Originally Published 2012-08-09 00:00:00 Published on Aug 09, 2012
President Barack Obama has to understand the Indian psyche before advising rapid economic reforms and realise that without adequate safety nets, open unemployment will be a scourge for India.
Figures don't reveal the real picture of unemployment
President Barack Obama’s warning to India about going slow on economic reforms and not opening up the economy anymore to foreign investment has not gone down well with the government. No sovereign state wants unsolicited advice from outside. According to many, the Indian economy is doing quite well as compared to the US. One indication is the number of the unemployed. There is 8 per cent unemployment in the US but in India, according to the latest government statistics, there is very little joblessness. As compared to Europe, India has much less unemployment. Spain, for example, is struggling with a high unemployment rate of around 25 per cent with around 50 per cent of its youth being without jobs. In Western countries, open unemployment is visible as young people can be seen in cafes spending the day, whiling away their time. They are not much worried about work because the state gives them hefty unemployment benefits.

In India, the last two years’ unemployment data was similar to that of the US and hovered between 6 and 9 per cent. As recently as in March 2012, Labour and Employment Minister Mallikarjun Kharge declared at a conference on "Innovation in Public Employment Programmes" in New Delhi that "despite global slowdown, India not only maintained its employment standards but also succeeded in reducing unemployment from 8.3 per cent in 2004-05 to 6.6 per cent in 2009-10". How is it possible that according to the latest Annual Survey of Employment and Unemployment by the Labour Bureau of India, the unemployment rate has suddenly plunged to 3.8 per cent for 2009-2010? Another survey (National Sample Survey Organisation) has declared that unemployment has been reduced to 2 per cent . Why is there a discrepancy between the two surveys?

In the years when India was growing at 8 to 9 per cent, it was widely acknowledged that the country was experiencing high GDP growth but it was jobless growth. This is because employment in the organised sector was growing slowly and it was only 1.9 per cent last year. In recent times educated young job-seekers have been increasingly frustrated in their search for employment because of the availability of very few openings in the corporate sector or the public sector. The recent data seems to deny all this and paints a picture of a robust economy in which jobs are growing rapidly.

But one wonders where and in which sectors are the extra jobs being generated? If industrial growth is plunging, exports are declining and agricultural growth is not encouraging and is below the target rate, in which areas are jobs being created? It could be the services sector but then the IT sector does not have so many new jobs either as outsourcing business is not growing rapidly due to problems in the Western countries who are its main clients.

According to the head of the Labour Bureau survey, however, the recent figures have been derived from a much bigger sample covering many more districts than the previous surveys. Moreover, the survey has been conducted across the country. The incredibly low unemployment figure, which almost indicates a full-employment economy, can only mean that people who are basically underemployed and are earning very little are not admitting that they are jobless. They may be having a part-time job or it is casual in nature, and they may have a place to go to and spend the day. When asked whether they have a job, they say that they are employed. The social stigma in India attached to being jobless is quite harsh and perhaps everyone who is actually jobless wants to claim that he or she is self-employed. The fact remains that they are underemployed.

Agriculture is a sector where the majority of the population is employed, but there is no doubt that under-employment and surplus labour exist in a big way. This is reflected in the low productivity per person in agriculture. With 52 per cent of the population engaged in agriculture, the contribution of agriculture is only 17 per cent to the GDP. Manufacturing industries are the biggest employers of semi-skilled labour, but manufacturing growth has been declining in recent months. In fact, if the manufacturing sector’s share in the GDP rose to 40 per cent as in China, many more jobs could be created.

Also, a semi-skilled person, when unable to get a job, often takes to small retailing or some other type of self-employment. No wonder, those with post-graduate degrees are more often unemployed than the less educated. A person with higher education will desist from selling small items on a footpath or take to vending goods from door to door than someone who is already poor and has to earn a living.

The data reveals all this - that only 15.6 per cent of the total workforce was in regular wage employment in 2009-10. According to the data, most people ( 51 per cent) were self-employed and 33.5 per cent were casual labour. Among casual labour, one must take into account those who find jobs for a certain period of the year under MGNREGA.

On the whole, the job data seems to give a wrong impression about the state of the economy because in actual life, doing farm work which is not needed or sitting in a shop with five other people is far from being productively employed. It only shows the special cultural milieu of India where being openly unemployed is not socially acceptable and families accommodate the jobless in their businesses or farms, however small they may be, to give the person some self worth and a sense of dignity. The data does not reflect the huge underemployment in the economy.

On the other hand, the data can boost our confidence that all is well with the economy and joblessness is not a big problem. In fact, if India does open up its retail sector, a large number of people (around 18 million) who are engaged in petty trading and retail would lose their livelihood as multinational companies would open their chain of stores all over the country. They would take over food and other types of retail business which will be heavily computerised and mechanised. Not only will the much-reviled middlemen lose their jobs but many other small retailers will also lose their livelihood. It is perhaps better to wait for the right time to open up the retail business. President Obama has to understand the Indian psyche before advising rapid economic reforms and realise that without adequate safety nets, open unemployment will be a scourge for India.

Courtesy: The Tribune
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David Rusnok

David Rusnok

David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany

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