Jobless Growth Triggers Concern of Voter Backlash in India

(Bloomberg) -- India’s financial capital Mumbai woke to a strange sight earlier this month. More than 100,000 young men and women on motorbikes drove through the city for almost six hours. Their demand: guaranteed jobs in state-owned and private companies.

The protesters, some as young as 14, are just one part of the swelling ranks of discontented citizens frustrated at the lack of job opportunities in India despite the country’s brisk economic growth. While gross domestic product grew at one of the fastest paces in the world, employment creation was the slowest on record in 2015, with just 135,000 net new jobs in the formal sector of the economy against the 12 million estimated new entrants to the workforce, government data show.

“Our youngsters have no jobs, no security -- and they say the economy is booming,” said Manohar Anandrao Patil, a 50-year-old farmer who traveled 500 kilometers for the rally. “We voted for Narendra Modi, gave him full majority. Yet half-way through his term he’s done nothing to assure our kids of education or well-paying work.”

With the world’s second-most-populous nation shifting from agriculture at a much slower pace than forecast, Prime Minister Modi risks a backlash that could jeopardize his re-election prospects come 2019. Public anger is also concentrating around India’s affirmative action program that enshrines employment and education preferences for members of disadvantaged castes and there are fears this could push political parties to play on religious and caste divisions in the lead up to state polls next year.

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Divisive Approach

"The lack of job growth has significant potential political and operational risk implications for companies in India," said Jan Zalewski, Singapore-based analyst at Verisk Maplecroft, a political risk firm. "In the longer term this could tip the balance away from its business focus. We could see a more socially and communally divisive approach emerging, especially in the context of local election campaigning."

The office of Arvind Subramanian, Modi’s top economic adviser, couldn’t immediately make him available for an interview on the government’s job-creation push. According to a vision document published by top bureaucrats this year, India will create 115 million new jobs by 2032 if GDP grows at 7 percent each year, which will rise to 175 million at a 10 percent growth rate.

The mass protests in Mumbai by the Marathas, a land-owning community that forms more than a third of the local population in the western state of Maharashtra, mirrors similar and at times violent mass agitations over the last two years by dominant caste groups across India.

In February, Modi was forced to call in 5,000 security forces to quell Jat mobs blocking roads and setting shopping malls on fire in riots that led to more than 15 deaths and cut off part of the water supply to the capital, New Delhi. Earlier this year in Gujarat, which Modi ruled as chief minister from 2001 to 2014, the relatively well-off Patel caste assembled in huge protests numbering up to half a million, again forcing Modi to send in the troops to help quell the unrest.

Demographic Dividend?

Caste reservations began as a way to right historical wrongs, but evolved into political tools as traditionally rural groups migrated to India’s cities for work, but found no jobs, according to Dipankar Gupta, a sociologist who studies India’s caste system. 

While the government hasn’t done enough to create jobs, farming groups have also been unable to shift focus to a future that’s urban and competitive, said Chandrabhan Prasad, a researcher and entrepreneur who belongs to one of the lowest castes in India’s rigid social hierarchy.

Only about half of Indian job seekers do find jobs, and half of these jobs are in the low-wage construction sector, said Jayan Jose Thomas, an economics professor at the Indian Institute of Technology in Delhi.

"It’s an opportunity, in a way, the demographic dividend. But it’s also a challenge, in that some of this growth is coming in the poorest, least-developed northern, eastern states, such as Bihar and Uttar Pradesh," Thomas said. "These are really tough times -- for any government."

Modi’s party lost state polls in Bihar last year. Uttar Pradesh, the nation’s most populous state, holds elections early next year, as will at least four other states.

‘The Young, Old, Poor’

While jobs data in India are delayed and partial, available figures paint a bleak picture. About half of Indian households have just one employed person, and in 77 percent of households no one earns a regular wage, according to a government survey of 156,563 households conducted between April-December 2015. More than two-thirds live on less than $150 a month.

The lack of a security net is due to the fact that more than 90 percent of Indians work in the so-called informal sector, that includes tailoring and pickling. Modi has been unable to win support from lawmakers and trade unions to ease some of the world’s most rigid land and labor laws, stifling job creation.

While the government remains an attractive employer, the fight for jobs is getting tougher. The public sector’s share in formal employment fell to about 60 percent in 2011 from 68 percent in 2003, and the number of jobs across federal, state and local bodies dropped 6 percent to 17.5 million. Private employees rose 38 percent to 11 million.

With more than 41 percent of India’s 1.3 billion people below the age of 20, the issue of jobs may become a key issue in next year’s elections, said Romita Das, an analyst formerly with Control Risks.

"Large-scale investment in the industrial and manufacturing sectors remains underwhelming, suggesting that jobless growth is likely to continue," Das said. "The burden of such growth is likely to fall on the country’s most vulnerable workers -- the young, the old, the poor."

(A previous version of this story corrected the analyst’s name in fifth paragraph.)

To contact the reporters on this story: Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net, Iain Marlow in New Delhi at imarlow1@bloomberg.net. To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Jeanette Rodrigues, Ravil Shirodkar