The Unemployment Powder Keg

Updated: Dec 14 2003, 05:30am hrs
A little over 40 million persons are registered with the employment exchanges in the country. Employment exchanges are established by the states as a funnel through which a job-seeker will pass in order to ensure fairness and non-discrimination in appointments to various jobs. A noble idea provided there are jobs. Employment exchanges do not create jobs; in fact, most of them have placed not more than a few hundred for many years.

Forty million in a country with a working age population of 600 million may not seem too large a proportion. But 40 million, in absolute numbers, is very large. It is more than the total population of many countries. It is large enough to start an insurrection. A few hundred or thousand, driven by a mixture of despair and misplaced ideology, are able to sustain the Naxalite movement in six states Andhra, Maharashtra, Orissa, MP, Chhattisgarh and Bihar.

Another problem with that number is that it is wrong. For every registered unemployed young man or woman, there is perhaps another unregistered, unemployed young man or woman. Besides, there are thousands who are notionally employed but are really unemployed. They work on farms or farm- related activities, when there is really no work for an additional pair of hands. There is massive under-employment in the country.

Jobless Growth: The most troubling aspect of economic reforms since 1991 is the tardy growth of employment. Some analysts believe that we are trapped in jobless growth. Growth is meaningless unless its benefits can be shared by all sections of the people. Jobs ensure participation in economic activity and distribution of income and wealth.

It was once believed that a high growth rate will throw up enough jobs. That remains true, but the hypothesis has come under attack. For example, it was believed, as a rule of thumb, that an 8 per cent growth rate will generate about 80 million jobs. Based on the experience of recent years, some economists have argued that the years in which there has been a high growth rate did not produce 60 or 70 million jobs, and it is likely that only about 20-30 million jobs may have been created in each of those years. If the revised hypothesis is true, then we are sitting on a powder keg.

Some of the reasons for jobless growth are obvious. Governments have virtually stopped recruiting people. Most PSUs are sick, and one of the causes of their sickness was a bloated employment roll. Manufacturing companies have been forced to become internationally competitive, and hence increase their productivity, which means fewer jobs for the capital employed. The buzzword is not jobs but voluntary retirement from service.

Yet, the situation is not too dismal. Software companies have announced plans for recruiting thousands of qualified professionals.

The golden quadrilateral project has provided work for thousands of people, albeit low-end work. These give a clue to solving the riddle of unemployment amidst growth.

One lesson is that government must promote investment public and private in areas where the potential for job creation is the highest. These are roads, irrigation works, power stations, airports and seaports. Public investment in these areas will, far from crowding out, attract private investment. The notorious delays in clearing projects have cost thousands of jobs. From all over the country, I hear stories of projects held up for years because of incompetent governments or insensitive bureaucrats. One of the reasons why Digvijay Singh lost the elections in Madhya Pradesh was the failure of his government to clear even a single independent power project during the past five years.

Job Creating Tourism: Another lesson is that the services sector has the largest potential to create jobs. Apart from software which is in capable private hands, tourism can generate millions of jobs, and these jobs will cover the entire range of skills from boatmen and waiters to highly qualified management professionals. Unfortunately, the development of tourism is stuck in the ministries and departments of tourism. Virtually every place of tourist interest is under the control of one department or the other. Development of tourism requires access to land, sea, sand, lakes, mountains, rivers, forests, historical places and archaeological sites and everyone of them is under the stanglehold of government.

Look at the way Britain is packaged and marketed. Something so mundane as change of the guards at Buckingham Palace attracts thousands of tourists every day. It is regarded as a must-see item. The West End Theatre, the Wax Museum, ballooning, the lake districts, a boat tour each one has been packaged and sold with very little government interference. Contrast the story of the Taj Mahal. Thanks to bungling and corruption, we seem to have lost forever the opportunity of celebrating the 500th birthday of the Taj. According to Narayana Murthy, the Taj Mahal alone contains a $10 billion (Rs 46,000 crore) opportunity. Here is his vision: There are about 200 million couples in the developed nations. If 10 per cent were to be persuaded to spend their wedding anniversary at the Taj, two nights, three nights... My God! You would attract 20 million people just to the Taj. Can you imagine the power of that If 20 million people visit and spend about $1,000 per visit, it is $20 billion on just one experiment! Give me that opportunity, give me that executive power, Ill make it happen.

Multiply that vision several times a vision for the snow-clad mountains, a vision for our archaeological heritage, a vision for the Buddhist trail, a vision for the long coastline, a vision for the deserts of Rajasthan, a vision for river rafting and we are sitting on not one but several goldmines. Why does India attract only 2.2 million tourists annually, while China claims to have attracted 89 million tourists (in 2001) How does Spain with a population of 40 million attract an equal number (40 million) of tourists and struggles to keep away the rest who want to come

Here are two things the Prime Minister can do in the final year of the present government. First, clear the biggest job-creating projects before March 31, 2004 and ensure that funds are actually invested beginning April. Second, call Narayana Murthy and give him total authority to promote the Taj Mahal. If Vajpayee acts on these two wishes, I will have two more on his birthday and two more in the New Year.

(The author is a former Union finance minister)