India Markets open in 6 hrs 39 mins

Why a full-blown unemployment crisis is awaiting India's next govt; political theatrics may no longer work to hide the problem

Dinesh Unnikrishnan

Two recent studies about the unemployment/financial situation of the average Indian worker, conducted by separate independent agencies, offer further disturbing evidence about India's worsening job situation. The first is from the Centre for Monitoring Indian Economy (CMIE), which said at 7.2 percent, the country's unemployment rate in February was worst in at least 29 months when labour force dwindled 25.7 million since September 2016. Another study conducted by S&P said about 83 percent women in India and 87 percent of men are worried about their financial future, presumably because of lack of employment.

Now these aren't the only warning signals about the job situation. We have the National Sample Survey Office (NSSO) survey pointing out the grim employment situation. It says the unemployment rate for skilled persons in the country doubled to 12.4 percent in 2017-18 from 5.9 percent in 2011-12 and the number of jobless among the educated, too, went up. Note that the literacy rate showed an upward movement at 76.9 percent in 2017-18 from 74.7 percent in 2011-12.

In October last year, a report from Indian rating agency CARE revealed that job growth in corporate India moderated to 3.8 percent in fiscal year 2018 from 4.2 percent in the previous fiscal and the problem is most severe with smaller companies. The report, based on an analysis of over 1,600 corporates, said smaller companies with net sales of less than Rs 500 crore have witnessed a contraction in employment growth, while larger companies with over Rs 500 crore sales had positive employment growth in 2017-18.

The point of citing all these studies/reports is to emphasise that the unemployment problem in Asia's third largest economy is neither a false alarm nor a hollow political charge, but a problem too real to ignore at least now.

The Narendra Modi government, not too fond of criticism, has been defending the problem of job deficit by picking the methodology that suits its counter narrative, using the EPFO-based methodology. But there is an issue with that. The EPFO-based employment mapping does not capture data in the informal sector but other studies like CMIE base their findings on household surveys to arrive at the unemployment figures.

Second, there may have been a spike in new EPFO registrations, but many of them may not be active accounts. What this means is that not all the new registrations may be of people currently employed. Experts have cited some more issues of using EPFO data-based methodology to calculate employment/unemployment figures.  So holding the EPFO shield to defend joblessness may not be a good idea.

The issue of unemployment isn't confined to theory but is beginning to be felt on the ground. The evidence lies in continuing agrarian protests, spike in demand for rural employment guarantee schemes and even a subject of mob fury. Unemployment also leads to other social disorders. A recent Firstpost ground report said in states like Bihar, where joblessness is at multi-year high, the youth are increasingly resorting to illicit liquor trade to make money.

Indeed, as many experts have already pointed out, the employment situation also raises questions on the true state of the gross domestic product (GDP) numbers that suggests a sustaining 6.5-7 percent growth in recent years. The recurring question is, how can a high-growth economy not create jobs. Obviously, there is no quick solution for India's unemployment crisis especially when the only element that has been pushing overall growth presently is government spending. For well-known reasons, private sector investors remain on the sidelines.

While, till recently, the focus of the national political discourse has been on critical economic issues, attention has been diverted for logical reasons in the aftermath of the Pulwama terror attacks and subsequent developments. The unemployment situation is likely to worsen going ahead with no serious attention, except for freebies and attention-diverting tactics, to address the problem. Diverting attention from the job crisis, or pretending that the problem doesn't exist at all, will be the next big economical blunder. Whoever wins the political puzzle in 2019 polls will have to face , a major unemployment crisis. No amount of political theatrics and attention-diverting tactics may work to pacify India's jobless youth except real jobs.

Also See: Modi's good governance agenda needs a relook

Farm sector doles: Band-aid solutions hide jobless growth; India's agrarian economy needs liberalisation, not govt handouts

Youth inactivity highest in India among emerging and developing economies, says IMF economist

Read more on Business by Firstpost.