Why GDP alone won’t create jobs

Updated: April 19, 2018 4:31:14 AM

The required growth rates rise dramatically when you consider how many jobs India actually needs to catch up with countries with similar levels of income, or to meet the demands of a population that wants to, for instance, move out of agriculture.

GDP, jobs, ILO, IndiaAccording to the International Labour Organization, India’s unemployment rate amongst 15-24 year olds is at 10.5%, implying that the process of job creation amongst first time job-seekers is abysmal in the country. (Reuters)

According to the International Labour Organization, India’s unemployment rate amongst 15-24 year olds is at 10.5%, implying that the process of job creation amongst first time job-seekers is abysmal in the country. Worse, World Bank’s South Asia Economic Focus report estimates that for India to maintain even its current employment rate, over eight million new jobs will need to be created every year. The required growth rates rise dramatically when you consider how many jobs India actually needs to catch up with countries with similar levels of income, or to meet the demands of a population that wants to, for instance, move out of agriculture.

Based on current employment elasticities, the World Bank estimates, India will need to grow its economy at around 18%, in nominal terms, as compared to the current 11% or so. Since getting this sort of growth is not possible, India needs to get more jobs for every percent growth in GDP. Building more roads and housing—as the government is doing right now—is one solution since construction has a high employment intensity. The other solution is to create more jobs in low-end manufacturing, like textiles and garments exports, areas where India is losing rapidly to countries like Bangladesh and Vietnam —fixing this requires not just making India’s labour laws, such as on overtime, more flexible, but also fixing logistics and infrastructure costs.

Another option is to create more services’ jobs like education, health and tourism. Given India’s abysmal shortages in education, health, judiciary, etc, this is a more permanent solution. But if a large part of these jobs have to be created in the public sector, as they do, this requires a serious rejig of the budgets of both central and state governments. Once expenditures on subsidies, for instance, are reduced, these can be used to hire more teachers, policemen, judges or health personnel.

By: Yash Budhwar

yash.budhwar@expressindia.com

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