Jobless Growth in India

Jobless Growth in India

When India’s growth was blooming in 2016-17, it earned the tag of the fastest-growing economy in the world. Even as the country kept clocking impressive growth numbers for successive quarters, economists were worried about one anomaly — jobless growth.

India’s rate of jobless growth had emerged as a top concern among economists who had repeatedly questioned how jobs were not growing as fast as the country’s GDP. They warned that the rate of jobless growth could severely impact India’s economy which depends heavily on the middle class population, engaged primarily in salaried jobs and entrepreneurship.

While GDP growth in India had been falling since the beginning of last year, the coronavirus shock in 2020 had an overwhelming impact on India’s economy and jobs. The pandemic and consequent lockdown laid the fragility of India’s formal job market, which has collapsed.

Five months into the lockdown, India has witnessed a sharp decline in the number of jobs in the formal sector — the largest source of salaried employment in the country.

Even after unlocking the economy, there has been no improvement in the salaried jobs space. The government has cited the unprecedented economic crisis behind the job situation in the country. However, the coronavirus pandemic may not be the only reason why salaried jobs — one of the most secure forms of employment — are losing prominence in India.

Unemployment in the country had been a problem since 2017-18. A government job survey, whose publication was delayed just ahead of 2019 Lok Sabha election, showed how the country’s unemployment reached a four-decade high of 6.1 per cent in 2017-18.It indicates that a large part of India’s workforce is employed by the informal sector, where it is easy comparatively easier to get jobs. However, such form of employment heavily depends on demand originating from the urban economy, comprising mostly of salaried jobs.

With the sudden meltdown of salaried jobs in India, the informal economy is also feeling the heat with thousands of small-scale traders and hawkers shutting shop.

Only the rural economy has seen a steady rise during the lockdown period as farming became the last resort for those who lost their urban jobs. Most daily wage labourers who were forced to return to their native places were the main reason behind a 14 million rise in farm employment.

However, rural growth is not enough for an economy which needs at least 10 lakh formal jobs to be created every year to support the country’s rising youth population.

Salaried job holders working in urban areas are among the worst-hit workers during the coronavirus pandemic in India.

This is a key to understand why private consumption numbers are so poor. India lost 2.1 crore salaried jobs by the end of August, down from 8.6 crore in 2019-20 to 6.5 crore last month.

Every month, a million Indians become age-eligible to join the workforce, but the growth in jobs has not kept pace with the rising number of aspirants. The result was- unemployment has been on the rise, despite India supposedly being one of the brighter spots in a slowing global economy.

Employment creation will be one of our greatest challenges for the next decade. The situation has worsened due to weak industrial growth, struggling agriculture sector with widespread drought, cost rationalisations in several sectors and the knock-on effect of a global slowdown. Also, traditionally labour-intensive industries are beginning to increasingly mechanise their operations. While it makes them more productive and profitable, it also shrinks job opportunities.

The reason for the decline in jobs could be a reduction in contract workers (nearly 70,000 of them were retrenched in the first half of FY 2016, compared to 161,000 additions in the first half of FY 2015). Value addition is happening across the world and, depending on the circumstances, people decide where to go. Employment in export units, reeling under shrunken global demand, also saw a sharp decline. There were only 5,000 job additions in the first half of FY 2016 compared with 271,000 in the corresponding period of FY 2015. In the automobile sector, for instance, there were 23,000 job losses in export units compared to the 26,000 job additions in the other seven labour-intensive sectors in the second quarter of FY 2016.

Large manufacturers are trimming operations, throwing many jobs into jeopardy. Nokia, locked in a tax dispute with Indian authorities, shut down its handset-making factory in Chennai in November 2014, rendering 8,000 workers jobless. For Microsoft, the new owner of the Nokia handset brand, making smartphones in China and Vietnam was cheaper. Meanwhile, some MNCs in the financial sector have also recently exited India, after finding the domestic competition tougher than they had bargained for. Following on the heels of Goldman Sachs and Nomura, JP Morgan Asset Management of the US exited its onshore India-based mutual funds business, selling out to Edelweiss Asset Management, the seventh foreign-sponsored fund house to exit the Indian MF business in the past three years. Cement major Lafarge is also planning an exit, after selling its 11 mt business here. Hardly a surprise as the global cement industry is beset by overcapacity and weak demand.

“We’ve only been downsizing in the last few years, especially in infrastructure,” says Sunil Kanoria, president, Assocham, and also vice-chairman. The crux remains- the situation of talented unemployed youth who look forward to the foreign countries to settle down!

Written by: Charu

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