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India – The job creation myth of PM Narendra Modi

Figures speak for themselves.

13 million enter the work force every year

and not  even a million jobs are being created.

In search of a job

  • The big gap: While about 13 million people will join the workforce every year, not even a million jobs are being created - Photo: Mohammed Yousuf
    BusinessLineThe big gap: While about 13 million people will join the workforce every year, not even a million jobs are being created – Photo: Mohammed Yousuf

Prime Minister Narendra Modi promised one crore jobs during the 2014 elections. At the present rate of job creation, this will take 30 years. Muthukumar K and Seetharaman R report on the employment crisis

Raj Abraham (name changed on request), a first-year student at a leading management institute in Chennai, is a bit anxious these days. Ask him how his seniors are faring in campus placement and the 22-year-old says: “The placement scenario has worsened over the last three years.” He is hopeful of a turnaround by the time his turn comes.

Raj will be among the 13 million youngsters who will join the Indian workforce next year. Over the next 10 years, 130 million more will — giving the economy an opportunity to reap the ‘demographic dividend.’ An expanding workforce will fuel the economy.

Well, yes, in theory.

The ground situation is different. Since the UPA-II Government, job creation has taken a beating. And it has worsened in the current regime, as indicated by the the quarterly survey (for eight industries) of the Ministry of Labour & Employment’s Labour Bureau. Under the leadership of Prime Minister Narendra Modi, 3.4 lakh jobs are being created a year, half of the rate in the UPA-II rule in 2009-2014. In the NDA Government’s three years in office, it seems it has achieved what UPA-II did in one year.

While textiles and IT & BPO sectors have fared better in the last three years, job creation in six other sectors – leather, automobile, gems and jewellery, transport, mining, and handloom and powerloom — was higher in the UPA-II years. Moreover, after the initial pick up in 2015, jobs in textiles are disappearing fast.

During the 2013 election rally in Agra, Modi had promised one crore jobs if elected to power. The BJP manifesto, while taking pot-shot at the 10 years of jobless growth (there was no increase in employment during the National Sample Survey Office period 1999-2000 and 2009-10) of the UPA regime, promised to plug the job deficit through development of labour-intensive manufacturing and promoting entrepreneurship.

Global economic meltdown, however, played spoilsport. Monthly exports have been down in 22 of the 33 months on year-on-year basis. Employment-intensive sectors of footwear and apparels have lost share in the international market over the last three years.

Bovine challenge

“We are losing orders to leather manufacturers in Pakistan and Bangladesh, who have abundant supply of good-quality hides and with their currencies quoting at a cheaper rate,” said Habib Hussain, a small-scale manufacturer based in Ambur, Tamil Nadu. While cow-slaughter is banned in most of the Indian states, hides of buffaloes are not a substitute for producing fine leather products like ladies bag or jackets.

“A cow’s skin texture is smooth and thin, making it ideal for fine leather articles,” says NR Jagannathan, an independent consultant in the leather industry. However, skin taken from emaciated dead cows is of poor quality, he says. Buffalo skin being thick, is typically used to make harder leather products like saddle covers.

In leading leather clusters like Kanpur, many tanneries are closing down after pressure from RSS and BJP karyakartas. Much of the impact has been on Dalits, who make up for most of the workers. in tanneries. According to 2011 Census data, unemployment rate among the Scheduled Castes was 18 per cent, as compared to 14 per cent for the general population.

Economic Survey 2016-17, an annual document released by the Ministry of Finance, recently highlighted the importance of leather and textiles sectors that provide plenty of jobs to low, and unskilled workers. With China exiting these sectors – due to increasing labour wages– India could grab the opportunity. However, the ugly truth is that the space vacated by China is being taken over by Bangladesh and Vietnam in case of apparels, and Vietnam and Indonesia in leather and footwear. “In both apparel and footwear sectors, tax and tariff policies are creating distortions that impede India gaining export competitiveness,” said the report.

Globally apparel is moving from cotton to synthetic (for instance, polyester). However, there is higher tariff (10 per cent) on yarn and fibre, which is man-made than that produced from cotton (6 per cent). Also, the Government has allocated just ₹1 lakh for the export promotion scheme (leather, accessories and footwear) in 2017-18, as compared with ₹25 crore in 2016-17 and ₹110 crore in 2015-16. The scheme helped promoting relevant technology and skilling the industry workforce.

Big is beautiful

Moreover, the common complaint is that the small manufacturers’ concerns are being given a short-shrift. Take for instance, the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), which was introduced in 2016 for textile (apparel) units to encourage recruitment. To give incentives to employers registered with EPFO for generating new employment, the Government of India was to pay 8.33 per cent of EPS contribution along with 3.67 percent of EPF contribution on behalf of the employer.


However, the Government is yet to keepits promise. “As on date, 160 units in Tirupur cluster have submitted the applications and the total number of employees recruited was 28,267,” says Raja M Shanmugham, President of Tirupur Exporters (of textiles) Association in the website of the industry body. These units are yet to get the reimbursement.

With global economy doing badly, the Centre looked inward to boost consumption and investment. And in Modi’s strategy, the private sector, especially the bigger companies, plays a crucial role.

“The model focussed on the large companies to kick-start investments (and generate employment) while those of the MSME (Micro, Small and Medium enterprises) were ignored,” says Jayati Ghosh, Professor of Economics at Jawaharlal Nehru University. This is despite the fact that MSMEs account for 45 per cent of the manufacturing output; and employs about 69 million people.

To be fair, the MSME financing – especially that of micro units – did get a leg up with the launch of the Pradhan Mantri Mudra Yojana in 2015. While in 2015-16, it exceeded targeted disbursements of ₹1,22,000 crore, most of the disbursement was done by micro-finance institutions (MFIs), instead of the banks. With NPA and balance sheet concerns looming large, says MS Sriram, visiting faculty, Centre for Public Policy, IIM Bangalore, banks might be more keen to work with bigger clients to keep a check on costs.

In November last year, demonetisation dealt a big blow to the MSME sector. “It’s a miracle that some of these units are still surviving,” says Jayati. Besides providing access to technology, credit and cheaper inputs to MSMEs, the Government has a role to play in establishing market linkages, improving product quality and innovation. Not much has been done, say industry players.

Low investment rates

While big industry houses in various investor summits promised mega investments, few have fructified. Since taking over from UPA-II (when the investment rate, calculated as gross domestic capital formation as a percentage of GDP, was 35.2 per cent) investment rate has been languishing at around 35 per cent in 2014-15 and 2015-16. Not surprisingly, job creation has suffered.

Though economists such as Jayati Ghosh have questioned the success of the PPP model, there is a reason why Modi wants to join hands with the private sector. The Government doesn’t have the wherewithal, given the falling tax-to-GDP ratio and the pressure to keep fiscal deficit in check.

The Government is banking on initiatives like Smart Cities and Start-up India to stimulate investment in urban markets, which are expected to create 70 per cent of the new jobs by 2030. But “raising private funds will also be a challenge for projects like ‘Smart Cities,’” says Shubhranshu Pani, Managing Director of Infrastructure Services at JLL India, a real estate consultant.

While many cities are floating special purpose vehicles, can a private company monetise a sewerage line or a local pavement? Unlike national highways, where regular traffic promises toll revenues, in projects such as sewerage lines there is little money to be made.

Start-up India, launched in 2015, had an initial allocation of ₹10,000 crore. The Government is expecting further investments of ₹60,000 crore in equity, and twice that through debt. By 2015, says a Nasscom report, funding in Indian start-ups stood at $5 billion (about ₹32,000 crore). Also, while the initiative aims to generate 1.8 million jobs by 2025 — or 1.8 lakh a year — presently just 48,000 positions are being created annually.

Another concern is that in order to keep up with fiscal marksmanship, the Government is compromising on spends in social sectors of health and education. In 2016-17, the expected spend on health and education was 0.68 per cent of GDP, as against 0.74 per cent in 2015-16. Social spends create employment in the service sectors, especially for women. But with large budgets allocated for infrastructure – ₹3,96,000 crore comprising 2.3 per cent of GDP in 2017-18 – social sector took a beating. While infrastructure development creates jobs, they are mostly one-off.

“Manufacturing by itself cannot plug the job deficit. We also need to focus on services that will complement modern (as well as traditional) manufacturing,” says CP Chandrasekhar, Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University.

Health sector for one has huge potential to create jobs, given the shortage of nurses and health care workers such as lab technicians and surgical assistants. According to KPMG, it has potential to provide direct jobs to 7.5 million people by 2022, as against 5.1 million existing as of today. While the Government laudably formulated the National Health Policy 2017 after a gap of 14 years, it again expects private sector investment to fill the critical gaps in the sector.

Moreover, universal health care and public spends of up to 2.5 per cent of GDP by 2025 seem a far-fetched goal. Currently, the Centre and the state governments put together are spending only half of that.

Many have questioned the employment data put out by Labour Bureau. “While not a robust metric, given its (Labour Bureau) limited coverage and sample size as compared to that quinquennial NSSO surveys, it’s the best information we currently have to gauge job creation scenario,” says Chandrasekhar.

Last year, to broad base the study, the Bureau added labour-intensive sectors such as manufacturing and construction. Again the figures were not encouraging.

During the September quarter of 2016, only 77,000 jobs were created. While about 13 million people will join the workforce every year, not even a million jobs are being created.

With just two more years left, can Modi make a difference? Raj Abraham will be hoping that he does.



Add yours

  1. The increase of workforce every year is more than jobs being created and consequently, unemployment is increasing. The rulers assurances of more jobs has not succeeded

  2. Your data for FY 2016 is partial, correct it.

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