In Its Assessment Of The Economy, Congress Party Calls Jobs The ‘Real Deficit’
The Congress in its ‘Real State Of The Economy’ report says that demonetisation hurt job creation.
A day before the government presents its Economic Survey for 2016-17, the Indian National Congress released its own assessment of the economy and called on the government to focus on job creation.
In an 85-page document which closely mirrors the economic survey, the Opposition party said that the government has failed to make good on its promise of creating one crore jobs during its tenure.
Going by the promise of one crore jobs during this government’s tenure, it would mean that there should roughly be 20 lakh new jobs created every year. There are nearly 10 lakh youth looking for a job every month in India. Amid such a staggering need and a tall promise, there were less than 1.5 lakh new jobs created in all of FY 2016, for which the latest data is available.Indian National Congress ‘The Real State Of The Economy’ Report
Job creation in the economy has been on the decline since 2010.
Data compiled by BloombergQuint showed that across eight key employment generating sectors, only 1.35 lakh jobs were added in 2015. The data was based on the quarterly employment surveys conducted by the labour bureau. Job creation has steadily fallen from a high of 9.3 lakh jobs created in 2011, shows the data. The poor track record on job creation is despite a relatively strong rate of economic growth, which suggests that growth is coming from sectors that may not absorb India’s large and growing workforce.
The Congress party, in its document, claims that the pace of job creation is only declining. It goes on to argue that the deficit of jobs is what the government should be worried about.
While the government needs to be mindful of its fiscal deficit target of 3 percent, and needs to keep the current account deficit within a manageable range, the most important deficit staring at all of us is the 1 crore jobs deficit every year. This is the real economic target for India.Indian National Congress ‘The Real State Of The Economy’ Report
The report went on to add that the creation of new jobs is contingent on new investments.
While GDP growth has been cruising at above 7 percent, the investment cycle has been slow to revive. Gross fixed capital formation, a component of GDP growth from the expenditure side, has contracted for three consecutive quarters till September 2016. Public investment has failed to compensate for private investment which remains sluggish due to relatively low levels of capacity utilisation.
According to the report, gross fixed capital formation is likely to shrink for the first time in 14 years in fiscal 2017.
“An important element to consider is the sector that attracts investments, because for the same amount of investments, different sectors create different number of jobs. So, naturally to create more jobs the government should focus on attracting new investments in the job intensive sectors,” said the report.
Demonetisation Hit
The Congress went on to argue that the government’s decision to demonetise has only hit a sluggish investment environment further. The currency exchange exercise has “hit the industrial sector very hard and for a fresh round of investments to emerge appears difficult in the medium term.”
It cites weaker auto sales and a fall in the value of new investment proposals in the December 2016 quarter as evidence. According to data from the Centre For Monitoring Indian Economy, new investment proposals worth Rs 1.25 lakh crore were submitted in the December-ended quarter, down from Rs 2.36 lakh crore in the previous quarter.
Private sector economists have forecast that the Indian economy will grow at between 6.5-7 percent in fiscal 2017. Many, however, are expecting a V-shaped recovery in fiscal 2018 as the shortage of currency eases.
Every 1 percent drop in GDP growth leads to a loss of Rs 1.5 lakh crore, said the report.
The Congress also, once again, raised concerns about the independence of the Reserve Bank of India during the demonetisation process.
..in the wake of demonetisation, questions have arisen regarding the central bank’s leadership, competence and independence. The RBI’s response to the parliamentary Public Accounts Committee revealed that the government had advised the RBI to consider demonetisation of high values notes on November 7, 2016, and the RBI Central Board approved the proposal the very next day. This indicates that the endorsement of the proposal was done without the required due diligence, a clear case of abdication of responsibility.Indian National Congress ‘The Real State Of The Economy’ Report
View On Universal Basic Income
The Economic Survey, to be released on Tuesday, is widely expected to discuss the idea of a Universal Basic Income (UBI) for India. While the structure of any such proposal is unknown, the Congress party in its report said that “it is worth exploring UBI as an alternative approach to addressing the goal of eliminating poverty in India.”
While laying down the pros of the concept, the Congress party said that UBI offers a way out of India’s challenging targeting problem. The downside of such a programme is the high cost that would be attached to it.
Commenting on whether such a scheme could be funded through tax increases, the report said that the instruments available to “claw back” from the rich are limited.
Given that only 1 percent of the population pays income tax, while 2.3 percent file tax returns, the fiscal instruments to claw back the transfers from the rich are limited. None of these are insurmountable issues. Cutting wasteful expenditure and raising the tax base are essential steps in fiscal reforms to raise resources, whatever may be one’s priorities, whether it is investing in infrastructure or fostering human capital or alleviating extreme poverty.Indian National Congress ‘The Real State Of The Economy’ Report