The reasons for the rise in unemployment are many.
India seems to have the biggest pools of unemployed people in the world. The prospect of getting a job for those who are unemployed will be an important issue in the General Elections 2019. According to CMIE (Centre for Monitoring Indian Economy), unemployment rate in October in India rose to 6.9 per cent. The number of unemployed which fell to 14 million in 2017 is now at nearly 30 million. This leads one to wonder what is wrong with the economy which fail to absorb the unemployed.
The unemployed who want jobs and are willing to work are increasingly getting disappointed. This also has a grievous psychological impact on their minds which is manifesting itself in diverse ways. The unemployment rate has been rising almost steadily since last year. The estimated number of persons employed during 2018 was 397 million which is 2.4 per cent lower than 407 million employed in 2017. (India’s total work force was 487 million in 2012.)
The reasons for the rise in unemployment are many. One of the main reasons is that the Indian economy is not witnessing a sustained rate of high growth because investment is subdued and the manufacturing sector, which creates the maximum jobs, is growing at a snail’s pace. The Industrial Index of Production that includes manufacturing growth was at 4.2 per cent last month. The slowdown in industrial and infrastructure sectors, especially the construction sector, and the low volume of IT growth of exports have led to only 1.9 per cent year on year hiring.
It seems that jobs in both the private and public sectors are shrinking. Corporate India is hiring less because of slower than expected recovery. The growth of employee count of India Inc. has been the lowest in 2017-18 in the last 3 years. According to one report (Capitaline companies’ annual report), at the end of 2018, 3.5 million persons were employed by top 171 listed companies that are part of the BSE 200 index. They are mostly permanent employees as most companies don’t report those working on contractual work and those working as sub-contractors. Around 64,380 employees joined the rolls of these companies in the last fiscal year 2017-18, compared to 116,300 one year ago. In 2014, 183,707 employees were hired in these listed companies.
Around 6 out of 10 new corporate jobs were due to industrial hiring. But due to the slow growth in major industries in the last three years, the headcount has been up by only 0.5 per cent. Also non-banking finance companies and retail banks that were top job creators in the last three years are faced with the present liquidity crisis which will force them to hire less.
Regarding jobs in the public sector, Nitin Gadkari, the Union Minister of Road Transport and Highways, admitted that public sector jobs are frozen. In general, after liberalisation, the public sector has shrunk due to its withdrawal from many economic activities. Jobs in banks have shrunk due to IT. But preference for government jobs remains high at 82 per cent among rural youth. This is egging them on to seek reservation for new groups.
Millions of youth have applied for an online recruitment test conducted by the Indian railways. It received more than 24 million applications for roughly 120,000 vacancies. Even persons with PhDs are applying for low end government job vacancies. It shows the extent to which people are desperate for public sector jobs because of social security and higher minimum wages.
In the agricultural sector, young people wanting to leave farming and work in towns and cities are getting more and more disappointed. Around 16 per cent of educated youth are unemployed today. This is particularly severe in the northern States. They lack the skills to be employed in jobs that would provide a decent living wage. Women on the other hand have been unemployed in large numbers in rural areas because of the mechanisation of farming operations like sowing, weeding, winnowing and harvesting. More and more rural women are unemployed because in MNREGA, none of the States give women 100 days of work. Stagnation of real wages and the government’s inability to ensure timely and reliable wage payments is discouraging rural women to stay away from one of the biggest employment scheme.
In urban areas, women in secretarial jobs and other low paying jobs are losing out to automation. According to the World Bank, the use of automation in India will lead to the loss of 69 per cent of jobs in the future. Automation is responsible to a large extent to the jobless growth in India. The government has to encourage more labour intensive industries. Prime Minister Narendra Modi has been emphasising boosting self-employment and micro, small and medium scale enterprises (MSMEs) and has given various financial sops for their growth.
It is the informal sector that includes many MSMEs which finally absorbs people seeking jobs. But it has no social security and often has inhuman conditions of work. 94 per cent of job seekers are forced to work in the informal sector. The challenge, therefore, is to create an economy dominated by self-employed and small scale enterprises to a modern vibrant one so that more people can be employed in them.
This may improve the nature of employment which is a cause for concern. Two thirds of the workforce is employed in casual labour while only 17 per cent are working in organised sector as salary earners. According to the 5th National Employment-Unemployment Survey which was released in September 2016, only 60 per cent managed to work for a full year while 35 per cent worked only for 6 to 11 months. The job scene is thus unstable and informal in nature. Unfortunately, the National Employment-Unemployment Survey has been discontinued and now for reliable statistics, one will have to wait for the National Sample Survey Office to release the employment numbers in India in the future.
India also has mostly poor quality jobs and hence training is needed for people to get better jobs. Skill certification is needed as well as a focused industrial policy and a national employment policy. There is also need to foster domestic competition and protect domestic industries against foreign competition. This is necessary because many of our small scale industries have been destroyed by the huge influx of Chinese products. The government has to promote vigorous export promotion and undertake some import substitution.
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David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany
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