Jobs: A tragedy turning into a farce

Step-in Finance Minister Piyush Goyal refused to talk about it in his eight-thousand-word budget speech. The Prime Minister gave it a miss and not one BJP leader wanted to talk about jobs before or after the ‘interim budget’. Wisdom demands that the first step to solving a problem is to acknowledge it, the BJP government is perhaps just being ‘otherwise.’

The BJP came into office in 2014, claiming to create crores of jobs but five years into the election, it has ended up destroying them. While every data source indicates slow growth and even contraction in jobs, those in the government continue to quote provident fund data, indicating that jobs continue to go up. The fact is, no one is believing them.

The debate on employment has to be simplified so that the average Indian is able to understand what is happening on the job front. More importantly, the discussion has to be kept as bi-partisan as possible to ensure that we are able to achieve some sort of a national consensus and put job-creation at the centre of our political discourse.

First, we need to understand the extent of the problem. Data from the 2011 census indicates that over the last five years, about 2.6 crore entered the workforce every year in the last five years. Considering that about 44% of our young are looking for work, we need to create about one crore jobs every year and there is nothing on the ground which indicate that we are generating anywhere close to the number.

Data from the NSSO created a storm as the headlines indicated the unemployment rate was the highest since the 1971 war with Pakistan, the highest in the living memory of a large number of Indians. Without getting into the numbers, the data reflected two strong trends, there was a notable decline in the number of people who were looking for jobs and the those getting these jobs.

Among rural young men, between 15 and 29, one in five persons looking for a job was not getting one and the condition of women was sadly similar. The number of people looking for work has also come down from nearly 40% to 37%, 3 in 100 Indians had given up their quest for employment, perhaps losing hope that they would be able to find jobs.

The reaction from the establishment was more political than reasonable. Niti Aayog Vice Chairman Rajiv Kumar first tried to dismiss it as a ‘draft report’ which had not been finalised and then went on to put a profound question: How can a country grow at 7% and not create jobs? But that is the exact problem. Jobless growth.

The paradox of 7% jobless growth could mean any of three things: The growth numbers are fudged (a possibility since the government revised its methodology), growth is government investment driven and is not consumption driven (rising income inequality is a good indicator) or growth is happening in sectors that don’t create enough employment. All three appear to be true in the current context.

Through the post-budget debates, a few data-savvy NDA ministers quoted EPFO data to claim there was massive job growth. Reports in early 2018, based on a research paper by Pulak Ghosh, a professor at IIM, Bangalore, and Soumya Kanti Ghosh, chief economic adviser at SBI indicated that 7 million jobs would be added in 2017-18 but this was driven more by an amnesty scheme and less due to the expansion in economic activity. It was clearly a smokescreen deployed to give some talking points to a government which was feeling the heat due to demonetisation.

Ministers and BJP leaders, who were not data-driven, mostly chose to talk about the ‘massive’ employment generated due to the MUDRA scheme and this includes BJP president Amit Shah who claimed that 7.28 crore jobs had been created. The government claims that 15.56 crore MUDRA loans have been given amounting to ₹7.3 lakh crore, but the average size of over 90% of Mudra loans is about ₹23,000 which may not be enough to create much employment.

BJP president Amit Shah put the number of people given employment through MUDRA at 7.28 crore but no one in the government seemed to have any clue on how he came up with these numbers. NDTV quoted a RTI reply on the issue and quoted NITI Aayog's Vice Chairman Rajiv Kumar as saying that they had "no firm numbers" on jobs created through the MUDRA scheme while affirming that "new jobs have been created". Mr Shah could have quoted any number that he liked and perhaps only he can say how he came up with the number.

But MUDRA loans have come at a cost, a massive 8.5% of all the expenditure of the Government of India in four years and the performance of these loans is beginning to worry the RBI. Bad loans under PMMY have risen to ₹11,000 Crore and the real test would come over the next few years as media reports indicate the presence of a 60:40 rule, in which the beneficiaries get only 40% while banking officials get 60%, the

The government’s claims of generating enough jobs is also contradicted by its own data. Prime Minister Modi launched the National Career Service (NCS) in July 2015 at a cost of ₹100 crore. While close to four Crore young Indians have registered on the platform, the government has been able to post, as per its own reports, only eight lakh vacancies since the launch.

The number of vacancies follow an interesting pattern: 46,000 jobs in 2015-16, 5.17 lakh in 2016-17, and 2.45 lakh in 2017-18. This data too indicates that the total number of vacancies have been on the decline. The government, however, does not have any data on how many people got jobs as they only count the number of vacancies posted.

Matters have reached a point where they have stopped reporting the number of people placed under Pradhan Mantri Kaushal Vikas Yojana.

NPAs in education loans is a good indicator on what is happening in the job market and here too, the situation does not look good as 9% of education loans are turning bad. “Engineering, where nearly 10% of the loans become NPAs, has a bad placement record in recent years. Only about 46% of the students who graduated from government and private engineering colleges across the country in 2016-17 managed to get a job placement,” reported The Hindu, quoting data given in the Rajya Sabha in July 2018. This is happening at a time when almost half the seats in engineering colleges don’t find takers.

The government’s track record on employment generation could be divided into two parts: the first two years when they announced a large number of schemes for skill training and employment generation. The Modi government, in the last two years, has been trying to defend its failure to create jobs as all their employment generation schemes failed to deliver.

Five years into the government, two things are clear: The government has no idea how many jobs were created and worse, absolutely no clue on how to create employment. Short of achievements, the government is trying to claim credit for employment generated through Uber, Ola and other sectors.

As we head into the next general election, we need to reimagine the process of job creation and whoever replaces the BJP, would have to start thinking about how we are going to create jobs for the next generation of Indians. Though population growth rates are declining, we are still adding about 2 crore people every year to the working age and at 50%, we need to have one crore jobs a year plus new jobs to clear old backlogs and shift a major part of the agrarian work force to other sectors.

Jobs are going to be created if we see a strong bottom-up growth in which the bottom 50% of the population get a greater share of income growth. We need a massive push in rural consumption in both, goods and services, which would come through better agricultural growth and higher spending on social welfare to raise consumption levels. We need to build a better value pyramid for the urban areas, which would be critical as the urban population crosses the 40% mark in the coming years.

The second, and perhaps the more challenging aspect would be to boost exports of goods and services which have remained flat over the five years of Modi government. Merchandise exports were at $314-billion in 2013-14 but declined to $310.4 billion in 2014-15 and $262.3 billion in 2015-16.

We also must get a little worried about our service exports because the world is catching up and our price arbitrage model in IT and IT enabled services industry is not going to work forever. We have developed some strong skills in the domain but technology is evolving and the focus always is to cut costs. We need to move up the value chain in the services sector as China has done in the manufacturing space.

Make in India had a catchy logo but it seemed to have disappeared from the Udyog Bhawan but we need to put the focus back on the National Manufacturing Policy initiated under the UPA government. Industrial corridors were considered to be the way forward but funding for these projects were cut by 25% in the interim budget. India needs to manufacture for domestic consumption, but we also need to manufacture for the world if we are to create enough jobs for the young Indian of the future.

The government has its spin doctors but who wins the debate does not matter. The fact is that we need to create more jobs and we need to do them quickly. Whatever drives your vote in the 2019 polls, nothing matters more than creating new jobs. This led to Modi’s rise in 2014, it would lead to his fall in 2019.