Opposition parties criticising the Government for not creating enough jobs are barking up the wrong tree as the Government has already shifted its focus from “unemployment” to “underemployment”. The current thinking in the Government is that unemployment is a “lesser evil” as the underemployment is a bigger challenge and “poses a more serious problem”. This is borne out in a strategy paper of National Institution for Transforming India (NITI Aayog), the Government’s premier think tank, set up in 2015 replacing the planning commission.
The strategy paper titled “Three-year action Agenda, 2017-18 to 2019-20” is first of the three series prepared on the advice of Prime Minister’s Office to help the Government align its development strategy with the changing reality of India.
The other two documents — Seven-year strategy and 15-year strategy — are currently under preparation.
The paper says the need of the hour is to create high-productivity/high-wage jobs as underemployment is a far more serious problem than unemployment. On an average, a job that can be done by one person is usually assigned to two or more.
As a result, the workforce gets overwhelmingly stuck in low productivity and low-wage jobs. Relying on the surveys by National Sample Survey Office (NSSO), the paper states the country has witnessed low and stable rates of unemployment for more than three decades. This means that the rate of unemployment has become more or less static and is therefore not alarming. It is the underemployment that needs to be addressed. The paper cites three examples to prove this point.
First, in 2011-2012, although 49 per cent of the workforce was employed in agriculture, the sector contributed only 17per cent to India’s GDP. Second, in 2010-2011, firms with less than 20 workers employed 72 per cent of the country’s manufacturing workforce and contributed only 12 per cent of the output. Third, about 650 large enterprises that accounted for 38 per cent of the services output but employed only 2per cent of the services workforce.
China, on the other hand, has focused on high productivity. As a result its per capita income is US$8,141 while India’s is US$1,604. The NITI Aayog also cites the examples of countries such as South Korea, Taiwan and Singapore that have managed to rapidly transform into big economic powers. The experience of these countries shows that the manufacturing sector and the ability to compete in the vast global market place hold the key to creating well-paid jobs for semi-skilled workforce. Interestingly, with the sharp rise in the wages in their country, many large scale firms in China are looking for low-wage locations where India could become the obvious choice for them.
In order to be successful, the ‘Make in India’ campaign also needs to focus on manufacturing for the global markets. In the past, emphasis on the domestic market through an import substitution strategy has failed to exploit the scale of economies. For instance, domestic market of the electronic industry is only US$65 billion in contrast to the global market at US$2 trillion. Unfortunately, the policy of import substitution under high protection has given way to small firms none of which seem competitive in the world market scenario. Thus, a shift to the global markets can potentially result in an output worth hundreds of billions of dollars and hence an abundance of well paid jobs.
The strategy paper by NITI Aayog has recommended the creation of two coastal employment zones; one in East and another in the West. This may attract multinational firms in labour intensive sectors to shift focus from China to India. The emergence of these firms will create an ecosystem for the small and medium scale firms also and will induce them to become more productive, thereby giving rise to more well-paid jobs. This in turn will help in the expansion of the organised sector and a shift within towards more labour intensive goods and services.