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Budget 2017: RaGa may be right, Jaitley's proposals unlikely to create enough jobs

Rahul Gandhi may have hit a raw nerve of the Modi government when he said on Wednesday that the Union Budget for 2017-18 does not propose any measures for job creation. The Congress vice-president, however, is only partly right. Some of the proposals in the Budget should spur manufacturing, which in turn should ideally spur job creation.

A cursory reading of Finance Minister Arun Jaitley's speech on Wednesday morning will show that he had devoted some time to the subject of job creation in rural areas and for the country’s youth. He also mentioned that a textile-industry kind of package would be developed for the leather and footwear sectors. This was a specific suggestion of the Economic Survey, presented in Parliament on Tuesday, and the FM seems to have acceded to his own Chief Economic Adviser by promising a package for this labour intensive sector.

Rahul Gandhi said that the Union Budget for 2017-18 does not propose any measures for job creation. PTI

Rahul Gandhi said that the Union Budget for 2017-18 does not propose any measures for job creation. PTI

But Rahul may not be entirely wrong: The measures in the Budget may not be enough to generate the jobs needed and the pace at which they are needed. For example, there is no mention in Jaitley's speech of an earlier suggestion on creating coastal employment zones, that would directly link tax incentives to job creation; though by offering incentives for electronics manufacturing, the FM may have created some new job opportunities.

Also, he has tried to ease the pain of demonetisation for MSMEs by reducing corporate tax for them – this could mean that some jobs lost due to demonetisation (this single decision impacted the Ministry of Micro, Small and Medium Enterprises sector severely) could be returning as the tax liability eases.

The focus on building rural roads under the Pradhan Mantri Gram Sadak Yojana and the increased allocation under rural jobs guarantee scheme Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) should help job creation. But still, all these are indirect measures to boost jobs; no one single direct measure has been outlined in this year's Budget.

Remember, two in three Indians are below 35-years-of age and about a million people enter the queue for employment every month – some estimates peg this number close to 1.5 million Indians seeking jobs every month. If India needs to tap the immense demographic potential of its youth, the FM cannot afford to ignore employment generation.

In a recent note to clients, ratings agency Crisil had noted that in the last three years, three sectors have grown way faster than the gross domestic product (GDP):

- Financial services, real estate and professional services.

- Public administration, defence, and community services

- Trade, hotels and restaurants.

“Of these, only the trade, hotels and restaurants sector is labour intensive, requiring about six workers to produce Rs one million worth of output. But its share in total output is low at approximately 12 percent. In contrast, other fast-growing sectors, despite having a larger share in output, have low labour intensity, of 2-3," Crisil noted.

"And sectors that have higher labour intensity – such as agriculture with 30, construction 13 and manufacturing 7 – have been undershooting overall GDP growth. Growing at 3-3.5 percent per year, agriculture is unlikely to become India’s growth engine. In fact, people need to be moved out of overcrowded agriculture to high growth and high productivity sectors.”

The simple point is this: Job creation will get a boost when the government spending is boosted in those sectors that are labour intensive – and as Crisil noted, agriculture (which employs a sizeable number of Indians even today) is unlikely to provide the required growth trajectory for employment in India in the near future.

According to earlier data released by the Labour Bureau, no new jobs were created but there was actually a decline of 20,000 jobs across eight labour intensive sectors in the December quarter of 2015.

An Indian Express report quotes Rahul saying that Jaitley made a “good speech”, but that job creation found no mention in the Budget. Well, the word ‘job’ itself came up six times in Jaitley's speech and ‘employment’ another 13 times.

Here are some excerpts from the FM's speech which emphasise on job creation:

- Pradhan Mantri Kaushal Kendras (PMKK) have already been promoted in more than 60 districts. We now propose to extend these Kendras to more than 600 districts across the country. Also, 100 India International Skills Centres will be established across the country. These centres would offer advanced training and also courses in foreign languages. This will help those of our youth who seek job opportunities outside the country.

- Metro rail is emerging as an important mode of urban transportation. A new Metro Rail Policy will be announced with a focus on innovating models of implementation and financing, as well as standardisation and indigenisation of hardware and software. This will open up new job opportunities for our youth.

- I have also proposed to increase the allocations for Deendayal Antyodaya Yojana (National Rural Livelihood Mission) for promotion of skill development and livelihood opportunities for people in rural areas to 4,500 in 2017-18. The allocation for Prime Minister's Employment Generation Programme (PMEGP) and credit support schemes has been increased more than three times.

- A special scheme for creating employment in the textile sector has already been launched. A similar scheme will be implemented for the leather and footwear industries.

- Tourism is a big employment generator and has a multiplier impact on the economy. Five Special Tourism Zones, anchored on SPVs, will be set up in partnership with the States.

Updated Date: Feb 01, 2017 16:32 PM

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