The showdown in Parliament last week seems to suggest the contest in Indian politics is not about the grasp over governance but over couplets. Couplets are useful to make a point but they surely can’t be the point. The address of the President is meant to project the outlook of the government. It was tediously tepid and tranquilising. The UPA’s mastery over presenting happenstance as achievement, failures as an inevitable outcome of circumstances, and pending resolution of issues as the promise for the future is unchallenged. The BJP needed to use evidence of failure dramatically but instead ended up deploying drama as evidence.
The debate over a government’s performance was reduced to equivalence of comparative inadequacies. The BJP spoke about the NDA performance and the Prime Minister responded with the predictable “we did better” argument. It was as if India was experiencing an out-of-body experience. The point in contention for the people of India is not about who did badly but why we are not doing better. The debate is not about how badly the world is doing but how poorly we are doing relative to potential. Neighbour’s envy is not necessarily owner’s pride. Really who will we compare next with, Burkina Faso?
The banality of political discourse is in stark contrast to the gravity of the crisis in the political economy. The big elephant in the room—that neither the Opposition nor the Congress-led UPA is willing to recognise—is the failure of the economy to create jobs. To appreciate the magnitude of the crisis, consider two data points. Every year, the government estimates, 12 million youth enter the workforce. The universities inform us that every year 16 million enrol for graduate courses. Is the economy ready to absorb this quantum?
Between 2004 and 2013, the economy has grown from around $750 billion to nearly $2 trillion. What has been the accretion of jobs in the period? Sure, the economy must have created jobs in the informal sector, particularly the construction sector. The question though is what about jobs for the skilled and educated? The 12th Plan lets the cat out of the bag: “Employment in manufacturing declined in absolute terms from 55 million to 50 million between 2004-05 and 2009-10, after having grown from 44 million to 55 million between 1999-2000 and 2004-05. In services, employment increased from 94.20 million in 1999-2000 to 112.81 million in 2004-05 and declined marginally to 112.33 million in 2009-10. The working group on employment for the 12th Plan reveals that between 1999 and 2004, the economy across all sectors added 60 million jobs while between 2005 and 2010, it added barely 2.72 million jobs. Nearly 70 per cent of those queued at employment exchanges are under 29 years of age.
It is this glaring failure that the Opposition should have been challenging the government on instead of exchanging couplets. Why aren’t jobs being created? The most immediate and apparent reason is falling investment and resultant slowdown in growth. Projects worth over `7 lakh crore are pending clearances. These investments would have created jobs, incomes, demand, consumption and growth. That outcome is stranded in the civil war in the government.
The tragedy is that manufacturing was supposed to shift excess labour from farms to factories. Manufacturing, however, is growing slower than agriculture, and is stagnating at 15 per cent of the GDP despite two decades of reforms and nine years of Manmohan Singh regime. Indeed, India lags at the bottom of the table at No. 14 when it comes to manufacturing as a share of GDP, trailing its BRICS peers and even Turkey, Thailand, Malaysia, Poland and Argentina.
There are other long-term issues that dog job creation. The qualification policy for MSME (partially attended to in Budget 2013) that inhibits small and medium sectors from expanding for fear of losing benefits. Add to this the plethora of labour laws. There are 54 different laws governing workers. There are five laws for wages; three for provident fund/insurance/gratuity; four laws on contract/maternity/welfare… so on and so forth. The laws ostensibly intended to preserve jobs work to preclude job creation.
Then there is the perversity of tax policy, virtually an alphabet soup of tax provisions— STPI, EHTP, SEZ, EPZ, FTZ, EOU, 2AA, 2AB, 35AC, 80GG, 80GGA etc.—which are supposed to enable investment and job creation. In 2012-13, the government is estimated to lose `2.06 lakh crore in exemptions on Central excise and service taxes. How much of this did the job-creating MSMEs producing nearly 40 per cent of industrial output get?
The other issue is employability. India spent over `22 lakh crore between 2007 and 2012 on social sector programmes. In 2012-13, the Centre and states spent over `3.3 lakh crore on education. Yet, class V students can’t read class II text. An industry chamber study reveals that barely 15 per cent of graduates are employable; an IT companies survey reveals that only 25 per cent of engineers are employable, while another study has castigated the non-relevance of the MBA curriculum for employment.
The job challenge is not just about graduates. India needs to train its human talent with skills. There is a surfeit of committees, commissions and corporations, and a dearth of outcomes. The minutes of the 10th meeting of the National Skill Development Coordination Board are an eye-opener. In 2012-13, the government had set a target imparting skills to 85 lakh persons. Achievement: 14 lakh.
Conventional pundits would have you believe that there is too much politics in India’s political economy. On the contrary, the problem is that there is only argument and not enough politics of the kind that sustains progressive discourse in paved economies.
Shankkar.aiyar@gmail.com
Shankkar Aiyar is the author of Accidental India: A History of the Nation’s Passage through Crisis and Change