Job creation needs business-friendly policies

Story by  Sushma Ramachandran | Posted by  Aasha Khosa • 1 Years ago
Jobless youth protesting in Kolkata
Jobless youth protesting in Kolkata


 Sushma Ramachandran

Employment issues have been one of the biggest concerns for this country over the past few years. Finally, however, there seems to be some good news based on data from both government and private agencies. One can only hope that this is the beginning of a turnaround on the jobs front as till recently there have been fears that the country’s demographic dividend would not be utilized gainfully. Even though India has one of the world’s most youthful populations, this huge workforce has not been able to find enough jobs to meet its needs. And even though India remains the world’s fastest-growing economy, this has not been enough to speed up the pace of job creation.

But now data is showing that employment is not only growing but has been rising gradually even from the crucial pandemic year 2020-21.The periodic labour force survey for 2020-21 released by the Ministry of Statistics and Programme Implementation shows that the country’s unemployment rate fell to 4.2 percent from 4.8 percent in the previous year. It was 6.1 percent in 2017-18 and 5.8 percent in 2018-19. According to the report, even the labour force participation rate (LFPR) rose to 41.6 percent from 40.6 percent in the previous year. This has been on the back of a spurt in the female labour force participation to 25.1 percent from 22.8 percent in the previous year.

The official data comes even as the employment research agency, Centre for Monitoring Indian Economy (CMIE) has given possibly its most upbeat outlook on jobs ever since the pandemic began in 2020. Its studies show the unemployment rate has gone down from 7.83 percent in April to 7.12 percent in May. It notes that employment increased from 402.9 million in April to 404 million in May, making it the second consecutive month of an increase in employment. The rise in April, however, was larger at 7 million.

It may be too early to say that employment growth has become positive but there is an upward trend that could be deepened by government policies aimed at creating more jobs. It is in this context that one must consider the initiatives that have been launched recently on the jobs front. The critical one is the drive to open up a million government jobs simply by filling all the vacancies that currently exist in departments and ministries. It includes the Agnipath scheme – a four-year short service commission proposal for the armed forces. This alone is expected to create over 45000 jobs in the immediate future. It is, of course,  not just an employment creation programme but a measure of reform for the armed forces that have continued with the erstwhile colonial scheme of lifetime service ever since independence. This will undoubtedly bring the defence forces into the modern era and reduce the overall age of personnel. It will also help in reducing the enormous pension bill of the defence establishment.

State governments are following the centre’s lead in trying to fill up existing government vacancies. U.P. chief minister Yogi Adityanath, for instance has declared the intent to fill more than 40,000 posts in the state police department by the end of the year.

At the same time, these government-linked programmes are not the real solution to the longer-term employment crisis. First, it must be recognized that the needs of the economy in terms of jobs are far higher than even the entry of a million government positions. With youth entering the workforce annually in several million, this will be just a drop in the ocean. Second, the filling up of so many government vacancies is bound to lead to a sharp rise in revenue expenditure. Whether all the vacancies need to be filled is also a question that has to be asked, as this could also bring about a situation of excess manpower in the administration.

More effective solutions lie more in policies that have already been initiated by the government in terms of boosting expenditure on infrastructure growth. These seem to have yielded some dividends in recent months, going by the latest CMIE report. It comments that there has been a big shift in employment from agriculture to industry and services over the last two months. Jobs in agriculture declined by 5.2 million in April but industry added 5.5 million and service another 6.7 million, thus ensuring that net employment rose by 7 million during the month. Farm jobs fell further by 9.6 million in May but industry absorbed 10 million and services another 500,000. Net employment thus rose by about one million during the month.

The revival of industrial growth that has already been recorded in the recent indices of industrial production is reflected in the CMIE data for the last two months. Within the ambit of industries, the construction sector accounts for a much larger share of jobs than the manufacturing sector. The incremental jobs growth recorded during these months thus was more towards construction rather than manufacturing. Yet there has been a sizable increase in the latter sector with total employment in May reaching 34 million, the highest since the pandemic. This is, however, lower than the 40 million plus level reached in October – December 2019.

Jobs in the construction industry, on the other hand, touched a peak of 72 million jobs in May, which is the highest in a long time, according to the research agency. As for services, there was an incremental rise of about 7.2 million jobs over this period, lower than for industry.

Thus the focus should be on policies that make it easier for industry and services to operate efficiently and effectively in the country. The processes for setting up new units need to become much more investor-friendly. Currently, despite many efforts by the government to improve the ease of doing business, bureaucratic red tape continues to mire down existing systems. There is hope on the horizon, however, given the rapid rise of the start-up ecosystem. Small businesses that have the maximum employment potential need more support. The good news on the jobs front is likely to continue if this is done while ensuring that policies and procedures are made much more business-friendly.