The budget must catalyse start-ups
India’s primary development challenge is to reskill and train more than a billion young adults
India officially has 18 million unemployed (ILO, 2017), with the majority of them young people. According to 2017 estimates from the of Labour and Employment, organised employment is currently just 10.1% of total employment, with the majority of our more than 600 million workforce employed in informal jobs with limited social security.
The demographic growth continues – we’ll have the largest workforce in the world within a decade, with a surplus of working age youth (more than 47 million) compared to a global deficit of 56.5 million.
At present, average daily wage rates remain low in rural and urban India. Typically, a farmer now earns ₹2,400 per month per hectare of paddy and about ₹2,600 per month per hectare of wheat, while farm labourers earn less than ₹5,000 per month according to IndiaStat 2016. Average daily wage rates in agricultural occupations continue to remain significantly low — ploughing would have earned an able-bodied labourer ₹280.50 in daily wages in 2016, while a woman would earn just ₹183.56. Consumer inflation eats at this, with agricultural and industrial labou- rers affected by a doubling of consumer price index numbers (332 in 2004 to 764 in 2014) in the past decade. Marginal farm economics is discouraging the youth from greater participation in the agricultural labour market, underlining the need for better quality jobs.
Historically, the government accorded priority to this issue. A National Youth Policy was first formulated in 1988, while the Youth Policy of 2003 sought to encourage youth skill development – further strengthened by the creation of the National Council for Skill Development in 2005. The National Youth Policy of 2014 had the government promising to spend ₹90,000 crore on youth through a variety of yearly targeted schemes. However, much remains to be done.
Our primary development challenge is to educate and re-skill more than a billion adults in the next few decades, helping transform them into productive members of our society. We have historically spent a pittance on reforming our education system by adapting innovations (the current financial year 2018 spend is just ₹275 cr).
Given our population, we should ideally have at least 50 world-class multidisciplinary research universities.
In reality, our research universities hanker for funding. Budgetary allocations for education have been piecemeal, without a focus on building total annual training capacity (currently at 4.3 million students annually; as opposed to 12 million people entering the workforce every year).
There are ways to resolve this: the upcom- ing budget should seek to encourage the private sector to utilise the Pradhan Mantri Kaushal Vikas Yojana to enhance employability skills, especially in a work environment in which rising automation could put more than 69% of Indian jobs at risk. The National Skill Development should be provided significant budgetary support.
An employment guarantee can help. In early 2013, amid a financial crisis, the European Union was beset with rising unemployment among young people. This was addressed by the enunciation of a youth guarantee. The Youth Employment Initiative was funded to the tune of €3.2bn for FY15 and had an immediate impact – the average rate of youth unemployment fell to 16.9% within three years.
The government should aim to catalyse the creation of start-ups. While the existing “Startup India Fund” is a promising initiative, fund deployment remains a significant issue – with only ₹605 crore committed by SIDBI and with just ₹337 crore invested across 75 start-ups. The budget can explore making it easy for entrepreneurs to launch start-ups, administer them and exit cleanly, if required. Telangana has sought to help start-ups by providing them with a working space and an encouraging environment in T-Hub, an incubator for start-ups. It is now associated with more than 835 start-ups.
Articulating a National Employment Policy is important in such times – recent reports that the government is moving in this direction are heartening. It should also attempt to offer a roadmap for the creation of quality jobs across sectors, with fiscal and tax incentives to encourage entrepreneurs and private sector firms to hire more in the organised sector. We should focus on reducing regulatory burden of sectors such as textile, construction and infrastructure that have a high potential of generating employment in the millions.
With rising trade tariff barriers, and a political landscape hostile towards globalisation, the window for scaling up light manufacturing is closing. India must ensure it is the primary target for the migration of job generating light manufacturing industries from China and the West. In pre-colonial times, India had millions working to manufacture muslin which clothed the world. The primary Indian budgetary challenge is to increase the employability of India’s labour force.