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Government policies must create the right environment for job creation as industry becomes technologically advanced and less labour-intensive, RBI Governor Raghuram Rajan said here on Thursday. It is important that the country’s GDP estimates reflect this job growth, he added, and not just be a narrow calculation of the total output produced, like it is now.
Rajan was speaking at the convocation ceremony for students graduating from the Indira Gandhi Institute of Development Research. The RBI governor is the president of the institute.
Giving the example of taxi-hailing app Uber, he said it resulted from a merging of technologies. “With ride sharing, we can essentially create public transport on demand... Soon, there will be driverless cars, which can be a source of fear for (those who are now) car drivers.”
“Technology can be a solution to drudgery even as it makes some jobs obsolete. However, the ingenuity of society will create new jobs, but the government must create the right environment for it, not distort job creation.”
Advising caution with official GDP calculations, Rajan said: “We get growth when people move into different areas. It’s important that when they move into different areas, they actually do something which is more value added.”
Poor record Pranab Bardhan, professor of graduate school at the department of economics, University of California, Berkeley, who was the guest of honour at the ceremony, also spoke at length on India’s poor record in job creation. According to national surveys, the output elasticity of employment (which is the increase in employment for every 1 per cent increase in economic output) is 0.2 per cent, even in the highly labour-intensive services sector.
He also pointed to data that showed that nearly 30 per cent of Indians in 1the 5-24 age group are neither in employment nor in education or training. “India is the worst-performing in this metric among the top 10-15 major economies. China’s equivalent figure is at 10 per cent,” Bardhan said.
He said it would be wise if the government changed the current system of offering capital subsidies to giving wage subsidies — that is, incentives for businesses for hiring more workers. Currently, he said, the sum total of corporate subsidies far exceed the government’s spending on social welfare, agriculture and fertilizer subsidies and job guarantee schemes.
“Let the government give wage subsidies instead, for new hires, for apprentices or for workers in training. Germany has the best example of this, where the system works like a public-private partnership.”
These subsidies are shared by the government and the business sector, he said, since these workers will eventually be part of the labour force.
Businesses also benefit because they are able to give workers the skills they need and also pick the best employees for themselves.
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