As India enters the election mode and political parties get busy hurling accusations of incompetence on each other, job creation remains a hot-button. It has been swiftly and steadily dominating most discussions on economy among both economists and the intellectual-engines from the Indian industry. That it has also been engaging the attention of the country’s chief economic advisor V Anantha Nageswaran should sound heartening to many. Speaking to this writer just after the release of the mini economic survey by the department of economic affairs in January this year, he dispelled as wrong, any notion that the country was experiencing disguised unemployment. Quoting the numbers from the Periodic Labour Force Survey (PLFS), the data source that the government often relies on, he said that the youth (age 15 to 29 years) unemployment rate had declined from 17.8 per cent in 2017-18 to 10 per cent in 2022-23 and that the youth’s labour force participation rate had risen from 38.2 per cent to 44.5 per cent in this period.”
Two months later, in a newspaper column today, he argues that the country’s job-creation machinery was healthy and functioning and backs it by quoting numbers. For instance, he points out that the workforce in factories (with more than 100 workers) grew at an annual rate of 4.0 per cent between 2014 and 2022, compared to the annual growth of just 1.2 per cent in the workforce of factories with less than 100 workers.
Working age population
India’s numbers guru and the country’s former chief statistician Pronab Sen agrees and says the chief economic advisor is right as the formal sector employment has indeed increased and has in fact seen a sharp rise post 2016. But then, he also reminds that the organised (government, public sector units and private) sector employment, excluding government, account for only 11 per cent of the total employment and therefore despite the growth (of say 4 per cent), there is not much dent in absolute terms because there are 12 million people getting added each year to the working age population. The growth in the organised sector, he says, does not absorb enough workers that are coming into the workforce and ends up absorbing only one-fourth or one-fifth of the net additions to the working age population. Also, he argues that if we were to develop properly, we should be seeing reduction in the number of people joining agriculture or as casual labour.
Agreeing and sharing his perspective, Naushad Forbes, co-chairman, Forbes Marshall, who wears a hat frothing with many feathers, including that of former president of the Confederation of Indian Industry (CII), says, “one could argue that we have returned to the pre-pandemic levels in absolute terms (which depending on which data you refer to ranges between 400 million and 500 million) but please do remember that in these four years we have also added 40 million to the working age population and the employment growth should have at least kept pace with that, which it apparently has not since we are back only to the pre-pandemic level.” Forbes, who is also the author of a popular book “The Struggle and the promise: Restoring India’s Potential,” says, “keeping the labour force participation ratio of 55 – 60 per cent, we should have ended up employing 25 million more people. The recent ILO survey, for instance, points to a rise in employment in the agriculture sector or in self-employment, which many construe as indicators of people having nothing else to do. So, in employment, we are not where we should ideally be at least.”
Human capital
To him, the solution lies in “investing enough in the right things for human capital – in terms of schooling and education and in removing the obstacles to employment. If we can improve our quality human capital supply through schooling improvements and if we can improve demand in terms of creating demand for better quality jobs then the future is secure for the next 30 years.”
The chief economic advisor also refers to the point on quality, which apparently, he finds as the area of focus now and to him, the country is already on the right track on this since “Indian youth are taking to tertiary education in large numbers” and also seeing “higher returns to higher education and more job opportunities.”