Three years into his office at 7 Race Course Road (now renamed a ponderous Lok Kalyan Marg) Narendra Modi has decimated his political rivals, to the point that some among the demoralized Opposition have abandoned all hopes of stopping him in 2019 and are instead gearing up for 2024.
And yet, instead of being the platform for a quantum leap into the future, this so-called "demographic dividend" is pulling India down because there are no jobs. Leave alone enough better and good quality jobs, there are simply no jobs for a million youth who join India's workforce each year.
This may sound alarmist but the truth is, things are about to go out of control. India is growing at a fast clip. In fact, it is the world's fastest-growing economy but the growth is essentially jobless. The crisis, which has not been tackled by adequate policy changes and display of political resolve, has been a long time coming. It may be unfair to blame Modi for it but as the prime minister, the onus of creating jobs falls largely (not entirely) on his shoulders.
Romesh Wadhwani, chairman of the Wadhwani Foundation recently wrote in Times of India: "Between 2005 and 2012, India’s GDP growth was 54% but its net job growth was only 3%. There were only about 15 million net new jobs. This giant disconnect will worsen in the coming decade. Assuming 7-8% annual growth, 2025 will see GDP double. India will add over 80 million net new job seekers. But at current rates only 30 million net new jobs – mostly informal, and low-wage ones – will be created. India should therefore prioritise policies that link GDP growth with job growth."
To complicate our problem, global advisory firm McKinsey & Company reckons in a report presented in February that within the next three years, nearly half of India's IT workforce will become "irrelevant" unless they are retrained on an urgent basis.
If 50% to 60% of the 3.9 million white collar workers in India's $150 billion IT services industry become obsolete overnight, that should be enough to rob any government of its sleep.
Creation of jobs was one of the key tenets that propelled Modi to power in 2014. Sure enough, surveys indicate that it remains the key concern among the youth who are otherwise still positively inclined towards Modi. Worringly for the prime minister, the mutters around unemployment are growing and it won't be long before this has a political fallout.
A recent survey coinciding with Modi's three years in power, conducted by LocalCircles via 2,00,000 votes collated from over 200 places including Tier-1 (42%), Tier-2 (28% ), Tier-3 cities and rural areas (30%) indicates that 61 percent of people are still happy with the Modi sarkar. However, in a stunning indicator of the magnitude of the problem, there has been a 20 percent rise in the number of people who are unhappy with the government's efforts at creating jobs.
The survey, conducted among participants with an average age of 32, finds that while 43% of people accused the government of not doing enough on employment front, that number has zoomed to 63% this year.
The government has acknowledged that there has been a rise in unemployment, but its data hides more than it reveals. It told the Rajya Sabha during this year's budget session that overall unemployment has risen to five percent. This is in accordance with the Labour Bureau data released in September 2016 but experts have pointed out that the actual number of unemployed is much higher.
In his book India's Big Government, excerpts of which were carried with permission by Firstpost, author Vivek Kaul points out why the unemployment figures based on Labour Bureau's Usual Principal Status (UPS) method and Usual Principal and Subsidiary Status (UPSS) serve more to hide the real unemployment numbers than reveal those.
Parsing the data, Kaul writes: "Only 60.6% percent of the individuals who were available for work all through the year were able to get work for the entire year. In rural areas, this figure was at 52.7 percent. This basically means that close to half of rural India cannot find work for all 12 months of the year." According to his diagnosis, "India's main problems when it comes to unemployment are the lack of regular work and formal jobs."
Kaul's estimates are echoed by the Organization for Economic Co-operation and Development (OECD), a 35-member intergovernmental economic organisation, established in 1961, which promotes policies on democracy and market economy. In its February 2017 Economic Surveys India report, the global body marked four crucial areas which India must immediately address to reverse the dire trend in jobs: Better data to reveal real unemployment figures, skilling up the youth and making them ready for the market, investing more in key sectors such as education and most importantly, fixing the archaic labour laws.
The survey points to a strange mismatch in India between employers, who are suffering due to lack of skills shortages in several areas such as information and communication technology (ICT), financial services, tourism, retail and skill-intensive manufacturing and youth who are suffering from unemployment simply because they don't have enough skills for the jobs on offer. So while the education system churns out graduates by the millions, most of these youths are largely unemployable.
The OECD report states that unless India makes its labour laws more flexible and equal, the labour market performance will continue to drag down the markers. It reads: "Promoting quality employment and reducing both labour informality and income inequality would require introducing a simpler and more flexible labour law which does not discriminate by size of enterprise, gender or job contract."
The report acknowledges government's effort in "regroup(ing) the multitude of labour laws into four Codes, to loosen employment protection legislation which requires firms to get government’s approval for firing even one employee and to remove restrictions on working women" but also notes that "these proposals have met considerable resistance."
So the path for Modi government is clear. It must a) Fix the labour laws; b) Skill up the youth; c) Invest more on education to bridge gap between degrees and employability and d) Work on providing reliable data.
To these ends, the Modi government has already taken some steps. It has, according to recent media reports, formed a task force headed by NITI Aayog vice-chairman Arvind Panagariya to work on a methodology to generate timely and reliable employment data that may replace obsolete and inaccurate statistics. Livemint has reported this to be a project "personally initiated by Modi".
It has also undertaken several programmes such as Skill India Mission and self-employment schemes such as Stand Up India. The 2015 National Skill Development and Entrepreneurship programme hopes to train 500 million people by 2022.
Bandaru Dattatreya, the Union minister for Labour and Employment, said recently that government will create 50 million jobs by 2020 through a combination of procedures such as digital solutions and job fairs.
Unless the labour law is fixed, these plans extremely ambitious. Here, the government has already faced and is likely to face stiff headwinds not just from the Opposition but even from within its own trade wing. The Bharatiya Mazdoor Sangh, RSS's trade arm, has been at loggerheads with the government and forced it recently to rescind several steps such as taxing Employees Provident Fund. This has created considerable areas of internal friction.
Writing in Business Standard, TN Ninan has forecast bigger troubles ahead for the government if it fails to carry the Opposition through in reforming labour laws on a priority basis. The proposed changes, writes Ninan, "are what the doctor ordered: offering flexibility in operations to the smaller companies, better compensation for the retrenched, a more representative character for trade unions, and a new framework for minimum wages. The proposals have been in the works for the best part of two years, and found brief mention in Arun Jaitley’s Budget speech this year. But the Congress has already declared its opposition. We should be prepared for a parliamentary battle in which the regional parties might become the swing factor."
To sum up, Modi's toughest job will require vision, adequate policy changes and strict adherence to deadlines. Additionally, he must fall back on his considerable political talent to convince the Opposition that obstructing labour laws will have a domino effect on India's job market and create a crisis that cannot be mitigated.
For India's sake, let's hope Modi succeeds.
Published Date: May 16, 2017 18:25 PM | Updated Date: May 16, 2017 18:25 PM