A closer look at the economy at large throws up numbers which suggest that while there may be a slowdown in employment generation, there is no job crisis at the moment.
Lets see what the statistics say-
-In 2011, there were 273 million agriculture workers. The total size of the workforce was about 481 million. Essentially, about 56 per cent of our workforce is in agriculture. While this is coming down, it is likely that some 2-3 million new workers enter the agriculture workforce every year (extrapolated from previous growth numbers).
-Medium and small scale enterprises (MSMEs) alone employ 81 million people (data is old). In 2014-15 alone, the Prime Minister’s Employment Generation Programme (PMEGP) alone is said to have generated 3,57,000 new jobs.
-The number that mainstream media quotes from is the 8 sectors that together employ only 20 million people. These are from units which have more than 10 employees and cover the following sectors – manufacturing, construction, trade, transport, restaurant, IT/BPO, education and healthcare. The number excludes household workers, financial services, mining and of course MSMEs. In sum the headline survey quoted by everybody covers only 4 per cent of India’s workforce.
-If one subtracts agriculture workers and large companies (those covered in the survey), there are about 188 milion workers. Assuming 1.5 per cent growth of employment in these segments (larger companies are at 1 per cent), it adds upto about 3 million workers.
-When you add up all the above, you arrive at a net employment figure of 6 million a year. Add retirement replacements and you can add 2.5 million more workers. That comes to about 8.5 million. That leaves you with 4.5 million unemployed every year or about 18 per cent given that only 13 million are looking for a job every year (low workforce participation in India).
-Now, over the last 10 years, average household wealth has gone up substantially. For example in 2010, the total rural deposits was about Rs 4,22,000 crores. In 6 years this has tripled to Rs 11,46,091 crores. The number of households meanwhile may have gone up by only 15 per cent. This translates to an average household deposit of about Rs 24,000 going upto to Rs 57,000 in just 6 years (back of paper calculations). The cost of land and other wealth too has gone up quite a bit. This increase in cash wealth in rural India alone suggests that households have much higher capabilities in supporting unemployed youth than before.
-In 2017-18, India will spend about Rs 1,50,000 crores on subsidized food. This amount was about Rs 60000 crores in 2010. This translates to Rs 25,000 per poor household per annum. So, if you add increased wealth at one level and access to low cost food at another level, households are much better protected than ever before.
Some of the numbers above are not perfect but it helps to make the larger argument that the headline statistics cover only 4 per cent of workers, the rest 96 per cent of the employers are likely absorbing large number of employees. Also notable is the fact that 2-3 million people retire every year and their replacements are not counted anywhere. Add more wealth and access to inexpensive food and in sum total you have a problem that is less pronounced than before.
It is not to suggest that there is no slowdown in employment, this is only to say why there is no song and dance about it amongst general public at this moment.
One issue in particular is thorny though, the large number of engineering graduates who are likely to be unemployed over the next two years. Meanwhile, the government can only hope that the economic recovery is complete and many more jobs are created to hire this bulging group of unemployed Indians. Nevertheless the trouble is not far away.
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.