An inclusive India would be one where good jobs are available to all people everywhere.The Indian economy’s employment elasticity has been declining in the last few years.
Prime Minister declared his vision for a “New India” in his victory speech after sweeping the Uttar Pradesh elections. “The poor want a leg-up, not a handout,” he said. A few days earlier, a national newspaper summarized what its journalists had gathered from citizens at election rallies. It reported this on its front page in the plea of a Dalit woman. “Give my husband a job: I don’t want LPG,” she said.
Jobs and livelihoods are what people want. Considering the huge population of the young that India has—the largest in the world—India should also be generating more jobs than other countries. But the Indian economy is a laggard in job creation despite good GDP (gross domestic product) growth. India’s rate of job creation is only two-thirds of the global average. Moreover, the employment elasticity of the Indian economy—the numbers of jobs it creates with economic growth—has been declining in the last few years. Modi must pull the aeroplane out of a nose-dive to lead the country to a vision of an inclusive India, where good jobs are available to all people everywhere, including Dalit men and women in the backwaters of India’s heartland.
Two recent reports, both produced jointly by the Confederation of Indian Industry and Boston Consulting Group, have analysed the reasons for low job creation and suggested how more jobs can be generated.
One, “India: Growth And Jobs In The New Globalization”, looks at global forces that are creating unemployment and increasing inequality around the world. “Capitalization” of production systems, with increasing automation, is reducing jobs for workers, and producing more wealth for owners of capital than for workers in production systems. “Financializing” of economies, with even more money being made from purely financial assets, has turbo-charged the increase in inequalities in incomes and wealth around the world. The report also points out that “Industry 4.0” automation technologies, more flexible, and less dependent on labour, are enabling production systems to be localized within developed countries’ markets. Combined with the pressure on governments everywhere to generate more jobs within their own countries, production systems are likely to become more local and less globally interconnected than they have been in the past 20 years.
Each country must develop its own job-creation strategies with the participation of domestic stakeholders because, while technology is universal across countries, social and economic conditions vary. The other report, “Future Of Jobs In India, Enterprises And Livelihoods”, is focused on India, and was prepared with the participation of over 170 diverse organizations and persons. It takes a broad systems’ view of the process of job creation, including societal forces that will make technology adapt to societal needs.
Both reports recommend strategies for:
(1) strengthening clusters and networks of small enterprises which can create more widespread employment and with less capital investment than large factories;
(2) developing life-long learning systems that will enable people to learn new skills “just-in-time” when the content of their work changes, which it will often in future when new technologies are applied and new industries emerge;
(3) re-framing labour law reform from a paradigm of more flexibility to “hire and fire” to a paradigm of better social security systems, without which societies will not allow employers more freedom to shape contracts with those who work in their enterprises (which Uber, for example, is discovering in many countries); and
(4) providing easier access to finance for micro-enterprises. Both reports also highlight the Brahma face of technology as a creator of jobs, while recognizing its Shiva face of a destroyer of jobs at the same time.
A youthful country of 1.2 billion people, with the largest number of employment seekers in the world, must create more jobs in many sectors. It must pursue more growth in manufacturing and build infrastructure.
It must vigorously pursue other avenues too. India has a large growth opportunity in natural produce sectors—food, fruits, vegetables, dairy, poultry and fish.
Rural and urban economies support each other through natural produce supply chains. Natural produce enterprises can generate jobs around the country. India has enormous and diverse assets of natural beauty, heritage and culture, spread across all its states.
Therefore, another sector where India has huge, insufficiently tapped potential for widespread generation of livelihoods is tourism and hospitality. Some other sectors with large potential for more enterprises and sources of livelihoods around the country are healthcare, renewable energy, water and sanitation.
A vision of a “new India”, with widespread opportunities for “a leg-up” for all, requires a coordinated, “whole of government” approach to policy reforms which are explained in the second report. It highlights that job creation must become an overarching goal for government along with economic growth, which it has not been so far.
Plans at all levels of government—at the Centre, in the states, and in cities—must be directed towards creating ecosystems that generate better livelihoods and jobs, and progress must be measured accordingly.
Finally, since jobs emerge from a healthy jobs ecosystem and cannot be sprinkled into the economy from above, many stakeholder groups must participate in systematic processes at the Central, state and city levels for finding and implementing solutions together.
Receive Daily Updates
Recent Posts
Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.