The Hindu Business Line : Tackling problem of jobless growth

The Economic Survey, while discussing the issues and priorities in its General Review, argued that the high inclusive growth would mean putting more people in productive and sustainable jobs which can be achieved provided only if the country reaches high growth trajectory. The assumption is that high growth will achieve the goal of generating more productive jobs. A noble perception no doubt, but experience does not provide comfortable evidence of job creation commensurate with economic growth.

Though, the 61st National Sample Survey estimated that employment increased at the rate of 2.48 per cent during 1999-2000 to 2004-05, the unemployment rate was as high as 3.06 per cent of labour force in 2004-05 compared to 2.78 per cent in 1999-2000 and 2.62 per cent in 1993-94. However, this data include disguised employment. The picture of job growth can be drawn on the basis of employment data in the organised sector.

Large Fluctuations

Employment growth in the organised sector has shown large fluctuations. For instance, during 1990-91 to 1995-96 it rose on average at less than 1 per cent, whereas GDP growth was 5.7 per cent per annum. Further, the employment growth rate fell to 0.31 per cent per annum during 1995-96 to 1999-2000 against GDP growth of 7.5 per cent per annum. The employment growth became negative at -1.33 per cent while GDP growth was 6.7 per cent per annum during 1999-2000 to 2004-05. During the last sub-period, investments had increased substantially to 24.2 per cent of GDP compared to 22 per cent during the preceding period.

Obviously, the economic growth had been jobless. Indeed, in the public sector employment declined by 5-6 lakh persons in absolute term during 1990-2004. Though the private sector generated nearly eight lakh jobs during this period, it was still negligible vis-À-vis the working population. The story gets more complicated, with severe disparities emerging in salaries. This may have prompted the Prime Minister to ask the private sector to re-think the salaries paid, but this is d ifficult in a free market economy.

Lost Share

An analysis of data put out by the Reserve Bank of India on private corporates showed that the quantum of wages and salaries paid vis-a-vis the total income of companies declined from 11.1 per cent during 1990-91 to 8.9 per cent in 2003-04.

This means the working class has not got its share of corporate income despite the enormous growth in corporate income and retained profits. In many sun rise industries, domestic as well as multinational, salaries have increased multifold for certain levels of employess, while a large has not enjoyed this privelege.

Indeed, neither the GDP growth nor of employment reflects any inclusiveness. With the growth becoming more technology oriented and capital intensive, its fruits are getting evenly distributed. There is clearly need to focus on common people, their income levels and social reforms, shifting away from high growth and globalisation that has seen reforms in financial as well as real sector.

Unemployment and poverty have high positive correlation. There are 26-28 crore people in India who are poor and without adequate work, especially in rural India where widespread disguised employment gives a misleading picture. This is well reflected in the massive migration of rural youths to the urban areas even for petty jobs.

SEZs, the way to go

To tackle the problem of rural unemployment needed are strategies for rural industrialisation and large investments in agriculture sector. As for rural industrialisation, Special Economic Zones is the answer. Only, the government must ensure that no fertile land is considered for SEZs, as also that the exercise does not end up as a land-grab will leave farmers further impoverished.

Only barren land should be used and a condition must be attached that the SEZs should employ as much local people as possible, providing them training, if necessary.

The government can pursue corporatisation of already existing rural industrial units by providing them financial incentives and concessions. The utilisation of uncultivated land for setting up units to make garments, chemicals, leather goods, agro-products, etc., deserves serious government attention.

(The author is a former Economic Advisor to SEBI.)