December , 2017
Jobless India: An Investigation
13:30 pm

R S Bawa and Rajiv Khosla

Joblessness in India is assuming dangerous dimensions and politicians are busy debating upon the number of actually unemployed persons in the country. There's no serious endeavour  to curb joblessness. The economy is already facing a slowdown and the GDP has nose-dived by 3.5% in just six quarters, from 9.2% in January-March 2016 to 5.7% in April-June 2017. Institutions like the RBI and the IMF have altered their growth projections for India and revised them from nearly 7.5% to 6.8% and 6.7%, respectively for the year 2017-18.

Lack of investment

Economists lament lack of investment as the raison d'être for this slow phase. Pertinently, investment (gross fixed capital formation) as a proportion of GDP dropped from 30.4% in 2014-15 to 27.1% in 2016-17. On the other hand, investors deem inadequate returns on invested capital along with low bank lending and infrastructural constraints as the basis for this remorseful condition. In order to douse the fire, government resorted to transitory measures like cut in excise duty on petrol and diesel, reduction in GST, decrease in repo rate, recapitalisation and others.

The corporate sector is making its own efforts to maintain the financial health in balance sheets by capitulating on mergers, takeovers, acquisitions etc. However, mergers and acquisitions are likely to accentuate the problem of unemployment. A study by Martin Conyon, Sourafel Girma, Steve Thompson and Peter Wright held in 2002 (published in the European Economic Review) highlighted that approximate job loss due to merger and acquisitions range from 8% (unrelated sectors) to 19% (similar industries).

If we analyse the Indian market in the communication sector (which employs 2.2 million workers directly and 1.8 million indirectly), major mergers like Idea and Vodafone, Airtel-Telenor and Tata Teleservices are on the cards. Accordingly, it is feared that every merger may see a cut of around 15000-20000 employees from these companies. Already the joblessness is high due to the failure of demonetisation which did more harm than good to the employment set-up in the economy. Construction giants like Larsen and Toubro got compelled to sack 14000 employees that constituted 11.2% of their total working personnel in 2016. Foxconn, that makes devices for the leading mobile companies, asked 25% of its workers to leave in December 2016 due to cash crunch. The estimates are only for the formal jobs without taking any cognizance of the job loss in the informal economy. The new tax regime under the GST is actually turning out to be a tax net and harming the informal sector. It is leading to the shrinkage of economic activities in the informal sector due to longer locking up of funds for obtaining input tax credit and high administrative costs due to engagement of software and financial experts.

Jobless future

Automation and digitisation is also taking its toll on the job market. Indian banks, particularly in the private sector, are disgruntled by it. HDFC bank has reduced its workforce by about 11000 in past one year, Yes Bank in September this year trimmed down its 20851 strong workforce by nearly 12%
(2500 employees). Estimates by leading research agencies point that the IT sector is already heading towards nearly two lakh jobs losses per year atleast for the next three years. A deep insight into digitisation leads us to the conclusion that advancement in artificial intelligence may further intensify the unemployment problem.

Alleviating joblessness

We propose a two pronged strategy (for the short and long run) to contain the ongoing predicament. In the short run, the government instead of relying only on monetary measures should emphasize upon fiscal measures and need to step up public investment and revive growth. So far, efforts of the government seem to be oriented towards containing the fiscal deficit to 3.2% of GDP.

In the long run, government should develop a skilled manpower for stopping the demographic dividend to become demographic disaster. For this to happen, there is a need to develop a synergy between the organisations that are involved in skill development like NSDC, HRD Ministry, Ministry of Labour and Employment (MoLE), Labour Market Information System (LMIS), and Ministry of Skill Development and Entrepreneurship (MSDE). These institutions should assess the need for skills which will be in demand in the future. Identified skill sets need to be imbibed from the school level by making it a part of compulsory educational framework. It is because skilling the experienced people, when the technical change has already taken place, is like replacing the wheels of a car when it is moving at a speed of 100 mph. Hasty stop-gap schemes introduced and propagated through marketing gimmicks can woo the public and offer temporary redressal to the problem but cannot eliminate the problem from its roots. Schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY) bears a testimony to the statement which were introduced with much fanfare but could not sustain even for two years. The need of the hour is to move away from hollow sloganeering and rigorously design and implement policies that will help to postpone or end the intensifying calamitous situation.

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