Wanted: Jobs for Indians

When the Uttar Pradesh police advertised 62 jobs for messengers last year, the response was stunning. Media reports said close to 4,000 Ph.D.s, 50,000 graduates, and 28,000 postgraduates applied for the posts even though the minimum eligibility was just Class 5. Staggering as the numbers may be, the crush of applications is not an isolated example but a reflection of a grave crisis in the country where jobs are increasingly difficult to find even though the economy has been growing at a relatively brisk pace. And it is likely to get worse.

Each year, India’s educational institutions churn out millions with degrees in the liberal arts, engineering, management, and other subjects. But jobs are few and far between, and thousands of people armed with degrees don’t find jobs that match their qualifications or skills and often end up working as clerks, taxi drivers, or delivery boys. Since Prime Minister Narendra Modi swept to power in 2014, his government has promised to create million of jobs. Five years down the road, economists say unemployment has only increased in Asia’s third-largest economy and India’s severe jobs crisis could cast a shadow on the Bharatiya Janata Party’s bid to return to power.

According to findings of a National Sample Survey Office (NSSO) periodic labour force survey (PLFS) published by the Business Standard newspaper, the country’s unemployment rate was at a 45-year-high of 6.1% in 2017-18. The government has not released the draft report, which shows the unemployment rate is about three times what it was in the last survey in 2011-12. The publication of the report had a huge political fallout, with the opposition using it to attack the government. The government countered, saying the data was not verified, and thus it did not allow its release. Interestingly, the government, which is the biggest employer in the organised sector, has hundreds of thousands of positions lying vacant across departments. For example, in 2018 it had more than 1 million vacancies for teachers in elementary and secondary schools, according to an answer to a question raised in Parliament.

“India’s growth rate remains robust, but the benefits of the country’s growth have been concentrated almost entirely at the top, with grim implications for the working classes and the lower-middle classes, women and the young,” Kaushik Basu, former chief economic advisor and professor of economics at Cornell University, wrote in an opinion piece on jobs in The New York Times. “The Modi government’s economic policy has been disproportionately focussed on a few big corporations, neglecting small firms and traders, the agricultural sector and most workers. The results are now showing.”

Unemployment isn’t a new problem in India. It has been brewing for years, but the government’s shock demonetisation move in November 2016 and the shoddy implementation of the goods and services tax (GST) have exacerbated the problem. Today, the economy is growing fast but India has been struggling with jobless growth for years and a big part of the working age population above 15 years is unemployed, the participation of women in the workforce is declining, and, more direly, automation is taking over human jobs sooner than expected. According to the NSSO survey, as reported by Business Standard, the Labour Force Participation Rate (LFPR)—or the proportion of working-age people who are either working or are actively looking for work—fell to 49.8% in 2017-18; it was 55.9% in 2011-12.

Let’s consider the latest data on unemployment. Monthly jobs data from the Centre for Monitoring Indian Economy (CMIE) pegged unemployment in February at 7.2%, the highest in 29 months, and said India lost 11 million jobs in 2018. But the government maintains it has created enough jobs over the last five years. NITI Aayog CEO Amitabh Kant defended the government’s position on the report at a press conference after the NSSO data was leaked, saying the think tank’s analysis shows India created 7.8 million jobs annually, which was enough to cover the new entrants in the job mar - ket. “You can’t be growing at 7.2% and saying that there are no jobs being created in the economy; that would require massive productivity growth which has not taken place,” he said. “In addition to new entrants, we need to take into account people exiting low productivity jobs in agriculture. There is a very aspirational population which wants better-paid jobs in this country and what all of us in the government have tried to do is to formalise the economy through GST, ease of doing business, and digital payments.”

For more clarity on the matter, we meet P.C. Mohanan, the former acting chair of the National Statistical Commission (NSC), at a statisticians’ conference in Greater Noida on the outskirts of the national capital. A statistician of 35 years, Mohanan was recently in the news for resigning from the commission after the government didn’t allow the NSSO data to be released and instead questioned it, while allowing NITI Aayog to defend the move. “The government is presenting a standard narrative that things are very good and that they are creating jobs through so many schemes, so this particular report perhaps does not fit into that narrative. That is why they are trying to discredit it,” he says.

One argument against the NSSO data was that such surveys do not consider those working in the unorganised sector or self-employed people like Uber or Ola drivers. Mohanan rubbishes the argument. “That is a total misunderstanding to say that some category of workers are missed by NSSO. The question we ask in the NSSO survey is what each member of the household is doing, so whether you are an Ola or Uber driver, they will say they are working and their occupation and industry are noted accordingly. The question of omission of any particular category doesn’t remain,” he says.

The government also uses Employees’ Provident Fund Organisation (EPFO) data to show an increase in employment. However, experts argue it is not reliable as the numbers tend to be inflated because the Pradhan Mantri Rojgar Protsahan Yojana incentivised enrolment in the EPFO. Data from the scheme is also problematic because many account holders are not employed.

India’s unemployment problem is a result of several factors. The government had launched the ‘Make in India’ initiative with a vision to create 100 million jobs in manufacturing, but the sector is reeling from the twin blows of demonetisation and the rollout of GST. Mahesh Vyas, managing director and CEO of the CMIE, says there has been a structural shift because of demonetisation and GST. They severely hurt medium and small scale units, which primarily run on cash. Reserve Bank of India data shows the MSME sector has over 63 million units that employ about 111 million people and accounts for 30% of GDP. It accounts for about 45% of manufacturing output and around 40% of total exports.

“Employment opportunities at the low end of the spectrum reduced and have not increased correspondingly in the larger units. Larger units use more automation, while smaller units use more labour. Demonetisation and GST hit the smaller units,” says Vyas. He adds that declining investment is also responsible for the jobs crisis: “Investment rates have been going down for the last six-seven years, leading to lower job creation. So if you have a low business cycle, and then you have big shocks that you impose on the economy, obviously jobs are going to be impacted.”

in India’s 28-year-old history as a liberalised economy, GDP has increased steadily as more multinationals brought their businesses here. However, the relationship between economic growth and jobs has weakened, and India has witnessed jobless growth for years now.

Deepanshu Mohan, associate professor and director of the Centre for New Economics Studies at O.P. Jindal Global University, says growth in India has been led by the services sector even though it employs only about 30% of the organised workforce. But jobs in the services sector have declined in recent years because of a slowdown in the once-booming BPO and IT sector. Mohan says the services sector grew briskly after liberalisation when foreign firms were allowed into the country. The BPO and IT services sectors saw spectacular growth then, but have slowed down in the past few years, primarily because some Western countries, the major clients for companies like Infosys and Wipro, have started looking inwards for their requirements. “Most jobs that have really come have come largely in the construction sector, which has been the major shining sector. But it is mostly in the unorganised sector and the quality of jobs is not really great,” he says.

Economists say the jobs crisis has worsened because of the distress in the farm sector. The agriculture sector employs more than 45% of the labour force and contributes about 15% to GDP, but people moving out of the farm sector can’t find jobs in manufacturing or services because manufacturing doesn’t have the capacity to absorb them and they don’t always have the skills for the services sector. “Reduction in the agricultural workforce is not accompanied by an increase in the manufacturing workforce. Services have absorbed more workers, not manufacturing. Agricultural workers or rural non-farm workers cannot automatically shift to modern services un - less they are educated and skilled and migrate out. One would thus expect a reduction in the rural workforce, especially the rural female workforce,” Mohanan says.

He adds that unemployment has grown in more literate states such as Kerala as there aren’t enough white-collar jobs to absorb skilled, educated workers. On the other hand, states with lower literacy levels have comparatively lower unemployment rates as people are willing to take up unskilled jobs.

Economists say a key issue is the LFPR. The CMIE says the participation rate fell from 47-48% before demonetisation to 43% by July 2017. Vyas says official statistics say the LFPR is a shade below 60% now, but CMIE data places it well below 50%. It was 42.7% in February 2019, according to CMIE. From a global perspective, India is one of the worst in terms of LFPR; the global average participation rate is about 66%. “If a very small proportion of people are willing to work then a low unemployment rate does not mean much. A high LFPR directly contributes to growth and greater well-being,” says Vyas.

The other issue is that young people are studying more and with that, their job expectations are rising as well. The number of people aged between 15 and 34 is expected to touch 480 million in two years. But more educated young people only mean more candidates for an inadequate number of skilled or white-collar jobs. Mohanan says the data for unemployment rate by education shows that amongst illiterate people, the unemployment rate is very low. “For people below primary, or below middle-level schooling, it is almost less than 1% or 1% everywhere, but as education goes up, unemployment goes up.”

This only reflects an acute mismatch of skills. One reason economists cite is that in terms of jobs, India has leapfrogged from the farm to the services sector. In economic theory, ideally, the farm worker should move to manufacturing and then to services. But India has bypassed the stage. Both the government and the private sector are trying to address the skills and underemployment issues. The government’s skilling programme, the Pradhan Mantri Kaushal Vikas Yojana 2016-20, has trained 3.7 million candidates for jobs in various sectors from retail to hospitality, skill development minister Dharmendra Pradhan said in a written reply to a question in the Lok Sabha. However, an RTI filed by CNBC-TV18 revealed only three of every 10 people trained by the Skill India mission in FY18 found a job.

If one looks at the private sector, India’s largest carmaker Maruti Suzuki has an organised skill development initiative in place. I visit its Gurugram plant to find out more. It’s four o’clock and as I enter the company’s oldest manufacturing plant a shift has just ended. Hundreds of workers in green uniforms are walking out. There is indistinct chatter, and I notice a lot of smiling faces at the end of a day’s work. It’s a pleasant sight, but I am curious if the jobs of these workers who assemble Altos and Vitara Brezzas all day will get more automated over time. And will automation exacerbate the unemployment problem by replacing factory workers with robots for repetitive jobs? Rajesh Uppal, senior executive director, HR & IT at Maruti Suzuki India, doesn’t think so. “With automation coming in, modern complexities coming in, the number doesn’t go down, but sometimes the required skills would change. You will need people who can maintain robots, who can do robot programming and all. Required skills may change but numbers don’t change significantly,” he says.

Modern technologies like robotics and automation are not just threatening jobs in manufacturing but other sectors too, especially the IT industry where thousands have lost their jobs in the past few years. Some of the biggest IT sector employers say they are reskilling their workforce to meet the demands of new-age jobs. Krishnamurthy Shankar, executive vice president and group head, human resource development at Infosys, explains that in the past, the company would hire engineers who did 80% of the largely application maintenance and development work. However, things have changed drastically in the past three-four years with an increased need for specialisation. He says the contribution of the newer digital businesses, related to the cloud, analytics, cyber security, etc., has increased. Digital, he says, makes up about 30% of the business and is growing at about 25%.

Another concern is the declining number of women in the workforce. While more women are getting college degrees, their participation in the workforce has decreased. Mohanan says one reason is that they are studying more and hence entering the workforce later. Safety and inability to migrate for better jobs due to social pressure are also keeping women away from the formal workforce. The LFPR for women was just 23.3% in 2017-18, according to NSSO data, as reported by Business Standard.

The job crisis will be a huge problem for the next government, regardless of who’s in power. The unemployment figures also become important in a deeply unequal society like India already saddled with the problems of hunger, poverty, and malnutrition. A recent Oxfam report says India’s top 10% of the population holds 77.4% of the wealth. Last year, it recommended promoting inclusive growth by ensuring the income of the bottom 40% of the population grows faster than the top 10%.

Sunil Sinha, principal economist at India Ratings and Research, says the first step for policymakers is to admit that there is a problem—and it is possibly far graver. This is because the surveys don’t always capture whether a person was continuously employed through the year or not. This means a lot of people who are underemployed or partially employed figure in the employed category. What needs to be done is to analyse employment elasticity, a measure of how employment varies (rises or falls) with economic output. “That gives you the idea if a particular sector is growing at 5-10%, what kind of employment can it actually generate. With changing technology, employment elasticity also undergoes a change, but at least you have something to work with. You can also identify the likely number of jobs a sector can throw up,” he says. This process can help devise policies to ensure a particular sector grows at a certain level and simultaneously keep a check on employment elasticity with the help of back data.

O.P. Jindal Global University’s Mohan says unless small or medium scale manufacturing and agriculture picks up, job growth will be in a limbo for the next few years at least. “Any populist measure to guarantee incomes without the necessary set of reforms in these two sectors, agriculture and manufacturing, is going to be counterproductive,” he says

This story was originally published in the April, 2019 issue of the magazine.

Follow us on Facebook, Twitter, YouTube & Instagram to never miss an update from Fortune India. To buy a copy, visit Amazon.