9% from 5.5% in urban areas during the same period.
Presently, according to the Labour Bureau, under-employment is at a staggering 35%.
Under-employment is as big a problem as unemployment, if not a bigger problem. (The two are different: in simple terms, an unemployed person is one without a job or one who is actively seeking a job; an under-employed person is one who is working in a job where the worker’s skills are not fully utilised.)
To quote Arvind Panagariya, Vice Chairman of NITI Aayog:
“We should understand, while speaking of unemployment in the Indian context, that our problem is mainly of under-employment and not unemployment … Often you have two to three workers performing a task of one worker. This translates into low productivity and low wages. What we need to do is create high productivity jobs that would also mean creating jobs in the formal sector, especially in labour-intensive manufactures.”
A trend widely covered by scarcely addressed
This disastrous trend has been covered by economists and journalists in India and abroad for quite some time now. In May 2017, The Telegraph wrote,
“The big red blotch on the Narendra Modi government’s report card after three years in power is its dismal performance in job creation – and there are no indications that things will improve in the near future.”
In a scathing article, Adam Roberts wrote in The New York Times,
“Almost no new jobs have been created under Mr. Modi. In the late Singh years, economists say, at least 400,000 extra jobs were added yearly. In the last three years of Mr. Singh’s government, from 2011 to 2014, on average 579,000 extra jobs were added yearly in India … That was far too few, considering roughly one million people join the labor force every month. But under Mr. Modi the job-creation rate has fallen, in effect, to zero. Data for 2015, the latest year for which they are available, suggest that little more than 100,000 jobs were added to India’s economy.”
However, the warnings don’t seem to have being translated into policy by politicians. According to CMIE’s Consumer Pyramids Household Surveys (CPHS), about 1.5 million jobs were lost during January-April 2017. The loss of jobs continues, with a growing list of IT and other private sector companies adding to the citizens’ woes.
What does the Labour Bureau say?
According to a Labour Bureau report in May this year, the Indian economy was growing at around 7% per year while the jobs market grew by just 1.1% last year.
The reports vindicates a growing employment crisis, which the government needs to urgently address before it blows out of proportion.
The Labour Bureau carried out a survey covering eight key sectors of the non-farm economy. Job growth is tracked by a quarterly survey of over 10,000 units while unemployment is recorded in an annual survey of 7.8 lakh people.
Education and health are the most booming sectors: nearly half of all new jobs were added in these sectors. But both these sectors suffer from low wages.
Meanwhile, construction and hospitality/food sectors showed a loss of jobs, which amounted to a dip of nearly 7%, in the construction sector.
New visa restrictions and the global slowdown in IT services and components are thought to be behind the recent reports of several IT and BPO majors cutting jobs. These have added to the worries of the people, especially those in the middle-class.
This painful situation is being explained by several other indicators. In the past three years, gross credit given to industry has grown by just 6.7%. The index of industrial production has inched up by just 6% and in January this year, gross fixed capital formation growth slipped to a low 0.6% compared to 6.1% last year.
A total of only 2.3 lakh jobs were added to the sectors covered in the quarterly survey, which are manufacturing, construction, trade, transport, accommodation and restaurants, IT/BPO, education and health.
Automation and digital processes are one of the reasons behind the jobless growth, claims the same report.
Only 34% are working 6-11 months even though they were willing to work for 12 months and 61% of people in the workforce were found to have year-round jobs. The report also revealed that 68% households were earning only Rs 10,000 per month or less. In this manner, nearly 16 crore people in the workforce were under-employed.
India’s usually neglected aspect of unemployment crisis is of concealed unemployment and underemployment – not finding work for full year and working at very low wages. The Labour Bureau’s report on unemployment paints a dire picture of both fronts.
Job creation: Modi vs Manmohan
“The country has been dragged through 10 years of Jobless Growth by the Congress-led UPA Government,” the BJP had said in its manifesto for the 2014 general election, “Under the broader economic revival, BJP will accord high priority to job creation and opportunities for entrepreneurship.”
Furthermore, during an election rally in 2013, Prime Minister Narendra Modi had said, “If BJP comes to power, it will provide one crore jobs which the UPA Government could not do despite announcing it before the last Lok Sabha polls.” The then Gujarat Chief Minister said with 65 % of the Indian population below the age of 35, the youth, currently struggling with unemployment, can be galvanised into a force for the development of the country.
In the three years since his historic victory, the numbers are simply not in favour of the Modi government.
In 2014, which was the last year of the second UPA government under Prime Minister Manmohan Singh, 4,21,000 jobs were created in textiles, leather, metals, automobiles, gems and jewellery, transport, information technology and the handloom sectors together.
Whereas, in 2015, these sectors created 1,35,000 jobs – a 67% decline. Over 20,000 people lost their jobs in these sectors bin October-December last year, partly because of shrinking exports. The rate of job creation has only slackened in 2016 and 2017.
Job growth plummeted in key sectors to its lowest levels in eight years in 2015 and 2016 at 1.55 lakh and 2.31 lakh respectively compared with a high of over 10 lakh new jobs created in 2009 when the Manmohan Singh-led UPA was in office.
A disaster in the making
Though India has been tagged as the world’s fastest growing economy, it has failed to create enough job opportunities for the young force or what you might call it as ‘jobless growth’.
IndiaSpend reports that the country need to generate at least 280 million jobs between now and 2050, the year when the working-age population (15 to 64) will peak.
Some of the major problems Indian job market is facing are:
- In 2015, India added the fewest organised-sector jobs—in large companies and factories—in seven years across eight important industries.
- The proportion of jobs in the unorganised sector—without formal monthly payment or social security benefits—is set to rise to 93% in 2017.
- Rural wages are at a decadal low, as agriculture—which accounts for 47% of jobs—contracted 0.2% in 2014-15, growing 1% in 2015-16.
- As many as 60% of those with jobs do not find employment for the entire year, indicating widespread ‘under-employment’ and temporary jobs.
- The formation of companies has slowed to 2009 levels, and existing companies are growing at 2%, the lowest in five years.
- With large corporations and public-sector banks financially stressed, the average size of companies in India is reducing, at a time when well-organised large companies are central to creating jobs.
Automation the main culprit?
According to researchers, 4 out of 10 jobs globally would be lost to automation by 2021. Around the world, and particularly in developed countries, automation has precipitated an unemployment crisis, which has escalated due to economic stagnation and ageing populations.
The threats – and opportunities – of automation have become a major component of public debate in these countries. This is perhaps best exemplified in the recent French Presidential election where automation and unemployment was a major campaign issue or the comments by Bill Gates, who proposed taxing robots to slacken the pace of automation so that other forms of employment can be made for human workers.
In India, a country where the pace of job creation is insufficient to keep up with the pace of increase in labour force, automation has added to the woes of the jobs market. However, it may seem to the average Indian that automation is not yet a major threat to Indian jobs. This is a misconception, as increased automation – and the increased need for automation – has led to the increasing disruption of the economy by technology.
In fact, only in October 2016 World Bank President Jim Kim warned that as much as 69% of Indian jobs are threatened by automation. Without a concrete strategy to re-employ blue collar and white collar workers by the government, it will become invariable that the Indian economy will head into an unemployment crisis.
The above reports and findings suggest an escalating employment crisis. Practically speaking, with many affluent Indian companies laying off their workers and managers, this employment crisis may already be here.
The government needs to urgently address these issues before the situation blows out of proportion. It is critical that large-scale generation of employment occurs in the near future before more and more youths join the ranks of the jobless, losing their savings and their futures.
To do this, the government should encourage the creation of small- and medium-sized businesses, promote foreign direct investment in the retail sector, address the looming threat of non-performing assets (NPAs), champion more economic decentralisation in the 2017-2018 Budget, and engage in public-private partnerships (PPPs), especially when it comes to infrastructure projects.
At the top of all this, the government must present to the country a clear plan or blueprint on how it will diminish the threat posed by automation whilst bridging the wide gap that already exists between job creation and labour generation. This will be a delicate and crucial challenge, but it must be combated right now as it will only grow worse over time.