1. PM Modi long way from creating 10 million jobs a year; India may see further 30-40 percent reduction of jobs

PM Modi long way from creating 10 million jobs a year; India may see further 30-40 percent reduction of jobs

PM Modi swept to power three years ago promising India’s poor and middle classes he’d restore their "dignity" after years of swelling inequality, with job creation central to his pitch. But now, the jobs market has been slugged by last November’s shock cash ban and July’s imposition of a goods and services tax.

By: | Published: September 20, 2017 11:34 AM
PM Modi, PM narendra Modi, narendra Modi, modi, modi news, jobs, jobs in india, job creation, india, employment in india, employment, economy, india economy, latest news, india news Prime Minister Narendra Modi has a jobs problem. (PTI Photo)

Prime Minister Narendra Modi has a jobs problem. He swept to power three years ago promising India’s poor and middle classes he’d restore their “dignity” after years of swelling inequality, with job creation central to his pitch. But now, the jobs market has been slugged by last November’s shock cash ban and July’s imposition of a goods and services tax. And things look like they’re about to get worse: India is set to see a further 30 percent-to-40 percent reduction of jobs in the manufacturing sector compared with last year, according to TeamLease Services Ltd., one of the country’s biggest recruitment firms. While other surveys aren’t quite so bleak, they also suggest Modi is a long way from creating the 10 million jobs a year needed to keep up with his young and rapidly expanding workforce.

The opposition — in disarray since losing to Modi — is dialing up its criticism as it eyes elections due in 2019. “If India cannot give the millions of people entering the job market employment, anger will increase, and it has the potential to derail what has been built so far,” Rahul Gandhi, heir-apparent to the main opposition Indian National Congress party, said in a speech at the University of California, Berkeley, on Sept. 11. “That will be catastrophic for India and the world beyond it.” Gandhi is the son and grandson of previous prime ministers, and could well be Modi’s direct opponent at the next vote.

Supporters Alarmed

Modi’s backers are alarmed too. A key ally and member of Modi’s party, Subramanian Swamy, told a TV channel over the weekend that he has conveyed concerns to Modi that the economy could be heading for a “major depression.” The Rashtriya Swayamsevak Sangh — the ideological parent of Modi’s ruling Bharatiya Janata Party that works like a volunteer wing to ensure voter turnout during elections — has alerted the BJP of signs of a shift in the public mood over the government’s performance, though Modi still remains personally popular, according to a report in the Telegraph newspaper last week that cited unnamed RSS sources.

Munira Loliwala, a general manager at TeamLease, said the slowdown accelerated sharply with demonetization. Indian manufacturers, who previously preferred to cut white-collar jobs rather than factory-floor workers, are now slashing all over, she said. “We see no option, things are not looking to improve much,” Loliwala said.

Loliwala was referring to Modi’s move in November to scrap 86 percent of currency in circulation, which contributed to growth in gross domestic product slumping to the lowest since 2014 last quarter. Modi then pushed through a nationwide goods and services tax on July 1, which is expected to benefit India in the long-run but for now is roiling supply chains.

Manufacturing accounts for some 18 percent of GDP and directly employs 12 percent of the population, government data show. Loliwala said that many of those who lose their jobs stay unemployed because they lack the communication skills required for the services sector, which accounts for 62 percent of GDP.

The struggle to create jobs threatens a key plank of Modi’s populist push to reverse decades of widening income inequality, a problem highlighted in a new study by Lucas Chancel and Thomas Piketty published this month. The top 1 percent of India’s population hold an unprecedented 22 percent of the nation’s wealth, while the middle 40 percent benefited the least compared with China, France and the U.S. over 1980-2014, the study found.

Another recent report underscores the magnitude of Modi’s challenge to boost employment. India ranks 103 out of 130 countries in the World Economic Forum’s Global Human Capital Report 2017, published Sept. 13. Its youth literacy rate is 89 percent, well behind other leading emerging markets, and it has the world’s largest employment gender gaps.

Elsewhere, Modi is making inroads on policy pledges. Higher savings rates offer funds for investment; record foreign-exchange reserves of around $400 billion provide a buffer to external shocks; steps have been taken to clean up a $191 billion pile of souring loans; and a crackdown on corruption may boost treasury coffers and capture the public’s imagination. Those strengths may help explain why the government remains optimistic.

“The economic slowdown and job losses are in line with a worldwide downward trend,” Finance Ministry spokesman D.S. Malik said by phone. “There may be problems in the manufacturing sector, but services are growing well. And that’s why our revenue collections are doing fine.” Jagdish Thakkar, a spokesman in the Prime Minister’s Office, didn’t answer calls seeking comment.

India must lower its benchmark to align it closer to the rates of other major economies to curb carry trades that artificially drive up the rupee’s value, Kaushik Basu, former top economic adviser to India’s government and World Bank chief economist, wrote for Project Syndicate in a column published Tuesday.

“Given the Indian economy’s massive size and extensive global linkages, its growth slowdown is a source of serious concern not just domestically, but around the world,” he said.

  1. A
    Ali
    Sep 21, 2017 at 12:26 pm
    I am not sure from where unemployment statistics are derived by this author. But it shows how bad an article can be written. The reason behind China's prosperity is FDI and Manufacturing. Since last 3years India has seen a traction in these areas. As everyone knows the Highway program was shut down after Vajpayee and banners were removed from roads just because Congress wanted the loan money go into their pocket rather than for development. We had only heard of loan sanctions from IMF, Work Bank and other financial organizations during Cong regime. But hardly the money went to benefit the public. It was well graffle and stacked to Swiss accounts.Job creation is directly proportional to investments, which the current govt is slowly doing it. Rome was not built in a day, so do India unemployment cannot be eradicated in just 5years.
    Reply
    1. S
      Siddharth
      Sep 20, 2017 at 4:11 pm
      As an Indian who lived and studied MBA in US....The current problem with Indian mindset (political level) is with the way Indian cabinet minister is operating..... 1: Attention to details - Indian Ministers only think about increasing incentives or giving more and more bonuses to employees IF THEY ......... Whereas Western counterparts will have an "eye to detail"....i.e they have suggestions and measures on how to increase productivity for most of the businesses.... and if Indian leaders are doing the same.... and still not getting the desire results then they should figure out the things that are lagging (Infrastructure, licensing, technology, work ethics.... loyalty, honesty on the part of employees, education attainment, making employees work hard, discipline, dedication).... BOTTOM LINE: Just get it done "Whatever it takes" at ude 2: Coming to the point.... modi ji should focus on providing jobs (tree cutting to maintain cities landscape beauty, disaster management companies)
      Reply
      1. Jayesh Sheth
        Sep 20, 2017 at 1:37 pm
        for bullet train 80000/- cr. loan and after 2 years 800/- cr. int. and 20000 jobs.this is position.
        Reply
        1. V
          Vineet
          Sep 20, 2017 at 10:17 pm
          Loan has to be paid after 15 yrs of the train functioning. Also .1 of 80K crores is 80 crores per year... from where did 800 cr come after 2 yrs ?
          Reply
          1. A
            Ali
            Sep 21, 2017 at 12:18 pm
            whats app has killed all mathematicians. All the fake posts keep people in shadow like Mr.Jayesh.

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