‘18% GROWTH MUST TO ENSURE JOBS’
The World Bank has advised India to raise its efforts at employment generation since economic growth itself can not solve the looming jobs challenge. India, it said, will have to grow 18 percent per year at the current employment generation rate to catch up with other comparable economies.
The World Bank (WB) has advised India to raise its efforts for employment generation since economic growth itself cannot solve the looming jobs challenge. India, it said, will have to grow 18 per cent per year at the current employment generation rate to catch up with other comparable economies in terms of providing jobs to its population over 20 years.
The impossibility of economic growth alone solving unemployment problem could be gauged from the fact that the WB has pegged India’s economic growth at 6.7 per cent for 2017-18, a tad higher than 6.6 per cent projected in the latest government estimates. The WB projected the growth at 7.3 per cent for the current financial year and 7.5 per cent for the next financial year. India’s gross domestic product (GDP) growth plummeted from 8.2 per cent in 2015-16 to 7.1 per cent in 2016-17.
The report said the same thesis holds true for other South Asian countries. “These (growth) rates are implausibly high, implying that rapid growth alone will not be enough. If South Asian countries are serious about increasing employment rates, more jobs will need to be created for every percentage point of growth,” said the report.
The WB released its bi-annual South Asia Economic Focus report for Spring 2018 titled Jobless Growth? in Washington on Sunday, a few days ahead of IMF-WB spring meetings. In its previous South Asia economic focus reports, it had focused on backlash of globalisation, tepid investment growth, and fading global tailwinds in the South Asian context.
In India, the working age population increases by 1.3 million people in a month and the country must create 8.1 million jobs a year to maintain its employment rate, which has been declining, based on employment data analysed from 2005 to 2015, largely due to women leaving the job market.
India would need at least 7 million jobs a year even if it sets an ‘unambitious’ target for job generation, about 8.5 million jobs a year if it intends to keep employment rate constant, and 13.5 million jobs a year if it intends to catch up with comparable economies, said the report. Keeping its eye on South Asia, the WB report said there is an addition of 750,000 jobs in India per percentage point of GDP growth. In Pakistan, 200,000 jobs are added for 1 per cent upswing in GDP growth, while the figure is 110,000 for Bangladesh. Prior to the report, the WB conducted a survey. According to the survey, respondents said better infrastructure, affordable housing, and greater integration with global markets should be the top priorities to generate more jobs per percentage point increase in GDP growth. Against the backdrop of an uptick in global growth in the current year, the report predicts that global demand and thus, the exports from emerging economies would moderate in the upcoming years to 2020.
It also notes that the 6 per cent growth in Indian exports in 2016-17 was lower than what the WB expected in its January update.
Exports growth is key to employment growth in India, economists and policy planners have observed time and again.
“With the Indian economy going through structural changes and technology changing the idea of our future every day, the report does not portray a realistic picture for India's growth,” Ila Patnaik, an economist and a professor at the National Institute of Public Finance and Policy, said.
Deconstructing the debate on unemployment, it says female employment rate dropped by 5 per cent per year in India in 2005-2015, whereas male employment rate decreased “very little”.
Labour force participation rate is defined as the number of persons looking for a job as a proportion of the working age population (age group 15-59). In 2015-16, the labour force participation for males was 75.5 per cent, while that for females was a meagre 27.4 per cent.
The national sample surveys in India indicate that female labour force participation has reduced, while the census data says it has remained constant, notes the WB report. This incongruity in data, the report said, makes it difficult to ascertain employment estimates and prospects for not just India, but all South Asian countries.
The report notes that “faster economic growth leads to either more jobs in the aggregate, or to a reallocation of jobs away from self-employment”, but it also observed that this correlation is the weakest for India.
Though India has grown faster than before past 2005, the report says that job growth has rather reduced in the reference period 2005-2015.
“A further acceleration to 7.5 per cent by FY19 and FY20 is dependent on a sustained recovery in private investments, which is expected to be supported by policy measures that improve the investment climate,” is said in its forwardlooking outlook for India.