Labour reforms, incentives vital to create quality jobs

The Modi government plans to raise the size of GDP to $5 trillion, from $2.75 trillion, by 2024. This indeed is a very ambitious target accompanied by another harsh fact, which was not officially accepted till recently — in 2017-18 India had the highest unemployment rate in the past 45 years at 6.1 per cent. Further, urban unemployment was at 9.7 per cent during October-December 2018. All these targets and data leave us with a question — will India be a country with $5 trillion economy with many smart cities having many un-smart unemployed people?

Development is possible without creating much employment. In fact it has been happening already if one goes through the data of many fast developing companies. Take a look at the balance-sheet of blue chips such as HDFC Bank or Reliance. Growth in their business, revenue and net profit is not matched by the growth in work force. Companies are doing more business with less or almost same or marginally increased work force.

If anybody is prepared to work for ₹10,000 or ₹15,000 per month, he or she has a job. However, good quality job is missing. This precisely explains that there is hardly any clamour or dharnas or processions for jobs that were witnessed during the seventies. A recent government survey on labour confirms what is already known to many — 71 per cent of employees do not have any written contract of jobs. Jobs are there, quality is missing.

One reason why quality jobs are missing is that the manufacturing sector is stuck at 16 per cent of GDP for almost three decades. This sector can create quality jobs even for the less-educated. Service sector jobs are usually for the better educated and trained and the data suggests that most of the development took place in the service sector.

In the global export market, India is losing even in traditionally strong areas such as textile to countries like Bangladesh and Vietnam. Good quality jobs in great numbers come from big manufacturing. Can we imagine any Indian factory employing around 2 lakh employees at a single location? The answer is no. In China, one company employs around 2 lakh employees at a single location producing Apple products.

In India quality jobs will require big manufacturing. The Indian economy may even be a $3-4 trillion economy in a few years on the strength of its services sector, yet the issue may remain the same — where are the good quality jobs?

Promoting good quality jobs

The government must consider incentives for job creation and must remove all the hurdles for big manufacturing.

With the ongoing China-US trade war, one must use the opportunity to persuade some big manufacturing units working for US brands to relocate to India. Some labour reforms and incentives may help create lakhs of quality jobs.

The author is Associate Professor (Commerce), Delhi University