Due to rapid urbanisation, construction is going to remain a robust job creator in the long-term. Segments like warehousing, commercial/residential realty, and infrastructure are promising job-creating sectors for the long-term.
By Abhirup Bhunia
The Indian jobs crisis has been brewing for some time now. The recently revealed NSSO data, confirming a 45-year-old high unemployment rate of 6.1% has triggered fresh debate eliciting diverse perspectives on how to interpret this vital piece of data. However, there are few important facts about India’s real economy which yield an easier consensus: Firstly, agriculture, which employs more than half of India’s population—including disguised unemployment—will employ a progressively lower number of people, due to unresolved structural issues. In rural India, income per farmer is about a third of the income of an average non-farm worker. Plus, more than 60% of existing farmers prefer a job in the city, a survey reveals. Secondly, India’s dynamic non-farm job-creating sectors (such as construction) have slowed down in the past few years. Thirdly ,exports, including that of labour-intensive sectors (like textiles), have been underperforming, thanks in part due to weak global demand.
The construction sector has been one of the most dynamic in terms of job creation—second only to agriculture. Between 1990-91 to 2015-16, about 36% of all new non-farm jobs created were in construction. Due to rapid urbanisation, construction is going to remain a robust job creator in the long-term. Segments like warehousing, commercial/residential realty, and infrastructure are promising job-creating sectors for the long-term. Rural construction also has been a major contributor to employment in the sector.
The Economic Survey of 2018 anticipated realty and construction to generate 15 million jobs by 2022, while the National Skill Development Council (NSDC) put the demand for labour in real estate and construction (by 2022) at over 66 million. But the construction sector has been going through a downturn after a long period of boom. According to the National Accounts Statistics of 2018, the Gross Value Added (GVA) in construction during 2012-17 was 2.5%, compared to 10.1% between 2003-11. Various factors contributed to this slowdown, including demonetisation, indebted developers and unsold inventories.
The government’s Pradhan Mantri Awas Yojana (PMAY) has also not kept up pace. Till August 2018, only 8.34 lakh housing units were built under PMAY, against a target of 2 crore houses by 2022. Bestowing infrastructure status on housing does not seem to have produced any substantial result on the ground, yet. The infrastructure sector—a key segment for construction—has not been performing very well either. Bank credit to infrastructure sector has been growing slowly or contracting, with the spectre of stalled projects and mounting non-performing assets (NPAs) looming large. However, the rate of construction of rural roads under Pradhan Mantri Gram Sadak Yojana (PMGSY) has grown from 100 kms per day in 2014-15 to 134 in 2017-18. The 2019 budgetary push for rural infrastructure, through an allocation of `19,000 crore for development of roads in rural areas under PMGSY, will potentially create additional jobs in rural construction.
Exports are significantly correlated with employment. Labour-intensive industries like textiles/apparel (employing more than 50 million directly) and gems/jewellery (employing about 5 million directly) make up more than 30% of India’s export basket. The annual growth rate in India’s exports has, since 2014, been tardy and has also ventured into negative territory. The value of textile and apparel exports from India rose marginally in the last four years, from $37.57 billion in FY14 to $39.20 billion in FY18.
During the same time, Bangladesh and Vietnam took much faster strides, with their textile/apparel exports-growth clocking high growth rates. A focus on apparel and textiles is beneficiary for employment as it requires relatively low investment per job. MSMEs, which account for 40% of India’s total exports, have also been facing declining credit growth rate. The flagship MUDRA scheme entails provision of loans to MSMEs without collateral or security. While admirable in scope, 90% of MUDRA loans are of a ticket size of up to `50,000, which, as investible capital, does not reflect very bright prospects for additional job creation.
Amongst the prospective services sectors where employment is expected to grow are travel and tourism and information technology. After a slowdown, the IT sector is expected to add 250,000 jobs in 2019. The travel and tourism sector in India meanwhile is expected to add 1 million jobs annually on an average until 2028, according to an estimate by the World Travel and Tourism Council.
It would need substantial re-skilling and up-skilling to achieve this forecast, given the evolving face of tourism and hospitality, particularly its growing tech-centricism. Sectors which show promise also need a push from the government, both in terms of budgetary support, as well as through incentives. Schemes such as Swadesh Darshan Scheme, National Mission for Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD), and Heritage City Development and Augmentation Yojana (HRIDAY) are well-placed to tap the enormous potential of the sector. However, actual investments on the ground will be a key metric for assessing the employment scenario, as opposed to headline budgetary allocation numbers.
The author is with IPE Global, a development consulting firm