Why Jobless Growth in India


Every month, a million Indians become age-eligible to join the workforce, but the growth in jobs has not kept pace with the rising number of aspirants. The result: unemployment has been on the rise, despite India supposedly being one of the brighter spots in a slowing global economy.
According to the labour ministry's 27th Quarterly Employment Survey of eight employment-intensive industries- textiles, leather, metals, automobiles, gems & jewellery, transport, IT/BPO and handloom/powerloom)- there were 43,000 job losses in the first quarter of FY 2015-2016. The second quarter was better, with 134,000 new jobs, but even then the 91,000 net new jobs created in the first half of FY 2015-16 look desultory.
Many wonder why an economy supposedly growing at a rate of over 7 per cent is not creating enough jobs. Probable reasons are -
(1) Many job-seekers are qualified for the job, but not skilled.
(2) Weak industrial growth.
(3) Struggling agriculture sector with widespread drought.
(4) cost rationalisations in several sectors.
(5) The knock-on effect of a global slowdown.
(6) Traditionally labour-intensive industries are beginning to increasingly mechanise their operations. While it makes them more productive and profitable, it also shrinks job opportunities.
(7) A reduction in contract workers (nearly 70,000 of them were retrenched in the first half of FY 2016, compared to 161,000 additions in the first half of FY 2015).
(8) Employment in export units, reeling under shrunken global demand, also saw a sharp decline.
(8) Downsizing Industries -  Large manufacturers are trimming operations, throwing many jobs into jeopardy. Nokia, locked in a tax dispute with Indian authorities, shut down its handset-making factory in Chennai in November 2014, rendering 8,000 workers jobless. Some MNCs in the financial sector have also recently exited India, after finding the domestic competition tougher than they had bargained for. Following on the heels of Goldman Sachs and Nomura, JP Morgan Asset Management of the US exited its onshore India-based mutual funds business, selling out to Edelweiss Asset Management, the seventh foreign-sponsored fund house to exit the Indian MF business in the past three years.
(9) Even some celebrated start-ups, touted as the next big thing, have found themselves in a tight corner.
(10) More work is now being done with fewer employees.
(11) The economy has become less labour-absorbent.
(12) This growth is capital-intensive, not labour-intensive."
(13) Whatever growth there is does not seem to be translating into jobs. Either the growth is in sectors that are not employment-intensive, or overall growth is overstated.
(14) Job creation is poor because the investment cycle has not kickstarted.
(15) higher levels of automation is cause for the job squeeze.
The India Exclusion Report 2013-14 by the Delhi-based Centre for Equity Studies, an autonomous research and social justice advocacy institution, says only 27 million jobs were added in the supposedly high-growth period of 2004-2010 compared with over 60 million between 1999 and 2004. Creating manufacturing jobs will be tough with the advent of robotics.

 Job displacement due to trade deficits.
Globalization harms the interest of unskillful workers, either directly through immigration or trade mobility. 
Growth without jobs

This year's Budget had specific provisions to expand productive employment, while also giving a push to certain sectors of the rural economy and infrastructure that would create jobs.
The move to encourage small and medium enterprises to hire more workers while the state pitches in with provident fund contributions, and the emphasis on roads and other infrastructure are all good measures.
The government could incentivise job creation by giving infrastructure a push, finding a way to lower interest rates and improve ease of doing business.
The government's Make in India jamboree held in Mumbai this February saw investment commitments of Rs 15 lakh crore from Indian and overseas investors, but those projects are still largely on paper.
Manufacturing blues

Currently, the manufacturing sector has an overall employment share of 12-13 per cent.
In the infrastructure and manufacturing sector, getting good talent at the leadership level, especially to handle profit and loss responsibilities with requisite commercial skills, is not an easy task.
The 'dignity of labour' remains an exotic concept in India. The manufacturing sector has been losing people to the services sector, which is seen as more glamorous, and betterpaid. It's also much easier to switch jobs and gain international exposure here.
The services story
Yet, there are some areas that still stand out when it comes to job creation, notably the financial services and the financial technology sectors.
For example, ever since the RBI granted licences to 10 new small banks and 11 payment banks in 2015, employment opportunities have been growing.
The other upbeat sector is e-commerce, which is flush with funds and investing heavily in logistics and lastmile delivery.
Changing it winds

Meanwhile, the traditional IT sector is experiencing big change that will impact job profiles and opportunities. Automation, self-service portals, costsharing are all dampeners on job creation in the ITeS segment.
Customers are seeking more productivity and value addition. While this will require a higher level of skill, it will not result in more new job opportunities.
The model of companies going to engineering colleges to recruit staff is changing. Disruptive technologies, such as social, mobility, analytics and cloud are offering new avenues of growth across verticals for IT companies. Artificial Intelligence (AI) is another upcoming area.
The other interesting trend is the shift of ITeS jobs to Tier-2, Tier-3 cities and rural areas-a trend that may owe to simple cost effectiveness, but which will require higher emphasis on interpersonal and communication skills.
The earlier euphoria over call centre jobs has all but vanished. Here, India seems to be losing out to countries like the Philippines and Malaysia which have staff trained in non-voice analytics and accounting work.
Hope on the horizon

This new economy-which is more digital and technology driven and is slowly but definitely changing how we live-from technology interventions in rural areas (the 'JAM' trinity of Jan Dhan Yojana, Aadhaar and mobile connectivity for targeted subsidies) to buying groceries online. India is on the cusp of a second-generation digital revolution, which will spread across the economic spectrum, from agriculture, rural, healthcare, education, retail, other services, manufacturing, and create a new set of jobs and render some existing ones obsolete.

Wednesday, 05th Jul 2017, 06:13:41 PM

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