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Capital Reallocation for Job Creation
Dr. Panagariya highlighted that while there is sufficient capital in the market, it is concentrated in sectors that are not labor-intensive. “You have got machinery. You got pharmaceuticals. You got petroleum refining. These are absorbers of capital, but they don’t absorb enough workers,” he explained. He emphasized the need to redirect capital to sectors that can generate more jobs per unit of investment.
Job creation, according to Dr. Panagariya, is closely linked to the composition of industries, particularly in manufacturing. “I think this is where you create good jobs and perhaps where the focus could shift a bit more than has been the case so far,” he said. He suggested that the industrial structure should evolve towards sectors that employ more workers relative to the capital invested. “That’s our challenge,” he added.
Unemployment is not the main issue: Arvind Panagariya
Responding to opposition claims that the government has failed to generate enough jobs, affecting their electoral performance, Dr. Panagariya refuted the notion that unemployment is the primary issue. “The issue of jobs are ongoing projects. There is no discontinuity here. The way sometimes this question is being posed on jobs and farm districts, etc., this is as if there is a discontinuity. There is no discontinuity. Economy has been growing robustly, and last three years we have seen very robust growth,” he said.
“Job creation is related to the composition of the industry, and particularly manufacturing. Let me also repeat something that I have often said, that our problem is not unemployment. You know, we do have pretty good data actually from the PLFS, the Periodic Labor Force Survey,” he added.He noted that unemployment rates have been decreasing. “Our problem is the productivity, the labour productivity per worker, has been low. That is a long-term problem,” he stated, referring to this issue as “under-employment,” where multiple workers are performing jobs that could be done by fewer people.As Finance Minister Nirmala Sitharaman prepares for the upcoming budget, Dr. Panagariya emphasized that it will be a significant test for her. He stressed that the budget is not merely a financial plan but a “statement of policy.” “She has to bring together various constituencies on board and show the roadmap for economic policy, since this is going to be a foundational budget,” he concluded.ET recently conducted a survey to gauge the mood of the nation. The survey also highlighted that the unemployment is one of the primary challenge for the next NDA government. As per a voter survey conducted by ET Online, the new Modi government faces five key challenges: unemployment, inflation, inequality, farmer protests, and a perceived rise in authoritarianism, marked by a growing number of opposition leaders incarcerated.
Job scarcity, the most pressing unresolved issue for Modi 3.0: Survey
The survey revealed that job scarcity is the most pressing unresolved issue, with 40.8% of respondents expressing concern. Following closely is a prevailing sense of inequality, highlighted by 31% of respondents as a significant issue. Inflation is also a pressing concern, with 19.7% of respondents citing it as a critical issue requiring government attention.
Youth Unemployment
Former Chief Economic Advisor Kaushik Basu had also sounded alarm bells last month, warning that India’s youth unemployment rate is alarmingly high. Citing data from the Centre for Monitoring Indian Economy (CMIE), Basu pointed out that the rate has surged to 45.4%, one of the highest globally. He emphasized the urgent need for government intervention.
Basu, presently an economics professor at Cornell University, took to the microblogging platform ‘X’ to air his concerns, stating, “For the sake of the country, we must not hide behind slogans, must put politics aside & take corrective measures.”
Decline in Formal Employment
The quality of jobs in India has also become a major concern. There has been a decrease in formal employment opportunities, with state jobs or “bhartis” being deferred for years, leaving many aspirants for competitive examinations feeling marginalized. The Armed Forces’ adoption of the ‘Agniveer’ model, involving short-term contract soldiering, has further diminished stable job prospects for the youth. This change affects a demographic with a median age of around 30 years, according to Statista’s report of a median age of 32.4 years in 2020.
Additionally, while the number of workers in agriculture in India has risen from 200 million to 260 million in the last three years, primarily due to reverse migration during the 2020-2022 period, this surge has not translated into productive employment.
Historical Employment Trends
Economic development entails not just a rise in per capita income but also a structural shift in employment from agriculture to industry and services. Historically, India witnessed a decline in the absolute number of agricultural workers after 2004, leading to higher overall factor productivity.
Challenges in Recent Years
However, recent trends indicate a reversal in this structural shift. Post-2013, the rate of non-farm job creation plummeted sharply, resulting in a surge in the overall unemployment rate. The youth unemployment rate tripled from 6% to 17.8% between 2012 and 2018, signifying a significant labor market challenge.
Current Unemployment Rates
The National Sample Survey Office (NSSO) reported a slight decline in the overall unemployment rate for individuals aged 15 years and above in urban areas. It stood at 6.7 percent in the January-March 2024 period, down from 6.8 percent in the same period the previous year. The unemployment rate was 6.8 percent for the March quarter of FY23 and remained at 6.6 percent in both the April-June and July-September 2023 quarters. It decreased to 6.5 percent in October-December 2023.
