Unemployment on the rise, highest among OBCs: How is high growth benefiting poor?

According to a response (read here) by Minister of State for Planning, Rao Inderjit Singh in Parliament on Monday, the unemployment rate in the country is on the rise. The condition of people under the category of Other Backward Classes (OBC) is worse among the broader population. While the overall unemployment rate in the country is 5 percent, it is 5.2 percent for OBCs, the minister said.

To get a perspective, one needs to look at the historic numbers as well. The unemployment rate in the country was 4.9 percent in 2013, 4.7 percent in 2012 and 3.8 percent in 2011. As for the scheduled castes, the unemployment rate was 3.1 percent in 2011, which has now risen to 5 percent. That means, while there has been a steady increase in the number of jobless people since 2011, there has been a worrying, almost double, jump in the figures pertaining to the unemployment figures among the scheduled castes.

Budget_2015_Jobs3These figures are, or should be, an eye opener to the Narendra Modi-government which has economic development as its key agenda since 2014 general elections. It should introspect why despite the various pro-growth, pro-development schemes launched with catchy slogans (on skill development, entrepreneurship, women empowerment and investment promotion) in the first three years of its 5-year term, the number of unemployed people are still on the rise, in the case of backward population, at a frightening rate.

This is a serious problem in an aspiring economy since more number of unemployed people means a corresponding increase in the poverty levels, less cash to spend on goods and services and more dependence on the state-sponsored schemes (read subsidies) to survive. All this, in other words, means low economic activities, low demand leading to inventory pile up across industrial segments and muted industrial growth. Further, this will have cascading impacts on the larger economy in the form of lower tax collection, bank lending and higher chunk of impaired loans.

Besides the economic impact, unemployment-induced poverty levels would harm key social indicators. More number of people will fall victims to malnutrition and will be deprived access to basic education and healthcare. The irony is India’s economy may still grow at the fastest levels among major world economies on the paper, even beating China (which is, by the way, a stupid comparison) also aided by the likely improvement in tax collections. But the reality on the ground will still tell you that more number of poor people is getting alienated and deprived of the fruits of the so-called economic growth.

Unemployment in %
Social Groups 2nd  EUS (July,2011) 3rd EUS (October. 2012) 4th  EUS (December,2013) 5th EUS (August, 2016)
SCs 3.2 4.5 4.6 5.0
STs 2.6 3.6 4.5 4.4
Total 3.8 4.7 4.9 5.0

Source: Labour Bureau, M/o Labour and Employment (Usual Principal Status UPS approach).


‘Jobless growth’

The trend of ‘jobless GDP growth’ hasn’t changed much when one looks at the UPA years and subsequently the term of the Narendra Modi-administration. The main reason for the continuation of this trend isn’t hard to imagine—absence of fresh investments that could significantly ramp up the industrialisation and job-creation. This slowed the migration of rural India to service, manufacturing sector jobs from agriculture that has been traditionally the largest employer-segment in India. But, as a percentage of GDP, agriculture has been losing steam with the share declining to 16-17 percent now from 37.5 percent in March 1980, according to official data.

The Modi-government, despite its aggressive push for ‘Make in India’ and investments, has not yet managed to kick start the private investment cycle. Presently, the investment demand is at a five-year low. The growth in gross fixed capital formation in 2016-17 is in negative territory compared to that of 2015-16. The share of fixed capital formation as a percentage of GDP dropped from 31.2 percent in the last year to 29.1 percent in the current year.

Then comes note ban shock

Things in the job market deteriorated further with Modi announcing, on 8 November, his decision to pull out high value notes abruptly. This decision sent panic waves to the informal economy, where cash transactions continue to dominate. There have been major job losses since then. A study by All India Manufacturers’ Organisation (AIMO), said in the first 34 days since demonetisation, micro-small scale industries suffered 35 percent jobs losses and a 50 percent dip in revenue. The organisation, which claims membership of over 3 lakh micro, small scale, and medium and large scale companies operating in manufacturing and export segments, said (read here), nearly all industrial activities came to a standstill post note ban, with the Small and Medium-sized Enterprises (SMEs) hit hard by the note ban.

The even more worrying part is that in India the efficacy of job data to represent the actual picture is inadequate. For instance, the job data from informal sectors do not get reflected adequately in the employment data collated by the labour department. Similar is the case of outsourced labour. This means the actual unemployment could be even higher. “There is a persisting disconnect between the physical and monetary components of GDP,” said Madan Sabnavis, chief economist of rating agency, Care. “Unless physical production picks up, jobs won’t improve. The trend of jobless GDP growth in the country has always been and still remain as a concern. Demonetisation has added to the problem since most people in informal sector draw wages in cash,” Sabnavis said.

Arguably, the Modi-government still seems to be obsessed with the GDP figures while focus on actual job creation remains weak beyond rhetoric. Economic Affairs Secretary, Shaktikanta Das, recently reiterated that he is confident of achieving a 7 percent GDP growth next year. Das was defending the demonetisation impact, which has prompted both Indian and foreign agencies to sharply cut India's GDP growth estimates to 6.5-6.6 percent level this fiscal year from the earlier projections of over 7 percent. But, the point here is till the time the benefit of higher growth figures do not translate into the lives of common man, it doesn’t mean much for him.

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Updated Date: Feb 07, 2017 13:12:53 IST

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