EMPLOYMENT SITUATION IN INDIA
Jobless Growth: Stagnation in share of Manufacturing Sector to India's GDP at 17% since 1991 reforms, Dominance of small-sized firms, Complexity in labor laws and land acquisition, lack of skill sets etc.
Nature of Jobs: Jobs created in Indian Economy have been concentrated in low-paying, low-productivity informal sectors such as Construction, Small-sized enterprises. Informal workers account for almost 90% of India's workforce. Thus, concerns have been raised over not just over number of Jobs created, but also over nature of Jobs.
Growing Informalisation of Workforce: Share of contractual workers increased from 12% of all registered manufacturing workers in 1999 to over 25% in 2010. Informal workers are paid almost 20 times less wages as compared to formal workers and lack social security.
Working Poors: Informal workers face number of vulnerabilities such as Poor wages, lack of access to social security benefits, poor skill sets, lack effective representation through trade Unions, lack of access to basic facilities such as housing, sanitation etc.
Decline in Female LFPR: India exhibits a low and declining female labour force participation rate. Female labour force participation rate in India was 23.7% in 2011-12 compared to 61% in China, 56% in United States.
Protection and social security: Several workers that are engaged in unorganized sector is not covered by labour regulations and social security.
Skills-Set: According to India Skill Report 2018, only 47% of those coming out of higher educational institutions are employable.
REASONS FOR JOBLESS GROWTH IN INDIA
- Focus on Capital Intensive Industries
- Accidental Impact of Government Policies: Both at central and state levels, there are fiscal and monetary incentives (e.g., capital investment subsidy, interest subsidy, export promotion capital goods scheme, credit-linked capital subsidy for technology upgrading of small-scale industries, etc.) that provide support for capital to various Industries. An indirect effect of such measures has been to decrease cost of capital and enhance cost of labour. This has incentivised Industries to be more capital Intensive and less labour Intensive.
- Nature of Demand: Since 1991 LPG reforms, demand for manufactured commodities has increased substantially. These manufactured commodities are more capital intensive and less labour intensive. This in has implications for technology choice and employment generation
- Presence of Dwarf Firms in MSME Sector: Government provides a number of incentives to nurture Infant MSMEs to grow into large sized giants and ensure optimum utilization of factors of production, higher productivity & job creation. However, Government policies as shown below create perverse incentives for firms to remain small rather than grow bigger.
- Poor Implementation of Labour Reforms
- Stagnation in the share of Manufacturing sector
- Need for high skill sets in Services sector such as IT and BPM, Telecommunication etc.
- Disguised unemployment in agriculture accompanied by poor skill sets hindering job creation.
- Employment data. We currently lack timely and periodic estimates of the work force. This lack of data prevents us from rigorously monitoring the employment situation and assessing the impact of various interventions to create jobs.
STRATEGIES TO PROMOTE JOB CREATION
- Focus on Labour Intensive industries such as Textile and Leather
- Exploring Tourism Potential: potential to create more than 40 million new jobs in the next 5 years.
- Smart Farming: should be explored from inherent strengths in the agriculture sector to shift disguised unemployment from the traditional agriculture to the agro and food processing exports.
- Focus on Assemble in India: By integrating “Assemble in India for the world” into Make in India, India would create about 4 crore well-paid jobs by 2025 and about 8 crores by 2030.
- Incentivizing ‘infant’ MSME firms rather than dwarf firms: Provision of incentives to firms irrespective of their age has led to dwarf firms. Hence, incentives should be limited to initial 5-7 years only.
- Change in Orientation of SEZs: SEZs to be renamed as 3 E's- Employment and Economic Enclaves. Today, SEZs are viewed as zones promoting only exporters with special privileges; change in nomenclature will bring together all the categories of Investors that enable economic activity and boost employment creation. (Discussed separately under the Topic of SEZs).
- Effective Implementation of Labour Reforms, including promotion of Fixed term Employment.
- Promotion of secondary Agriculture in rural areas to boost non-farm employment.
- Making investment subsidies conditional on realizing a targeted level of employment per unit of investment.
- Enhance female labour force participation by ensuring the implementation of and employers’ adherence to the recently passed Maternity Benefit (Amendment) Act, 2017, and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act. It is also important to ensure implementation of these legislations in the informal sector