Unemployment in India: Why government may need to adopt new approaches

The government may need to adopt new approaches.

Unemployment, India, government
In 2016, the country’s unemployment rate was 7.97%, with rural unemployment at 7.15% and urban unemployment at 9.62%.
Unemployment, India, government
In 2016, the country’s unemployment rate was 7.97%, with rural unemployment at 7.15% and urban unemployment at 9.62%.

The recent Annual Employment and Unemployment Survey of the Government of India brought out startling facts about the unemployment scenario. According to this survey, the labour force participation rate (LFPR) nationally stood at 50%, which is much below the potential level, and the worse is that female participation is much lower than male participation. Of course, it’s a recognised fact that India has been experiencing unemployment problem for quite some time, but no significant improvement has taken place, as data suggest further deterioration of the crisis.

Many are convinced that providing enough employment opportunities in India is not easy, especially when half the population is below the age of 25 and will soon enter the job market. This is a huge challenge for the government. In response, the government has taken some important initiatives including Make-in-India, Skill India and Start-up India.

But what currently and over the last three years the economy has been witnessing is high growth, which means there has been almost continuous rise in GDP or India has dramatically scaled up its growth. However, correspondingly, job-creation or job growth hasn’t taken place. This has led us to believe that India is witnessing a ‘jobless growth’.

Jobless growth is a dangerous trend—it creates social tension and disharmony. It spreads further inequality, which may lead to societal collateral damage. Faced with such a situation, what should the government do?

One of the probable reasons for jobless growth is automation in most economic activities. Sectors like automotive, computers, finance, transport, etc, are currently witnessing dramatic automation growth. As a result, employment opportunities are gradually sinking. This survey also brought out serious decline in employment growth. Even sectors like jewellery, which was one time one of the top export earners for the country, is currently witnessing reduction in employment.

In 2016, the country’s unemployment rate was 7.97%, with rural unemployment at 7.15% and urban unemployment at 9.62%. In rural areas, unemployment figures are lower due to the MGNREGA. In the Union Budget 2017-18, the MGNREGA received Rs 48,000 crore ($7.5 billion). While the Act helped lower unemployment rates, it has not been able to tackle disguised unemployment or underemployment—and such initiatives focus only on unskilled employment.

The question then is, how does the government tackle such a major social problem? It’s apparent that a new approach is needed.

Of course, the government has, in the past, taken initiatives to create employment by connecting job-seekers to potential employers through the ministry of labour and employment which launched the National Career Service portal. It is a common platform connecting job-seekers, employers, skill providers, placement organisations and counsellors. The government also initiated the Pradhan Mantri Kaushal Vikas Yojana (PMKVY)—a skill development scheme for which the ministry of skill development and entrepreneurship has been made the nodal point to help young people learn industry-relevant skills and enable them to secure skilled employment.

Such schemes may create employability through skill upgrading, but the sad story is that one of India’s largest employers of educated youth—the IT sector—has been laying off employees. Companies like Wipro, Cognizant and Infosys have announced they will downsize. While there was 8.6% growth in the IT sector in the 2016-17 fiscal, jobs grew by only 5%, compared with 6% in 2015-16. This downward trend is predicted to continue, with a 20-25% reduction in growth in employment in the sector over three years.

Industry experts blame this on automation, artificial intelligence and stricter visa norms in markets such as the US, UK and Australia. Some companies have announced they will focus on new technologies rather than concentrating on low-skilled IT jobs. But this technological advancement may not adversely impact job-creation because India can move towards a knowledge-based economy by focusing on high-value manufacturing, high-end services sectors and enrolment in quality higher education.

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New approaches

The government should make its teaching and academic curricula more employable-driven. Human capital can be developed only when investment in education and accessibility to tertiary education is guaranteed. The current disparity in access to higher education leads to unemployment among the youth. Singapore has launched certain programmes to establish partnerships between domestic and foreign universities to promote tertiary education. India could learn from such initiatives.

India also needs to reform its archaic labour laws which currently proliferate only contractual jobs instead of permanent employment. Retail is a labour-intensive sector, and foreign investment in retail would create jobs in the both retail and related sectors like apparel manufacturing and logistics. Similarly, allowing foreign investment in sectors like legal and accountancy services will create employment as more foreign firms will move to India. Infrastructure investment can also be utilised as an engine of job-creation. Finally, India needs to bargain hard with the US for easier work visa norms so that pressure of some unemployment can be eased out to an extent. With such policies and approaches, the government can handle the impending unemployment problem.

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