For those aged 15 and above in urban areas, despite being available for work, finding a job that can help one survive and manage subsistence has been a struggle. Youth unemployment rate across India has been at its highest peak in the last four decades.
Low growth and private investment cycle has further made the post-pandemic recovery of ‘jobs’ from areas of manufacturing to agri-business, where most new workers are employed, extremely precarious. The crisis perpetuates itself as sub-contractualisation of work even within the organised sector promotes insecurity among existing workers about their future. Massive layoffs being seen across the tech sector is a glaring example.
So, when it comes to mapping the key fiscal priorities for the Union Government this upcoming budget, the answer should be pretty simple: Spend Towards Creating Good Jobs. Else, India’s demographic dividend period may soon be recognized as a period of a demographic disaster-or worse, a lost decade for the ‘youth’. Somewhere PM Modi is also cognizant of this crisis in a year which will this government’s last full Budget session before the 2024 National Elections. Measures like Naukri Mela are all part of an appeasement drive to pivot more young voters towards the BJP by ‘handing over jobs’. Unfortunately, that may all seem less likely if the poor performance on job creation continues for the government.
It’s not as if the government’s previous budgets didn’t try to address some of these issues.
The last few years’ pandemic budget outlays by Finance Minister Nirmala Sitharaman sought to offer a ‘pro-growth’ vision -- seeing the government increase its capex spending with the hope to ‘crowd-in’ private investment and reviving ‘Animal Spirits’ for growth.
Many ‘supply-side’ interventions were made to ensure that all sectors get a boost in investment that can help with job creation and a higher growth performance. Schemes like Performance Linked Incentive (PLI), PM Gati Shakti, National Infrastructure Pipeline (NIP) amongst others were all part of the Modi Government’s ambitious measures to do this-in the subsequent hope of creating jobs through private investment.However, so far, they have all yielded disappointing results.
India’s Employment Challenge
For budget 2023, the biggest macro-fiscal challenge is creating good quality jobs for those joining the workforce. Acknowledging the issue would be the first step for the government (note: none of the finance minister speeches in the past four to five years have even acknowledged the employment concern). Correct diagnosis of the issue at hand is equally important. Most fiscal measures taken so far by the government are part of ‘supply-side’ interventions which, as per evidence, not always work.
It must be emphasised that looking at the overall unemployment rate-to picture the labour market realities isn’t always the right thing to do. Amid many concerns in disjointed labor market structure, one of them is how most adults don’t clearly express desire to work to earn wages or profits. That makes traditional socio-economic metrics less significant in interpreting the problem.The employment-population ratio is a far more useful indicator measuring the ratio of employed to the total working age population.
Employment rate in India rose to 43.90% in the second quarter of 2022 from 43.40% in the first quarter of 2022. But, compared to the actual demand for work, and overall labour force participation rate among the 15 and above age category, a 43.9% employment rate is sub-optimal.In rural India, the demand for MGNREGA work (seen as a fall back option as a safety net) still remains high despite the resurgence of some economic activity from second half of 2021. Inadequate MGNREGA budgets have made it difficult for states to provide adequate employment in rural areas who have less or no alternative employment opportunity.
Still, where the finance ministry may need to get their act straight a year before the 2024 Polls is clearly defining their fiscal spending priority in upcoming Budget on two critical things (addressing employment challenges): One, focus the design of our fiscal policy towards creating good quality jobs through incentives across labour-intensive sectors where government intervention has worked and do so over a three-to-five year fiscal plan.
Second, create a well-financed job-based social security nets by supporting increased outlays to MGNREGA in rural areas and create an urban version of National Employment Guarantee Scheme in cities for relief to those struggling to find employment in both rural-urban areas.
The DUET Program
Jean Dreze’s own job-security proposal -- Decentralised Urban Employment and Training program (DUET) -- is based on a simple idea where a government issues ‘job stamps’ and distributes them to “approved public institutions – public health facilities, schools, colleges, shelters, jails, municipalities, transport corporations etc.”. This author proposed this idea from of an urban-based job guarantee scheme to be pilot tested across cities to allow more young workers-entering the job market, including those migrating from rural areas, to be absorbed as part of a social-safety net and have jobs across different public works municipal programs in urban areas. This will do a lot to complement the existing MGNREGA program, restricted to rural areas. The real question is: whether the government has the will and the money to implement such a policy proposal now?
(Author is Associate Professor of Economics, and Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities, OP Jindal Global University)