Line up the right reforms first
When it comes to creating jobs, patchwork solutions won’t do
Besides absorbing the 10-12 million youth who are joining the labour force every year, a recent Confederation of Indian Industries (CII) report has rightly added 5-8 million more jobs needed to absorb Indians who are leaving farms to seek work in manufacturing and services. Going by the higher end of such estimates, this means a national requirement of 20 million new jobs a year. In contrast, the major services and industrial sectors of the formal economy together barely generated 150,000 new jobs last year including heavy industry and software.
India largely missed the manufacturing boom that lifted so much of Asia out of poverty between the 1970s and 1990s thanks to populist labour and land laws which destroyed the competitiveness of industry. Most developed economies saw manufacturing employment reach about 25% of their workforce before making the switch to services. India’s manufacturing employment has never gone above 15% and is now about 12% and declining. Manufacturing jobs are socially important as they absorb poorly skilled farm labour and provide a springboard for the next generation to acquire the skills to move into services. Each government has sought to address this with a patchwork of solutions. These have included financial handouts to keep unviable farms staggering along for a few more years, creating large numbers of pointless government jobs, import substitution strategies and, as the present regime is doing, encouraging self-employment. But this band-aid approach did not provide real solutions.
The BJP government deserves to be commended for addressing the structural problems that hold back the manufacturing front and investing in a future economic model built around digitisation. However, its tolerance of the cultural campaigns against, for example, the meat industry means it may still destroy as many jobs as it is creates. Jobs are the country’s main challenge and New Delhi needs to prioritise it as the main yardstick by which to judge almost all policies.