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:
a growing number of better educated youth.
uneducated agricultural workers who wish to leave distressed agricultural sector.
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:
low investment.
low credit off-take.
low capacity utilisation in industry.
low agricultural growth.
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.
