ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Addressing Unemployment


Unemployment will be a key issue for the electorate in the forthcoming Lok Sabha elections. An estimated 12.75 crore first-time voters would be exercising their franchise in the elections to be held between April and May 2019. India is the world’s second most populous nation, having a population of around 135 crore. With every two out of three Indians below 35 years of age, and around one million of its working-age population seeking jobs every month, India is currently witnessing a perpetual and astonishing job crisis scenario. According to the Centre for Monitoring Indian Economy (CMIE), as of July 2017, there were 14 million unemployed people in the country, which doubled to around 29 million in October 2018. As of February 2019, around 31.2 million people were actively looking for jobs. The unemployment rate has increased to 7.2% in February 2019 vis-à-vis 5.9% in February 2018.

Though the gross domestic product (GDP) growth rate has been high during the last few years, it has not translated into enough jobs for the youth of the country. According to the “State of Working India 2018” report published by Azim Premji University, the relationship between growth and employment generation has become weaker over the last few years. During the 1970s and 1980s, when the growth rate was around 3%–4%, employment growth was strong and hovered at around 2% per annum. Since 2004, even though the annual growth increased to more than 7%, the employment rate slowed down to less than 1%. A growth rate of 10% now results in less than 1% increase in employment. The situation is further precipitated by a low wage earnings problem whereby 82% of male workers and 92% of female workers earn less than `10,000 a month. There is also a greater disparity in the gender wage gap; women earn between 35% and 85% of men’s earnings, depending on the work type, education level, occupation and type of industry. An important point to be highlighted is the declining trend of female labour force involvement in the Indian economy over the last two decades. According to the International Labour Organization’s international database (ILOSTAT), India ranked 121 out of 131 countries on the participation of female workforce.

The employment rate has not picked up with the GDP growth rate, thereby resulting in the number of unemployed people increasing with every month. With half of the population below 25 years of age, the country is experiencing a high rate of open unemployment. India’s high economic growth has not proportionally yielded the desired benefit of employment opportunities for the young population. In fact, the lack of enough jobs is a key reason for discontentment among the young generation.

The question that arises is: What are the probable factors that have contributed to such high unemployment and what are the remedial measures? More than 75% of the jobs are in the informal sector, with agriculture, construction, and small enterprises being the biggest employers due to the labour-intensive nature of their businesses. The twin after-effects of demonetisation and the goods and services tax (GST) had an adverse impact on these sectors, leading to large-scale job losses. The sudden withdrawal of 86% of the currency in circulation in November 2016 had a cascading effect on the small and medium enterprises as many of these businesses conducted their daily transactions in cash. The roll-out of GST on 1 July 2017 further led to the closure of numerous small businesses and rendered lakhs of people jobless in the unorganised sector. The complexities of the GST regime led to the shutdown of numerous small enterprises as lakhs of small uneducated traders could not comply with the monthly online filings. The glitches and amendments post the GST rollout added to the woes of the smaller traders.

The stringent, complex, and archaic labour laws have been a major bottleneck for the formal growth of the manufacturing sector, resulting in fewer jobs. The payment of wages and salaries are governed by the old Payment of Wages Act, 1936 and the Minimum Wages Act, 1948. Worker lay-offs and closure of businesses are regulated by the anachronistic Industrial Disputes Act, 1947, which mandates that companies take prior permission from the government for laying off workers or closing businesses employing more than 100 people, though few states such as Rajasthan, Madhya Pradesh, Maharashtra, and Haryana have increased the minimum number to 300. The powerful labour unions have vociferously opposed the labour reforms ­insisting that these would endanger job security and safety. The prevalence of too many regulatory barriers on companies for setting up of manufacturing and industrial units in the country have been retrogressive in terms of job creation. Key bills related to the labour market and land acquisition are stuck so far, and the slow pace of reforms on agriculture and product markets have dented the job growth rate. Infrastructure projects frequently get entangled in land acquisition issues and delays in environmental clearances.

Labour reforms are desperately required for inclusive and sustainable growth with greater jobs for women. Modernisation and codification of labour laws are required for harnessing the demographic dividend and providing enough jobs for the young labour force. Voters would expect the new government, after the elections, to usher in reforms on land, labour, product markets and the agricultural sector, which will lead to inclusive growth and add more jobs. Greater flexibility for the labour market through labour reforms and faster infrastructure development through land reforms are the key ingredients for employment generation for the youth, besides providing for rapid inclusive growth. The sizeable, young electorate would expect the future government to take sustainable long-term policy measures on employment generation and provide some stimulus to the agriculture, construction, and small enterprises sectors, which will contribute to job creation for the ever-increasing labour force.

Sudip Das


Updated On : 5th Apr, 2019


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