Struggling with jobless growth

India’s economy is growing. But job creation is a different story altogether. The Economist explains:

The numbers are daunting. Just to keep unemployment in check, India needs to create some 10m-12m jobs a year. When economic growth is strong, it has just been able to do that: the government’s Labour Bureau estimates that from 2013 to 2015 the economy added 11m jobs a year. A slowdown in the prior two-year period, however, had kept job growth at half that level, leaving a shortfall of 10m jobs. The tipping point seems to be economic growth of about 7%. Ominously, growth has steadily slowed since 2016; in the quarter ending in June it fell to 5.7%, although transitory factors may have played a part in that.

Some of these “transitory” factors are rather well known now. But the job creation issue is a structural one – the poor quality of education, viability of our farms, labour contracts in our factories, the credit constraints that have depressed industrial activity, etc.

On labour laws:

The rules are indeed onerous. In many states, firms with more than 100 employees must seek government approval to fire a single worker. As a result, many resort to contractors to fill their payrolls with temporary hires, a solution that evades red tape but produces neither dedicated staff nor a happy workplace. Other companies simply choose to stay small: some 98.6% of non-farm businesses have fewer than 10 workers. This carries a long-term cost in productivity. Indian garment-makers, for example, tend to be tiny. Small wonder that competitors in such countries as Vietnam and Bangladesh, where giant factories are plugged into global supply chains, now far outpace India in exports.

And of course, automation is here. Automation may well be part of the answer to our manufacturing woes, it is unlikely to help the cause of job creation

Surprisingly for a relatively poor country, their factories tend be more capital-intensive than those of their counterparts in China. For example, at a sprawling site outside the southern city of Chennai run by Hyundai, a South Korean firm, some 8,500 workers toil alongside 530 robots. The fully digitised facility turned out 661,000 cars last year, one every 72 seconds. It ranks second in productivity and quality among the firm’s 34 factories around the world; its engine plant is number one 

The level of apathy is shocking. Skill missions lie abandoned; meaningful education reforms are nowhere to be seen. Restructured small loans are being passed off as job creation successes. It is increasingly difficult to see Indian political parties coming together to effect far-reaching labour reforms. Certainly not in the current climate, where monumental disasters such as demonetisation have set the economy back…

 

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