The Indian economy is the fastest growing among all major economies in the world. Plus inflation is low. But there is a singular lack of good cheer. Last year the unemployment rate touched a four-decade high.

As Indian policy makers confront this conundrum the opposition parties are putting together a common minimum programme to fight the coming Lok Sabha elections. So how can the programme address this crisis of joblessness?

First, the policy must know where not to look for a solution. Currently both the BJP and the Congress have promised support to farmers. But the ability of better farming to offer more jobs is zero. The income support will act at best as unemployment dole. With every new generation coming in, fragmentation of farm holdings will continue and migration to urban areas will, if anything, increase. A sustainable agriculture will have to make do with fewer and fewer cultivators.

Another sector which offers no hope for new jobs is large-scale manufacturing whose projects attract big ticket investments and incorporate latest technologies. Cost of capital to cost of labour has drastically come down in recent years, thus raising the attractiveness of bringing in new technology which will kill jobs. The current rise in digital technologies, automation and robotics has strengthened these trends further.

The government sector was once a key source of formal jobs but extensive use of contract employment and outsourcing to private firms, which also hire contract workers, has dealt a severe blow to quality jobs.

Small sector thrust

So the place to look for new jobs is businesses at the bottom of the pyramid and the place to begin is small units, even unincorporated ones where the business and the proprietor are financially undifferentiated. These are the businesses which have traditionally dealt mostly in cash and were the worst affected by demonetisation. A favourable policy environment needs to be created for them. The same potential for growth and job creation exists among the small-scale sector. Thereafter come the small to medium size units which are incorporated and form the bottom rung of the corporate sector. Job creating potential in businesses is the foremost among young and small entrepreneur-driven firms which are eager to scale up.

But the introduction of GST was the second big shock to small businesses which have only rudimentary accounting systems and absolutely no ability to file documentation online. So the maximum policy focus has to be on improving the ease of doing business for small and medium business, contrary to the focus so far on the demands of the corporate sector which wields substantial lobbying power. It goes without saying that infrastructure for small businesses has to be available at a minimum. Without adequate and affordable power, water and access to roads, neither business nor jobs can prosper. Here local governments have to take the initiative.

While the job potential in agriculture and industry is limited, it is the opposite in the case of services. Accounting for the largest chunk of India’s GDP (55 per cent in terms of value added) service sector jobs exist not just in urban and semi urban areas but in the countryside too. Rural labour has been increasingly moving from farm to non-farm activities.

Across the country, the construction sector is a major job creator. But the property sector is down with large unsold stocks and the government’s focus on expenditure control has meant inadequate allocation for infrastructure projects.

Rural non-farm jobs and infrastructure investment come together in a key concept propounded by former President Abdul Kalam — providing urban amenities in rural areas. As rural incomes grow demand for non-farm services increases. Technicians who repair cell phones, TV sets and solar panels are in demand. But infrastructure is needed to take these urban amenities to rural areas.

But the one magic key to job creation is skills creation. In this the Indian administrative system has proved to be woefully inadequate.

By far the most potent policy weapon for creating new jobs at the bottom of the pyramid which reduces distress is the rural employment guarantee programme (MGNREGA). But here also allocation as well as attention to glitches are inadequate. So polices and programmes are there waiting to be implemented.

The writer is a senior journalist

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