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Options For Job Creation

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October 14, 2017

What is the issue?

  • Given the slowdown in economy, it is widely accepted that employment generation is essential.
  • In this context, it is important to look into the shortfalls in the past and opportunities at present to take forward job creation.

What is the current scenario?

  • India’s labour market is a highly segmented one.
  • And there are primarily three demographic groups in urgent need of jobs, which include:
  1. a growing number of better educated youth.
  2. uneducated agricultural workers who wish to leave distressed agricultural sector.
  3. young women, who are increasingly getting educated than before.
  • Unfortunately, for the past few years India had not been very positive in absorbing this job seeking population due to various factors.

What are the causes?

  • Pattern of growth - Although growth was relatively high over the past few years, the pattern of growth was problematic.
  • Since 1991 economic reforms, growth is largely driven by the services sector.
  • Manufacturing has not been the leading sector in driving growth.
  • Notably, manufacturing has more potential to drive productivity in the whole economy and create more jobs.
  • Services cannot bring about this effect, as by definition ‘service’ is the distribution of already produced goods.
  • Inverted duty structure - Under the inverted duty structure, import duty on finished goods is low compared to the import duty on raw materials used in production.
  • Resultantly, domestic manufacturing becomes uncompetitive as against imported finished goods.
  • Excessive imports due to inverted duty structure since 1991 reforms, have undermined the Indian manufacturing industries, thereby considerably reducing job opportunities.
  • Conversely, the absence of this in the automobiles sector has helped it perform better.
  • Other factors - Given the present economic situation, India faces problems in employment generation due to factors like:
  1. low investment.
  2. low credit off-take.
  3. low capacity utilisation in industry.
  4. low agricultural growth.
  5. low plant load factor (i.e. low output of a power plant in proportion to its maximum potential).

What should be done?

  • Industrial policy preparation by the Department of Industrial Policy and Promotion (DIPP) should be hastened.
  • While doing so, it should ensure that the industrial policy is also consistent with the trade policy.
  • This can address issues such as that of inverted duty structure.
  • Proper implementation of  the National Manufacturing Policy, 2011 is also essential.
  • Special packages are needed for labour-intensive industries to create jobs.
  • This could include food processing, leather and footwear, textiles, apparel and garments, etc.
  • The nature of the package will have to be individually designed, considering the sector specific needs.
  • Cluster development should be enhanced to support job creation in micro, small and medium enterprises (MSMEs).
  • The present cluster development programme of the Ministry of MSMEs is poorly funded and could be better designed as well.
  • The modern and traditional industry clusters can enhance the unorganised sector employment in MSMEs.
  • Urban development should be aligned with manufacturing clusters to create jobs.
  • E.g. AMRUT programme which is on infrastructure improvement can focus on towns which have clusters of unorganised sector economic activities.
  • This can considerably absorb the non-agricultural job seekers.
  • A co-ordination between the Urban Development and MSME Ministries is necessary to ensure this.
  • Skilling programmes are going in vain due to low job placement.
  • Skilling close to clusters, which is where the jobs are, rather than standalone vocational training providers, is likely to show better results.
  • Public investments in health, education, police and judiciary can create many government jobs.
  • Unlike the private sector, preventive and public health measures can only be taken by the governments.
  • Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased faster.
  • This can also help in utilising the potential human resource in production, for driving economic growth.

 

Source: The Hindu

 

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