Job creation in India had always been a hotly debated issue as far as ameliorating unemployment and poverty in the country is concerned. Between 1980 and 1991, before the Big Bang liberalization of 1991, employment in the economy had a compound annual growth rate (CAGR) of 2.04%. Between 1991 and 2014, the CAGR has been 1.43%. What is truly surprising is that during the years 2004-08, when the Indian economy’s growth rates were reaching for the sky, the CAGR of jobs was a mere 0.12%. More recently, between 2008 and 2014, the CAGR for job growth has been 1.22%. An analysis of more than 900 listed companies with a total employee base of 5 million shows that jobs growth has been good at 3.7% during FY17 and 4% in FY16. Which sectors employ the most people? In 2014, construction accounted for 13.6% of total employment, trade 10%, transport 4.3%, “other services” 4.9% and education 3.1%.
Employment has stagnated over the past half decade. New data derived from Employees’ Provident Fund Organisation (EPFO) accounts suggest that, contrary to the jobless-growth narrative, India created at least 5.5 million jobs in the formal sector in FY18, on top of around 4.5 million in FY17 — that is, not only are the number of jobs created many times greater than that put out by organisations such as the Labour Bureau, The data of employment status in India shows that job creation is walking but yet not running.
India needs 10 mn – 12 mn jobs a year
The government has two big challenges ahead: India needs to create some 10m-12m jobs a year. The models of job creation that have worked in the past, will not work in future. Until the turn of the century, jobs were created in capital-intensive sectors. Investment in manufacturing, mining, power plants etc has created jobs before. The public sector banks have been large employers. Automation is making that opportunity disappear. Many of the jobs that have disappeared have been blue collared jobs.
Build a world-class academic network
Academic institutions are often accused of having a 3-4-year time lag before they create the course content needed by companies. Higher education in India needs more world-class teachers who are at the cutting edge of their discipline. Till then don’t rush to label every institution as “world class”. Wait until it can attract a global classroom ie both students and professors.
Encourage startups
India ranks at the 100th when it comes to ease of doing business. The criteria for this ranking is a good list of areas for us to improve if we have to help entrepreneurs scale up. The areas are: starting a business, dealing with construction permits, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
Encourage scale up – not just startup
98.6% of non-farm businesses have fewer than 10 workers. Entrepreneurs create jobs for themselves and for others. We have to encourage them to scale up.
