What is the issue?
- Given the slowdown in economy, it is widely accepted that employment generation is essential.
- In this context, it is important to look into the shortfalls in the past and opportunities at present to take forward job creation.
What is the current scenario?
- India’s labour market is a highly segmented one.
- And there are primarily three demographic groups in urgent need of jobs, which include:
- a growing number of better educated youth.
- uneducated agricultural workers who wish to leave distressed agricultural sector.
- young women, who are increasingly getting educated than before.
- Unfortunately, for the past few years India had not been very positive in absorbing this job seeking population due to various factors.
What are the causes?
- Pattern of growth - Although growth was relatively high over the past few years, the pattern of growth was problematic.
- Since 1991 economic reforms, growth is largely driven by the services sector.
- Manufacturing has not been the leading sector in driving growth.
- Notably, manufacturing has more potential to drive productivity in the whole economy and create more jobs.
- Services cannot bring about this effect, as by definition ‘service’ is the distribution of already produced goods.
- Inverted duty structure - Under the inverted duty structure, import duty on finished goods is low compared to the import duty on raw materials used in production.
- Resultantly, domestic manufacturing becomes uncompetitive as against imported finished goods.
- Excessive imports due to inverted duty structure since 1991 reforms, have undermined the Indian manufacturing industries, thereby considerably reducing job opportunities.
- Conversely, the absence of this in the automobiles sector has helped it perform better.
- Other factors - Given the present economic situation, India faces problems in employment generation due to factors like:
- low investment.
- low credit off-take.
- low capacity utilisation in industry.
- low agricultural growth.
- low plant load factor (i.e. low output of a power plant in proportion to its maximum potential).
What should be done?
- Industrial policy preparation by the Department of Industrial Policy and Promotion (DIPP) should be hastened.
- While doing so, it should ensure that the industrial policy is also consistent with the trade policy.
- This can address issues such as that of inverted duty structure.
- Proper implementation of the National Manufacturing Policy, 2011 is also essential.
- Special packages are needed for labour-intensive industries to create jobs.
- This could include food processing, leather and footwear, textiles, apparel and garments, etc.
- The nature of the package will have to be individually designed, considering the sector specific needs.
- Cluster development should be enhanced to support job creation in micro, small and medium enterprises (MSMEs).
- The present cluster development programme of the Ministry of MSMEs is poorly funded and could be better designed as well.
- The modern and traditional industry clusters can enhance the unorganised sector employment in MSMEs.
- Urban development should be aligned with manufacturing clusters to create jobs.
- E.g. AMRUT programme which is on infrastructure improvement can focus on towns which have clusters of unorganised sector economic activities.
- This can considerably absorb the non-agricultural job seekers.
- A co-ordination between the Urban Development and MSME Ministries is necessary to ensure this.
- Skilling programmes are going in vain due to low job placement.
- Skilling close to clusters, which is where the jobs are, rather than standalone vocational training providers, is likely to show better results.
- Public investments in health, education, police and judiciary can create many government jobs.
- Unlike the private sector, preventive and public health measures can only be taken by the governments.
- Given the state of health and nutrition of the population, it is critical that public expenditure on health is increased faster.
- This can also help in utilising the potential human resource in production, for driving economic growth.
Source: The Hindu
