Today's Editorial

Today's Editorial - 15 April 2024

India’s missing jobs — and where the next government can find them 

Why in News?

Mark Zuckerberg’s Meta is going to open its first data center in India on Reliance Industries’ Chennai campus which can affect the Indian employment system positively or negatively. 

  • Apart from that,  at present, when the general election is on its way and parties are  fighting hard with their manifestos, employment is missing from their primary targets. 
  • It raises the question of how India’s educated youth will do without employment.

Key Points:

  • India is on track to be the world’s third largest economy: The fastest-growing, youngest, leading the world in the number of hours on smartphones, billionaires brandishing pop stars and beggars brandishing QR codes, and soon home to a Tesla factory.
    • The one fly in the proverbial ointment is that the share of the working-age population actually working is 46.6 percent. That takes some of the shine off of the economy’s glitter; in other emerging markets the rate is closer to 70 percent.
  • Over half of all workers are self-employed. 
    • Even “unpaid helpers in family enterprises” are counted as self-employed.

Employment-related issue?

  • Reconsidering India’s original bet against the Asian formula for development: Conduct land reform, move excess labour from farms to factories, manufacture stuff with that abundant labour force, and sell to the world.
  • Instead, India’s bet was on services.
    • In exporting services, it graduated from the 1990s call centres to the early 2000s outsourced IT and back-office services to a fuller menu of technology-enabled services offerings today, employing 5.4 million people.
  • The working-age population is about 950 million strong. 
    • Jobs in high-end services require workers with requisite skills; however, the 2023 India Skills Report points to a massive skills deficit with only half of young Indians employable currently. 
  • This means that for the foreseeable future, low-skilled services remain the default labour absorbers: Construction, street hawking, home repair, kids doing tea runs for a notary’s cramped office, where one person is a scribe, a second person holds a stamp pad, a third sorts through stamps in a plastic bag. 
    • The jewel in the service's crown, the IT sector, shrank for the first time in 25 years. As automation and artificial intelligence pick up pace, many jobs in IT will become redundant. 
  • The slowdown is showing in cutbacks and slow hiring. As for the rest of those “employed” in low-skilled services, earnings are so low that after the long march back home to the villages during the Covid lockdown, many preferred to remain there. 
    • Sixty million more people are in agriculture than they were four years ago. 

Promising Vectors:

  • First, in high-end services exports, there’s potential in Global Capability Centres (GCCs) — offshore units of MNCs that provide services to the parent ranging from finance, legal and HR to high-tech innovation clusters in cyber, analytics and AI. 
    • There are already over 1,500 GCCs employing 1.6 million people, expected to grow to 4.5 million by 2030. 
    • Services out of such centres could become one of India’s biggest exports, generating incomes and demand for even more services from lower-skilled tiers.
  • Second, there is unrealised potential in India’s tech startups. If they can scale up, they employ many people directly and indirectly. Back in 2021, hot money was seeking refuge from an unfriendly China and India provided a convenient destination. Early investors drew in others who feared they were missing out. 
    • Successive investors were pressed to overvalue a company to get in on the deal, often ignoring market fundamentals, regulatory uncertainties and talent shortages. 
    • Fast forward to now: Many high-flyers — Paytm, Byju’s, Oyo — have crash-landed and investments in Indian startups have fallen to their lowest levels since 2015, while write-downs have surged.
    • Consider this a second chance — with fresh lessons — for Indian startups. 
      • There are growing needs in AI, SaaS, defence and greentech – solid industries that play to India’s strengths. 
      • As these startups grow, they will hire more people; creating a skilled talent pool is essential.
  • Third, consider India’s urgent need for a green transition. As the third-largest energy-consuming nation, it is already fourth in the world in renewable energy installed capacity. 
    • It plans to install 500 gigawatts of renewable energy capacity, producing 5 million tonnes of green hydrogen annually, cutting emissions by 45 per cent by 2030. 
    • The World Economic Forum projects 50 million net new “green economy” jobs in India.
  • Fourth, given the size of the jobs deficit, we cannot afford to slam the door on manufacturing. 
    • We must look beyond the high-profile plans for manufacturing iPhones, Teslas and semiconductors and enable small-and-medium manufacturers, who will likely be less automation-intensive and more reliable labour absorbers. 
    • India’s Digital Public Infrastructure — possibly using the Open Network for Digital Commerce (ONDC) that connects market players on a single protocol — can be leveraged for access to credit, resources, logistics, warehousing and customers. 
    • This can help small-and-medium manufacturers replicate the benefits of larger players.

Way Forward:

  • With an employment picture this grim, the government that comes to power after these elections needs to make job creation its job number one. 
    • It also needs to re-think the de facto singular bet strategy — manufacturing’s share has shrunk to 13 percent of GDP with all hopes riding on services. 
  • Given the number of people who need employment, multiple job-creation vectors are essential. 
    • It needs policy support, co-investment — especially in education, skill-building and jobs-preparedness — and tax and regulatory incentives to employers.
  • The policy agenda should involve making production and growth more employment-intensive, improving the quality of jobs, and making skills-training and active labour market policies more effective.

Beyond Editorial:

What is the situation for youth employment in the country?

  • India experienced mostly jobless growth in the first 19 years of the current century. 
  • At the national level, employment grew at an annual rate of 1.6% between 2000 and 2012 and then stagnated with a 0.01% rise till 2019, even as the economy grew at 6-7% on average during those years. 
  • Growth in job creation picked up after the pandemic, which can be attributed to a rise in employment in agriculture. 
    • However, that surge in agriculture jobs was due to a lack of opportunities outside the farm sector.

Contribution of the manufacturing sector in employment generation:

  • The manufacturing sector, which can absorb a lot of skilled and educated workers, lagged in employment creation even though the output of the sector, as measured by Gross Value Added (GVA) rose. 
    • China with its mega production lines provided millions of jobs, and when manufacturing moved to lower-cost centers such as Vietnam, those countries experienced growth in factory jobs. 
  • However, in India, employment in the manufacturing sector rose just 1.7% even as its GVA grew 7.5% per year in 2009-19. 
  • Manufacturing sector job growth gained pace only following the reopening of the economy after a harsh lockdown enforced to contain the spread of the COVID-19 pandemic. Yet, job growth at 3% lagged the relatively muted GVA growth of 3.5%.

Services sector’s role in job creation:

  • Job growth in the services sector despite absorbing millions including the young and educated, lagged the growth in GVA, according to the IHD-ILO (Institute for Human Development (IHD) - International Labour Organisation) report. 
  • But it certainly performed better than the manufacturing sector. 
    • Against a rise of 7.5% in GVA per year in 2000-19, employment in the services sector grew by 2.9%. 
    • Between 2019 and 2022, when GVA growth slowed to 2%, mostly due to a slowdown in software services, employment grew by 1.1%.
    • Construction was the only sector that consistently created employment, though mostly low-paid informal jobs.

How severe is the level of unemployment among educated youth?

  • An estimated 7-8 million youths are added to the labour force every year. That is equivalent to the population of a state such as Himachal Pradesh. Given the profile of India’s demography, similar numbers will continue to join the labour force for some more years. 
  • About 27% of India’s 2021 population of 1.36 billion were in the age group of 15-29 years, that is about 367.2 million people. 
    • By 2036, the share of youth in India’s projected population of 1.52 billion is expected to decline to 23%, but their numbers will still be very large at 349.6 million. 
    • While most of the younger ones would be in education, those who cannot find appropriate work will be forced to sit out or take up jobs that won’t make use of their qualifications.
  • Youth unemployment continues to be in double digits, although it has declined from 17.5% in 2019 to 12.1% in 2022. 
    • The IHD-ILO report notes that the incidence of unemployment was much higher among young people in urban areas than in rural areas and among younger youth than older youth.
  • Since 2000, the youth unemployment rate has risen by more than four percentage points with an increase in the level of education. 
    • The unemployment rate in 2022 among youths with a graduate degree was 28.7% compared to 3.2% for those with less than a primary education. 
  • This indicates a problem of unemployment for highly educated youths, who accounted for nearly half of the total unemployed non-student youths in 2022, the report stated. 
  • Underemployment is another problem and was seen to be higher among less-educated and poor youths.

What is the scene of youth with technical education and vocational training?

  • Technical education and vocational training also did not ensure employment for the young workers. 
    • Analysis by the IHD-ILO team found that in 2022 the unemployment rate among youths with a graduate diploma was 31.1% and those with technical training degree at 29.4%.

What is the state of unemployment among women?

  • Overall, young women are less likely to be employed and also have lower participation rates in education and training. 
  • In 2022, over 48% of young women, equivalent to 84.9 million, were not engaged in employment, education or training against 9.8%, or 18.5 million, young men. 
    • Encouragingly, that proportion for women fell below 50% for the first time since 2000. 
  • The overall unemployment rate for young women is more or less similar to that for young men in most of the recent years, even though fewer females sought work. 
    • However, the unemployment rate for educated women tended to be higher at 21.4% compared to 17.5% for men, and even higher at 34.5% for female graduates compared to 26.4% for men with similar qualifications.

Conclusion:

Thousands of educated young men and women are unable to find jobs that match their skills and education and are unable to contribute meaningfully to the economic growth of the country. Hence, employment should be the primary focus of development work and politics, and the role of all three sectors in employment generation should be equal in their contribution to GDP for sustainable development.

 
 
 

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