Addressing India’s Job crisis

Addressing India’s Job crisis

News: India is facing a jobs crisis which is marked by low labour demand for regular wage work.

• According to the Centre for Monitoring Indian Economy (CMIE), an independent think tank, India’s unemployment rate was more than 7% for most of 2021 and 2022, and reached 7.9% in December 2022. This is considerably higher than the global average and most of the emerging economies.

What are the types of Employment in India?

Wage Employment
• Regular Wage Jobs: Formal, structured positions with fixed salaries, found in government organizations, private companies, and multinational corporations.
• Casual or Daily Wage Labor: Involves daily wage labour, prevalent in sectors like construction, agriculture, and unorganized labour markets.

• Entrepreneurship: Many individuals in India are engaged in entrepreneurial activities, running small businesses or enterprises.
• Farmers: Agriculture is a significant source of self-employment in India. Many individuals own and operate their farms, either independently or as part of a family-run enterprise.
• Freelancing and Informal Work: With the rise of the gig economy, freelancing and informal work arrangements have become more common.

What are the reasons behind unemployment in India?
• Structural shortcomings - In the last 4 decades, economic growth in India has aided a structural shift away from agricultural jobs. However, this has mainly moved to construction and not to high-value sectors such as manufacturing or services.
• In the non-farm sector, the link between GDP growth and the pace of job creation has weakened over time, leading to rising unemployment.
• Policies solely focused on output growth (as is the case with India) may not result in a corresponding increase in employment opportunities, especially if labour productivity growth rate rises.
• While India has made huge progress in improving its physical infrastructure, it has fallen behind on human infrastructure like education and skills.
• Education-skill mismatch as seen in several cases. For example, on one side young students find themselves overqualified for manual labour jobs. On the other, they lack the technical skills required for high-paying jobs in IT and professional services.

What is Jobless growth in India’s case?
• There are two types of jobless growth in India:
• Weak Responsiveness: Automation and tech introduction lead to jobless growth, but increasing GDP can still boost employment.
• High Responsiveness: In India, labour productivity growth is strongly linked to output growth. So even though GDP increases, output will increase only if labour productivity increases.
• Kaldor-Verdoorn Coefficient: The Kaldor-Verdoorn coefficient measures the extent to which labour productivity growth responds to output growth. A higher coefficient indicates a stronger relationship between the two.
• The assertion that India\'s non-agricultural sector has a higher Kaldor-Verdoorn coefficient compared to other developing countries implies that the country experiences a more pronounced form of jobless growth.

What are the various approaches to Growth and employment?

Keynesian TheoryThe central contribution of the Keynesian revolution in macroeconomics was to highlight the role of aggregate demand as the binding constraint on employment. Fiscal policy was perceived to increase labour demand by stimulating output.
The Mahalanobis StrategyIt identified the availability of capital goods as the binding constraint on output and employment, putting forward the policy for heavy industrialisation.
Structuralist TheoriesIt is based on experiences of developing countries, highlights agrarian and balance of payment constraints on output. This led to significant policy debates in India during the 1970s and early 1990s.
Modern challengeRecognition that addressing the employment challenge requires a separate policy focus on employment, not just relying on more rapid GDP growth.

Measures to address Unemployment in India
• Focus on Skilling of labour force
• Special packages for Labour intensive industries – Leather, footwear, construction, food processing, textiles etc.
• Formulate National employment policy – Evidence have suggested that employment challenge can no longer be met only through more rapid GDP growth.
• Implement New Education Policy 2020 in letter and spirit as it addresses several aspects – Skilling, vocational training etc.
• Introducing an Urban Version of MGNREGA: It can provide a safety net and a source of income for the urban poor.
• Increase Industrialization and Investment in Agriculture: It can create more jobs and boost productivity.
• Diversify Agriculture and Promote Agro-Processing: Shift to labour-intensive crops, promote agroprocessing for export, reduce wastage, and increase value addition.
• Expand Education and Healthcare: Enhance human capital through education and healthcare expansion, providing employment in the social sector. Vocational and technical training can help the students acquire the skills and knowledge required for specific occupations and industries.

• More than Half of India’s population today is below the age of 25 and more than 65% is below the age of 35. Our young population is solution to world’s ageing problems and is a valuable asset to boost global production levels. It shows a potential that needs to be tapped into. 

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