Clichés are sometimes useful in explaining things. The saying that reality usually lies between two extreme viewpoints is apt for describing the brouhaha raised by the latest International Labour Organization report on unemployment in India. On one side are ferocious critics of the Narendra Modi regime, who insist that India faces a ‘demographic disaster’ due to rising unemployment; the regime’s supporters insist India is reaping a demographic dividend and will continue to do well into the next decade. Realists like this author, who do not allow ideology to dictate opinion, think both are wrong.
The data presented in the ILO report, the recent employees’ provident fund update, and CMIE’s January 2024 report contradict the alarmist stance of the critics. The same dataset also negates the views on the other extreme that deny India’s genuine unemployment crisis. What’s the reality? The most significant data in the ILO report is that the young account for 83 percent of those unemployed in India. For many years, the CMIE has highlighted very high levels of youth unemployment, often putting it above 25 percent. To that extent, only the naïve or the ideologically blind would live in denial.
Now that the problem of high levels of acute poverty has been addressed to a significant extent, there is a consensus among non-partisan economists that the biggest policy challenge now is tackling unemployment, particularly among the educated young who should be at a pole position when it comes to reaping the demographic dividend.
C Voter has always asked respondents in opinion polls in the run-up to assembly and Lok Sabha elections to identify the most serious issues that concern voters. Since the March 2022 assembly election cycle to big states like Uttar Pradesh, respondents have singled out unemployment as the single-most important issue that worries them. Inflation, too, is a concern, but the proportion of those picking unemployment as the bigger worry is significantly higher. Recent C Voter poll data indicates that more than two-thirds of Indians think unemployment is a serious issue. (Why voters still prefer to stick with the NDA regime despite such grim statistics is beyond the scope of this column.)
Based on the data available from government, private and international agencies, we can highlight some home truths about unemployment. First, in a country with an electorate of 960 million and a workforce of more than 600 million, there will always be at least 30 million citizens who are unemployed—that is, assuming the unemployment rate hovers around 5 percent. Second, just as India licked the poverty challenge in the three decades after the 1991 reforms, the problem of chronic unemployment, too, can be successfully tackled. Third, there appears to be no possibility of unemployment disappearing as a serious policy challenge till 2035, when India, by some estimates, could be a $10-trillion economy with a per capita income of more than $7,500 a year. Fourth, even the 2035 goal would remain elusive unless there are fundamental changes in the policy sphere as well as the mindset of Indian families.
Why am I convinced it will take at least a decade to solve the unemployment problem in a meaningful way? For starters, it took India more than two decades to successfully combat poverty after pragmatic economic policies were launched in 1991. These things take time. Then again, the much-talked-about productivity-linked scheme that provides generous incentives to encourage domestic manufacturing in 14 segments is the first serious attempt at ‘industrialisation’ after the first flurry in the 1950s, when Jawaharlal Nehru talked about building factories as the temples of modern India. And it will be many more years before an honest assessment can be made about how effective it has been and how many manufacturing jobs it has managed to create.
Early data from the electronics sector, particularly mobile phone manufacturing, indicates that success is possible. The total value of mobile phones manufactured in India in 2014-15 was about Rs 19,000 crore; by 2023-24, it has zoomed to Rs 4,10,000 crore. Similarly, the value of exports has grown phenomenally, from Rs 1,500 crore to Rs 1,20,000 crore in the same period. From just two in 2014, the number of mobile phone manufacturing plants has grown to more than 200. Obviously, a huge number of new jobs have been created.
But mobile manufacturing remains a kind of oasis, with similar success not visible in other sectors. That brings us to the policy challenge. Shorn of jargon, labour laws in India have to be changed to encourage investors to set up mega factories that produce goods for domestic consumption as well as exports. But shallow polemics over workers’ rights are still preventing pragmatic policies from being adopted. Take the example of Tamil Nadu. A few years ago, the state announced 12-hour workdays as an option would become legal. Workers and investors welcomed the move. But trade unions and assorted political parties claiming to represent workers raised such a hue and cry that the policy was withdrawn.
The last home truth is about changes in mindset. For a total workforce of 600 million, the government sector provides just 40 million jobs. This number will not increase. It is crucial for Indian families to abandon the obsession with government jobs and with medical, engineering and MBA degrees. Their children need different skill sets that match the rapidly transforming economy as it gets more and more digital.
Assuming all these changes happen, one can see significant changes—but unlikely before 2035.
Sutanu Guru
Journalist and author with 38 years of experience;
Executive Director, C Voter Foundation