100 million jobs by 2022 was the promise of the Narendra Modi government. That promise was to be met through campaigns like Make In India, intended to encourage big ticket investments; Startup India, aimed at pushing entrepreneurship; and Skill India, which was to make Indians more employable.
Half-way through its term, the government is yet to deliver on that promise with data showing that job creation in the Indian economy is still to pick up.
Data collected as part of the Labour Bureau’s quarterly employment surveys across eight job creating industries shows that only 1.35 lakh jobs were created in calendar year 2015. The pace of job creation has been on a steady decline since 2011 when 9.3 lakh jobs were created.
In an interview with BloombergQuint, Mahesh Vyas, chief executive officer and managing director of the Center For Monitoring Indian Economy (CMIE) said that while some of the initiatives announced by the government were well intended, they do not appear to have “borne fruit.” One reason for this could be the lack of private investment in the economy.
What is required for jobs to get created? First, you need to get investment or you have a MGNREGA kind of programme. But the choice of this government is to create jobs through manufacturing activities and startups etc, which is a little more exciting. So while there have been some initiatives from this government, I don’t think it has actually borne fruit...The data shows that private enterprise has not been enthused sufficiently to invest to create the jobs required.Mahesh Vyas, CEO & MD, CMIE
Vyas explains that while growth in gross domestic product (GDP) has been strong for the last couple of years, the number is more reflective of a better way of measuring economic activity. The new GDP data suggests that a substantial amount of growth is coming from smaller manufacturing units, said Vyas while adding that such units may not be the efficient users of capital or labour.
The Indian economy is expected to grow by 7.1 percent this fiscal year, according to estimates by the Reserve Bank of India. In the previous fiscal, the economy grew at 7.6 percent.
A large part of the growth is an improvement in our measurements. So we are calculating GDP through a newer methodology which shows that there is a substantial amount of growth coming from the smaller manufacturing units...The problem is that efficiency of labour is best achieved by the larger units and the employment of labour in the smaller units is low on efficiency.Mahesh Vyas, CEO & MD, CMIE
‘Demonetisation Is Bad For Investments And Jobs’
While the Labour Bureau provides annual data on the unemployment rate and quarterly data on jobs created by key industries, India so far does not have an official source of high-frequency unemployment data, which can be used to measure the impact of economic developments on the employment scenario.
The CMIE has developed a survey-based index which throws up a monthly unemployment rate and a 30-day moving average of the unemployment rate on a daily basis. The index, data for which is available since March 2016, got its first opportunity to measure the employment impact of an economic event when the government announced its decision to withdraw Rs 500 and Rs 1,000 currency notes.
The demonetisation decision has impacted activity in the services and manufacturing sectors but has so far not led to a significant spike in the unemployment rate measured by the BSE-CMIE Unemployment Rate.
Over the longer term, though, any decision which creates uncertainty in the economy is bad for investments and, hence, for jobs, said Vyas in the interview conducted on December 30.
A separate set of data released by CMIE at the start of this month showed that new investment proposals in the third quarter of the current financial year saw new investment proposals worth Rs 1.25 lakh crore, lower than the level seen over the last few quarters. The average value of quarterly investments during the Narendra Modi regime stood at Rs 2.36 lakh crore, said CMIE. The number of new investments proposals fell to 404 during the quarter – the lowest in a decade.
I think it is very important that the government should not create uncertainty. Demonetisation is very bad for investment and very bad for jobs. The way it has unfolded itself and the way it presents itself even today, we are still in an extremely high uncertainty phase. Investors can deal with risk, they can deal with a volatile market. It’s painful but they can deal with it. But they cannot deal with uncertainty, which is very different from risk. So the first thing I would say today is that don’t create uncertainty.Mahesh Vyas, CEO & MD, CMIE
‘It Is About The Right Kind Of Skills’
Apart from encouraging investment by creating a conducive macroeconomic and operational environment, the government needs to focus on reforms that would allow Indians to be more appropriately skilled, said Vyas.
“It is about the right kind of skills. It is very clear that the average graduate is largely unemployable. So he or she requires much more than his education. This is not that we require higher education, the story is that our graduation level education is not good enough. We study by rote without understanding.”
Vyas added that what is needed is not a large policy document aimed at education reform but a continuous process through which corrections are made, which eventually results in a more appropriately skilled workforce.
It is not about making policies. Policies then become too much. What is required is a continuous process to correct our educational system. It certainly is important to keep putting out papers. An example – we reformed the financial markets big time in the 1990s. There was no policy or document of financial reforms that came out. But a bunch of people got together, thought a lot, put out lots of papers in many forums and had many discussions and debates and came out with solutions. That continuous process is what you need.Mahesh Vyas, CEO & MD, CMIE