Economic revival must focus on creating jobs

It is now clear that if the biggest challenge facing the Modi government before the pandemic was unemployment, it has now assumed tsunami-like dimensions in the wake of the lockdown. The rise in utilisation of the MGNREGA scheme is witness to the number of workers who migrated to the rural areas and are now in search of jobs. Surveys have also shown that lockdown has had a disastrous impact on family incomes.

Economic revival must focus on creating jobs

distress: Agriculture is the biggest employer, but its share of the GDP has gone down.

Sushma Ramachandran

Senior Financial Journalist

The stark reality of joblessness faces urban dwellers every day. It is when the household staff or peripheral workers in the neighbourhood ask us for jobs for their children or relatives that the gravity of the situation strikes us. Often, these young persons are educated, some even holding college degrees that prepare them for nothing in the real world. But that was before the pandemic and the lockdown. Now, the stories are of family members losing jobs in hotels or restaurants and wage cuts for workers in all kinds of occupations, whether informal, domestic or regular salaried ones.

It is now clear that if the biggest challenge facing the Modi government before the pandemic was unemployment, it has assumed tsunami-like dimensions in the wake of the lockdown. The rise in utilisation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme is witness to the number of workers who migrated to the rural areas during the lockdown and are now in search of jobs. The data shows 1.3 crore more persons have registered under the rural job scheme from April to August this year.

Not only that, surveys are showing the lockdown has had a disastrous impact on family incomes with women being hit even harder than men. An Action Aid survey conducted during May-June this year in 20 states, according to media reports, found that 79 per cent of women were out of work after the lockdown, compared to 75 per cent of men. It also found that 85 per cent of workers lost their livelihood post-lockdown. Even with the caveat that this is a relatively small sample survey and also that the situation improved from July, it gives an inkling of the scenario.

The fact is that job losses occurred both in the informal sector as was dramatically evident in the migration of workers from cities to villages, and in the formal sector where innumerable established businesses and enterprises had to shut shop. Salaried and contract jobs alike have been hit with similar ferocity by the lockdown.

Unemployment data from the beginning of 2020 shows that January had brought a glimmer of improvement. Reports of the Centre for Monitoring Indian Economy (CMIE) showed the unemployment rate had dipped slightly to around 7.16 per cent in January 2020 as against nearly 8 per cent in some months of 2019. To put the data in perspective, the unemployment rate has in the past been in the region of 3 to 3.5 per cent. It was even 2.2 per cent in 2011-12. It then went on to increase to as much as 6.1 per cent in 2016-17, according to official data. Jobs, or rather the lack of them, had thus already become a looming crisis.

The latest CMIE surveys show that the overall unemployment rate in India is 7.7 per cent as of mid September with urban joblessness at 9 per cent and rural at 7 per cent. This is slightly lower than the 8.35 per cent recorded in August. Even for this month, urban unemployment was higher than in rural areas. In addition, it seems salaried jobs have taken the biggest hit during the lockdown due to the pandemic. While informal jobs have returned to the economy, formal or salaried jobs have not come back. Total informal jobs, according to these studies, rose by 2.9 per cent in July 2020 as compared to 2019-20. On the other hand, formal or salaried jobs declined by a huge 22 per cent over the same period.

Clearly, this is a situation that needs to be dealt with on an emergency basis by the government even as it may be finalising its next stimulus package for the economy. To a large extent, the availability of jobs is linked to an economic revival. Any plans for a stimulus thus need to focus on labour-intensive sectors. In this scenario, it is significant that agriculture is the biggest employer with as much as 55 per cent of total employment engaged in this sector. Its share of GDP, in contrast, has dipped to about 16 per cent. Even so, the wide-ranging reforms announced for the agriculture sector could end up providing support to job growth in industries linked to agriculture, including dairy processing, animal husbandry and pisciculture.

The need to revive employment in urban areas and in the manufacturing sector, however, is imperative right now. For the time being, it has to be accepted that the travel, tourism and hospitality sectors, which were big employers, will not revive anytime soon. It is thus apparent that the greatest attention must be paid to the manufacturing sector as it provides sustainable employment in the long run. The aim should be first, to ensure that the existing manufacturing units are able to restart production so that wage payments can be resumed to workers who are facing hardship. State governments need to give greater leeway to industrial units to revive operations instead of imposing temporary lockdowns that do not make much sense even to epidemiologists.

Second, medium and small enterprises that are major employers need to be given much more support. Although a credit package was unveiled for the MSME sector, small businesses felt the net had not been spread wide enough. Plus, there are difficulties for the MSMEs in navigating the ecosystem for credit as well as product marketing.

And finally, far more incentives need to be given for investment in greenfield manufacturing units. The ease of doing business needs to be improved dramatically as despite all the claims, multiple approvals by numerous agencies are still needed before a production unit can be set up and start operations. Cutting red tape both at the Central and state levels needs to be a priority to achieve the goal of luring foreign investment and raising domestic investment. The hopes of investors that the Modi government would bring a magic wand and carry out sweeping reforms to curtail bureaucratic rules have not been fulfilled.

As the pandemic continues to rage, it is thus time to focus on the critical economic imperatives of ensuring that livelihoods are not lost along the way. Creation of new jobs needs to become the focus of policy-making along with structured plans for economic revival.

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