Can India be a ‘developed nation’ without quality jobs?

FinMin’s ‘White Paper ends on a high note: “The Amrit Kaal has just begun and our destination is “India a developed nation by 2047”.” But the obvious pathway to be “developed”, from the current “low-middle income” status is: Access to quality jobs.

Jobs are far more critical as a channel of redistribution of wealth and income when an economy is growing rapidly but also pushing up inequality and contains the world’s largest population of extremely poor and hungry – which is the case with India as multiple global reports have been saying in the past few years. But the ‘white paper’ doesn’t mention unemployment; ‘employment’ and ‘wages’ are mentioned only as problems of the previous decade (FY05-FY14). Nor ‘Demographic dividend’, but ‘demography’ is mentioned once in the context of the current decade’s social security scheme for unorganised sector workers.

The economic review and interim budget devoted to the current decades’ policies and achievements, which preceded the ‘white paper’ also does not tackle jobs.

When jobs disappear

Nothing can be farther from the truth.

The latest manifestation is the revelations that about 100 Indians were hired as “helpers” in the Russian army in the war against Ukraine in the past one year, many of whom have ended up actually fighting the war and seeking help from the Indian government for the violation of contract – despite huge vacancies in the Indian defence forces and the ‘Agniveer’ scheme not even replacing those who retire every year.

This follows the desperate rush for high-risk and unprotected work in war-hit Israel (the Centre has refused to ensure their safety while facilitating such recruitments). After Haryana and Uttar Pradesh, recruitment camps would be held in Rajasthan. Four more states – Bihar, Himachal Pradesh, Telangana and Mizoram – are in the queue, having written to the Centre for such camps.

Another manifestation is the sharp rise in the number of Indians illegally entering the US (and other countries like Canada, the UK and other European countries). According to a Rajya Sabha answer of December 14, 2023, their number (as nabbed by the US authorities) went up from 8,027 in FY19 and 1,227 in FY20 to 30,662 in FY21, 63,927 in FY22 and 96,917 in FY23 (as per the US fiscal year of October to September). Undoubtedly, such illegal influx to the US poses high risks to life (some have lost theirs) and costs a bomb (₹60-80 lakh reportedly paid to middlemen).

This illegal influx is over and above hundreds of thousands already living illegally in the US (“unauthorised immigrants”). A Pew Research report of November 2023 said, 725,000 Indians were staying illegally in the US – the third-largest after Mexico and El Salvador. Economist Ashoka Mody explained that while those from Mexico are rapidly falling and from El Salvador rising slowly, Indians are rising “at a brisk pace”.

None of this is surprising. Every job vacancy in India attracts a disproportionately large number of aspirants, often overqualified ones (just like engineers, and postgraduates in maths and anthropology joining the Delhi Zoo as keepers).

Besides, official data confirm the crisis.

The job crisis

On the face of it, the PLFS reports of 2017-18 to 2022-23 show improvements in the headline numbers – employment rate (WPR), labour participation (LFPR) and unemployment rate (UR). But scratch the surface and the ugly reality bursts forth:

· Reverse structural transformation – a sign of lack of non-farm jobs – continues with (i) jobs shifting to informal, low-paying and low-productive farm sector, reaching 45.8% (ii) jobs in “proprietary and partnership” households in no-farm sectors (informal sector) steadily rising to 71.4% (iii) manufacturing jobs falling to 11.4% in 2022-23 and (iv) best quality jobs, “regular wages/salaried”, declining to 20.9% with “no social security” cover (for these jobs) rising to 53.9%.

· WPR and LFPR numbers are (iv) abysmally low compared to the OECD averages: 38% and 40%, respectively (all ages, weekly status) against 70% and 74% (15-64 years, weekly status) in the OECD. WPR is also inflated because (iv) 18.3% of total workers are unpaid (“helpers in household enterprise”, mostly women (v) very large number of people have dropped out of labour force (“more than half of the 900 million Indians of legal working age – roughly the population of the US and Russia combined – don’t want a job”, says a Bloomberg report after analysing the CMIE data in 2022), automatically raises LFPR and FLFP and (v) “self-employment” (underemployment, uncertain income) has risen sharply to 57.3% due to lack of jobs.

· 'Real’ wages falling for “regular wages/salaried” by an annual average of -2.9% and self-employed by an annual average of -1.8%. It has risen for “casual” workers by an annual average of +0.6%.

· CMIE data shows the Indian workforce is ageing – undoing the demographic bulge/dividend – with the share of above 45 years rising sharply to 49.2% in 2022-23, from 36.9% in 2016-17; while those in 15-44 years falling to 58.2%, from 63.1%, during the same period.

· EPFO data (a proxy for the formalisation of jobs) shows, in six years of FY16-FY22, “regular contributors” increased by 8.7 million – almost the same (“more than 8 million”) as annual additional jobs required to “keep employment rates constant” (World Bank, 2018).

· No official labour data says how many Indians work or are in the labour force. Hence, knowing the status of employment is almost impossible.

· MGNREGS – which provides menial jobs with below statutory minimum wages of states – provides jobs to 64 million rural households (average of FY19-FY24 up to February 16, 2024). This is 38.1% of total rural households (where 68.8% population reside, as per Census 2011). They got 49 days of work in a year at a wage rate of ₹208.9 (average of six fiscals). If individuals are counted, their number is 93 million (average).

At least 10 “rozgar mela” have been held until February 12, 2024, but no data shows how many vacancies have been filled or remain vacant. About 1 million vacancies existed in June 2022 in ministries and departments – excluding CPSUs, PSBs, Central Universities, IITs, IIMs, armed police forces (CAPFs), defence forces etc., about which no comprehensive data is available.

Meanwhile, the Centre’s “sanctioned” posts have declined over the years; a high proportion of jobs is either outsourced on contract (Group C and D, experts, consultants) or retired employees are rehired at low salaries (to cut down cost). The “Agniveer” scheme is also a symptom of this (cost cutting). The CMIE and a business daily estimate (based on 2024 budget data) that the number of workers in the central departments (excluding CPSUs) would decrease by about 50,000 by March 2025.

The private sector too has failed to provide adequate and secure jobs – hence the persistent agitations for quota in government jobs and a few states forcing the private sector to give jobs to locals (Punjab and Haryana High Court struck down Haryana’s law mandating 75% quota for locals in private enterprises in November 2023).

Tech industries and start-ups are shedding jobs in the post-Covid recovery phase. Airlines have been in the doldrums for a long. The gig economy – hiring youngsters at abysmally low wages – is growing rapidly. The Code on Social Security of 2020 promised them social security, but not minimum wage, but there is no sign of any social security – which is unthinkable when it is secularly declining for the best quality jobs (“regular wages/salaried”). Then, a new threat is emerging: The use of Artificial Intelligence (AI). The IMF says 40% of global jobs are exposed to AI – which the FinMin quotes in its review.

Doing more of the same can’t produce different results

The centre for job creation remained unchanged for a decade – reliance on growth in GDP and manufacturing (‘Make in India’, PLI, DLI and Skill India).

The GDP growth stopped creating proportionate jobs after 1990, more so after the 2000s when GDP growth accelerated to 7% but job growth declined to 1% due to tech revolutions and capital-intensive manufacturing (Azim Premji University, 2018). It would be more so in future (with AI coming in). Manufacturing never lived up to its promise, not even ‘Make in India’ (its job share falling to 11.4%) either as an income generator (GDP share) or employment (job share). A 2021 study by the Ashoka University-CMIE said manufacturing jobs halved (“declined by 46%”) in five years between FY17 and FY21.

“The Indian Economy: A Review” of January 2024 says 0.7 million jobs have been created (but no evidence is available in the public domain) – as against the target of 6 million in five years. On the contrary, there is evidence that it is driving more jobs abroad than in India. In August 2023, India re-imposed “license” on laptop imports. A business daily found that 11 of the 12 winners of the PLI scheme for solar photovoltaic modules recently listed supply chain partners and service providers from China (some with more than 20 Chinese vendors). The mobile phone industry has benefited from the PLI but it is assembling phones with imported components (as Raghuram Rajan found after analysing trade data). The DLI for Micron’s semiconductor (chips) plant in Gujarat is also an assembling unit.

‘Skill India’ was re-launched in 2015 to train 300 million youth by 2022 in industrial and services skills to raise chances of landing jobs (the Indian workforce is extremely low in education and skill levels). Its outcome is revealing: Its official ‘dashboard’ data (accessed on February 16, 2024) says, “as of July ‘21”, Skill India “trained” 1,28,554, “certified” 94,852 (those informally trained) and “placed” (job placement) 48,074. That is, 0.2% of the target was achieved and 21.5% of trained ones found jobs.

A national policy on employment (NEP) – the work which started during UPA-II – is yet to materialise. A new industrial policy, the consultation paper for which was circulated in December 2022, was put on hold a year later as the focus firmly remains on the PLIs and DLIs.

None of the recent documents (‘white paper’, ‘review’ and interim budget) indicates a change in the growth model either. Without a change, Fortune India explained, using data (“2024 Ahoy! Why GDP growth must improve the livelihood of average Indian”) that India would continue to remain a “lower-middle income” country in 2047, even if the GDP size jumps four times.

How would better focus on jobs help?

Good quality jobs automatically translate into better wages (income) – which improves access to better education, skills and healthcare, raising the quality of human capital (HDI). India continues to be in the bottom half of countries in UNDP’s HDI ranking (132 among 191 countries in 2022); its HDI score went down from the peak of 0.645 in 2018 to 0.633 in 2022 – after consistently rising from 0.434 in 1990 (UNDP HDI).

Better HDI would automatically translate into higher productivity and hence, higher growth (than the average of 6% in current decade). On the other hand, continuation of “free” ration to 813.5 million people, ₹6,000 cash transfer to 90.8 million farmers under the PM-Kisan (August-November 2023) or 49 days of menial low-paying MGNREGS work to 38.1% rural households (or 93 million individuals) will avert starvation – but can’t make India “developed”.