Decoding Slow Economic Growth And Unemployment
In a major setback to Prime Minister Narendra Modi’s central government, the Finance Ministry has said that India’s economy is likely to witness slowing growth, however, higher than the other emerging players.
Experts in the past said that when the economy grows slowly, unemployment rises, but not always. For instance — during 2010-13 the United Kingdom (UK) witnessed a slow rate of economic growth, however, unexpectedly unemployment fell.
In India, as per the Periodic Labour Force Survey (PLFS) for 2020-21, the unemployment rate saw a decline of 0.6 per cent and fell to 4.2 per cent in 2020-21, compared with 4.8 per cent in 2019-20. Can we say is the drop enough? Currently, critics of PM Modi’s policies are asking questions about why the world’s fastest-growing economy is not generating enough jobs.
“Though it is inspiring that India’s unemployment rate fell to 4.2 per cent in 2020-21 despite the challenges faced by the Indian economy in terms of two waves of the pandemic, which impacted millions of workers, the drop could have been much more significant. The government has taken various structural and policy-oriented reforms during this time period which directly or indirectly aimed at creating employment opportunities in the country, ” said Pardeep Multani, President, PHD Chamber of Commerce and Industry (PHDCCI).
Considering the statistics, there will be a significant improvement in employment in the country in coming times and government policies will contribute to providing employment opportunities to people, experts believe.
As India is celebrating 75 years of independence, central and state governments have introduced several initiatives in terms of technology, work methodologies, work-sphere facilities and the nature of works, among others.
To provide employment to the public, the centre has invested in schemes like Aatmanirbhar Bharat Rojgar Yojana (ABRY), Pradhan Mantri Mudra Yojana (PMMY), Prime Minister’s Employment Generation Programme (PMEGP), Garib Kalyan Rojgar Abhiyan (GKRA), Prime Minister Street Vendor’s Atmanirbhar Nidhi (PM SVANidhi) Scheme, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pradhan Mantri Rojgar Protsahan Yojana (PMRPY).
“We definitely need more jobs to be created. Our major jobs in the organised sector till date have been in the tech sectors driven by IT in the last couple of decades, and in a couple of other sectors where startups have flourished, such as edtech. But many sectors have lost jobs to the pandemic and its aftershocks, and are yet to recover fully,” Rajendra Nargundkar, Director, Shri Vile Parle Kelavani Mandal (SVKM’s) Narsee Monjee Institute of Management Studies (NMIMS), Bengaluru.
The government’s monthly economic report for May 2022 mentioned that introduction of the Production Linked Incentive (PLI) scheme, enhancement of renewable sources of energy, less dependence on crude oil import and boosting of the financial sector are going to drive economic growth.
Production Linked Incentive scheme (PLI) in the manufacturing sector is a good initiative by the government. Now bureaucrats have to “Walk the Talk” and supervise the grass-root level implementation,” said Sharad Chandra Shukla, Director, Mehta Equities.
Shukla, however, added the employment rate is directly linked to economic growth. Technology adoption leads to job losses but alternative jobs get created due to the “trickle-down effect”. With over 100 unicorns created in the last decade leading several 1st generations of USD millionaires. The promoters and their employees holding ESOP benefitted and in turn increased the need for support staff for themselves and their family members.
Growth and jobs:
Experts have pointed out that Covid-19 has changed the dynamics of the job creation and employment scenario in India. The country witnessed a shift in the demand for skills by the industry which has resulted in enhanced requirements for a skilled and trained workforce.
“The types of jobs will keep evolving with technology and innovation. Skilling needs to be done accordingly. The term “good jobs” is very subjective. It is about what one wants to do and is skilled to do,” said Sidharth Agarwal, Director, Spectrum Talent Management while talking about the correlation between growth and jobs was a mismatch between skills and good jobs.
Presently, the main objective of the government is to provide employment and increase the employability of the growing young workforce in India.
The drop is not enough
Talking about the Periodic Labour Force Survey (PLFS), Smiti Bhatt Deorah, Co-founder and COO, Advantage Club said that this is a drastic reduction from the 10 per cent in 2011. The report justifies the theory of large-scale reverse migration and job losses during the pandemic.
“No, this is not enough. And the government has introduced new schemes, policies and projects to further improve the employment scenario country-wide. The job market is also rapidly changing and we need to focus more on creating more employment opportunities along with upskilling initiatives to further decrease the drop,” said Deorah.
If the drop in poverty rate number is to be taken as an appropriate methodology used by authors in World Bank papers then a 10 per cent drop is a big achievement for India in a decade full of challenging years, added Mehta Equities’ Shukla.
“No, the drop is not enough. We are expecting the demand of the workforce to rise steeply, and with the number of skilling projects currently, this number will surely reduce,” said Agarwal.
Major question
Highly populous India is going through economic reforms, setbacks and gains under PM Modi’s rule. Indian exports are at record highs, it is getting recognition on the international level (few misses like Prophet row), however, one question remains — how the country is faring as far as providing employment to its people.
While talking about why the world’s fastest-growing economy is not generating enough jobs, both Agarwal and Deorah disagreed and said that jobs are available, and willingness to be skilled is what is lacking. We have a lot of skilled talent available for managerial roles. The skill needs to be in correlation with the availability of jobs.
Experts expressed hope for Modi’s development policies like the announcement to hire a million people in the next 18 months. We need to work on upskilling and reskilling our workforce to bridge the gaps in the job market, the industry leaders mentioned.
Also, schemes such as PLI, development of renewable sources of energy, boosting of the financial sector and additional spending on infrastructure will create employment, experts said.
However, Shukla said, “We still have a long way to go in the manufacturing sector. The dream of becoming the global manufacturing HUB is yet to come true. As we can see that the pace of reforms has been slow (not as per the expectation of manufacturers) on several fronts. Just to state a few labour reforms or for example reforms for improving the environment for ease of doing business.”
Job opportunities
To move forward, the government can develop a focused and sector-based policy approach to identify job opportunities. We need to raise education standards to equip young people to be able to take up jobs. And most importantly we need to assist unemployed people to acquire employability skills in order to find jobs, said Deorah
“Awareness, and then skilling. The education and training need to be in fields where there is a shortage. The government has taken excellent steps towards this which will yield results very soon,” said Agarwal.
Notably, the Indian economy witnessed a growth of 4.1 per cent in the quarter that ended 31 March. For the entire year, it expanded by 8.7 per cent, slower than the centre’s second advance estimate of 8.9 per cent.
Meanwhile, RBI retained the real gross and domestic product (GDP) forecast for the financial year (FY) 2023 at 7.2 per cent.
Resource : businessworld.in