No jobs: It’s not all the Government’s fault

The Government has come in for strident criticism from the Opposition for not creating enough jobs. While the Opposition is doing its job, the people, however, have to examine the issue from every angle.

The first thing about ‘jobs’ is, there is very little data. Other countries put out employment figures fairly fast and there is no reason in today’s wired world why it should not be possible in India.

Too little, too late

However, the reality is that in India jobs data is too little and too old. First of all, there is no proper measurement of agricultural jobs, as was pointed out by P Chidambaram in a debate which is in the public domain. Secondly, there is no reliable data from the informal sector. Who knows how many people a wayside auto mechanic shop or a small truck operator employs?

The story about the data that we do have is not great either. The latest figures are from the

Fifth Annual Employment-Unemployment Survey Report of 2015-16, the field work for which was done between April and December 2015. This was a survey, not data collection. It surveyed all of 1.56 lakh households in the country, covering 7.81 lakh people. More precise data collection was done by the Sixth Economic Census of 2013, which conducted the field work between January 2013 and April 2014. The Census said that 131.29 million people were employed in the country, implying that a huge chunk of employed workforce was outside the purview of the exercise. Here again, the ministry of statistics and programme implementation, which conducted the census, says in its annual report for 2016-17: “Collection of information is not generally record-based but based on oral information. The factors like recall lapse and casual approach on the part of the informant may lead to some non-sampling errors.”

India’s job data is in a mess and nobody who speaks about jobs, on either side, speaks with solid evidence. However, based on empirical evidence, it could be said not enough jobs are being created. Some 12 million people are said to enter the workforce every year in India, while according to some estimates 3.7 million jobs are being created annually. The Government is being roasted over this.

Governing woes

Apart from having had to contend with drought in its first two years in office, the BJP has had the misfortune of being in power when investments are just not happening. The reason is known to everybody: saddled with huge non-performing loans, banks have been reluctant to lend. The problem began around 2010-11 and there were a number of reasons for it, such as the global economy, the stoppage of projects on environmental grounds, and corruption. Industries also had less need to invest (and employ) more because of marked improvements in productivity. Vikram Kirloskar, vice-chairman of Toyota Kirloskar, said at a CII meeting in Chennai in July 2017 that the company initially produced 25,000 vehicles, but now produces 100,000 vehicles with “same area, same number of people and no additional automation”, purely by skilling workers. He used the example to illustrate the huge productivity gains industries are making all across the country.

Jobs get created when investments happen in fixed assets used in production. With the private sector getting little money or having the need for creating new factories, employment growth has been recalcitrant. What has the Government done to ease things?

Evidently, a lot. Government capex increased 17.3 per cent to ₹4.5 lakh crore in 2016-17, and by a further 11.9 per cent to ₹5.05 lakh crore this year. Despite this, the ratio of gross fixed capital formation to GDP has been falling (29.3 per cent in 2015-16, to 27.1 per cent and 26.4 per cent in the subsequent years — compared with 34.3 per cent in 2011-12.) As Sunil Kumar Sinha, principal economist and director-public finance with India Ratings, points out, government spending alone is not enough to push economic growth.

Thus, in terms of putting money in building assets the Government has done its bit. For example, according to reports, in 2013-14, they were building 11.67 km of roads a day; in April-January this year, 21.46 km were built daily. Likewise, railway electrification rose by 2.4 percentage points to 32.83 per cent between 2010-11 and 2013-14; it increased 4.05 percentage points to 37.69 between 2014-15 and 2016-17.

So, what could have been done differently to create more jobs? It could have recapitalised banks earlier so that lending could have picked up. But whether it should have put money into banks first or waited for the fiscal position to improve is a matter of opinion.

Overall, given that the thrust and run of economic policies have not changed with changes in government, it is only fair to assume that the current economic scenario would have been the same, no matter who was in power. Faulting the Government is good politics and perhaps necessary to keep it on its toes, but to put all the blame on its shoulders is not fair.