Modi govt blinded by neoliberal dogma of relying on big business to create jobs

The Union Budget for 2023-24 has virtually unveiled an assault on the lives and livelihoods of the common people of the country. Spending on schemes and programmes that provided a direct economic benefit to them has been slashed across the board. But even bigger and more alarming are the sins of omission.

Key problems confronting the people have been either ignored or cavalierly dealt with. These include the raging unemployment, especially among youth, that has criminally frittered away the much-vaunted demographic dividend.

For the past about 41 months, the unemployment rate has been above hovering around 7 per cent, often even higher, according to a CMIE survey data. Urban unemployment has been consistently higher, at 8-10 per cent.

This is an unconscionably high rate, sustained by consistent government indifference.

In the last three years, the total number of employed persons has practically remained stagnant – it was 41.1 crore in January 2020, before the pandemic, and it is 40.9 crore as of January 2023.

Meanwhile, the labour participation rate (the share of working age population that is either working or seeking jobs) has dipped from 42.9 per cent to 39.8 per cent over the same period.

The combination of these different measures speaks of a dire and distressing situation – despite a growing population, the number of employed not growing and a falling participation rate, implying more people getting discouraged and going out of the labour market. It shows a fall in living standards.

But, the government, and the Prime Minister, have been assuring the people that jobs will be created, to the tune of two crore per year, or that Central government vacancies to the tune of nearly 10 lakh will be filled up soon, and so on.

Hence, it was not unreasonable to expect that the Union Budget, which lays down fiscal policy for the coming year, would at least announce some measures to deal with this unemployment crisis.

To the contrary, some of the existing schemes that provide some measure of relief from joblessness have had their funding slashed. Funds for the rural jobs guarantee scheme (MGNREGS) were cut by 33 per cent, from Rs 89,400 crore spent in 2022-23 (as per revised estimates) to Rs 60,000 crore for 2023-24.

Similarly, funds for the National Livelihoods Mission have seen a marginal decline compared to the budget allocation last year.

Besides these cuts in direct job schemes, the cuts in rural housing scheme, Swachh Bharat Mission and other welfare schemes means that the jobs created under these would also be lost.

Practically no increase in funds for ICDS means that the 2.4 lakh vacancies in sanctioned posts of anganwadi workers and helpers would also continue to remain vacant. Similarly for other schemes, and indeed for other departments and ministries.

The government and its apologists have been busy in propagating several myths about the job creating potential of this budget, and earlier policies. One of them is that the Modi government is allocating more for capital expenditure which will create jobs.

It is well established that the quantum of jobs created per unit of spending is always more if it is on social heads (like education or health) rather than on capital heads (like infrastructure building).

Also, under PM Modi’s rule, capital expenditure has come to involve more imports of foreign machinery, etc and so capital expenditure will increase imports at the cost of domestic production and local jobs.

Another abiding myth is that easing bank credit to industry will lead to expansion of productive capacities, which will mean more jobs. As the experience of the past several years has shown, giving tax concessions and incentives to corporate sector and extending cheap credit has spectacularly failed in creating more jobs. Profits of listed companies have hit record levels in the two pandemic years but job creation has remained dismal.

The explanation is simple: people do not have sufficient buying power in their hands due to joblessness and low incomes; so there is low demand for goods and services; and so, no amount of sermons and exhortations, or incentives and credit will entice industry owners to expand production and hire more workers. All the money being channelised by the government to such employers simply goes to improving their profit margins.

What about the MSME sector which has suffered immensely due to a series of blows – first demonetisation, then GST rollout, and then the pandemic? Wouldn’t this sector need easy credit of the kind promised in the present budget? The government should be aware that out of the 6.33 crore MSMEs in India, 6.30 crore (99 per cent) are micro enterprises, 3.31 lakh are small units, and only 5,000 are medium enterprises.

The micro enterprises employ nearly 11 crore workers, small enterprises employ 32 lakh and medium ones employ only about 2 lakh workers.

So, if employment is to be created, it is the micro sector that needs much more help. But credit meant for MSME sector is mostly cornered by the medium enterprises. In the last quarter of FY22 when loan disbursal to MSMEs was sharply rising, small and medium enterprises together took Rs 2.57 lakh crore while the micro enterprises got only Rs 68.9 thousand crores.

Clearly, the Modi government is blinded by its neoliberal dogma of relying on big business – both domestic and foreign – to boost the economy and create employment through some kind of chimerical ‘trickle down’. It is incapable of addressing the employment crisis and needs to either radically change its policies or get thrown out in the next elections.