India's Job Creation Challenge

"The really difficult part of creating employment opportunities is to ensure that those who are moving out of agriculture and settling down in urban areas are able to find jobs in the manufacturing industry. The growth of this sector of the Indian economy has been tardy of late."

" If one looks at the data that has been put out by the National Sample Survey (NSS) Organisation, between 1999-2000 and 2011-12, the average annual rate of job creation was only 2.2 per cent. In other words, even if the economy grows at a relatively fast pace, there is no guarantee that new employment opportunities will be created at a similar pace. That is, even as output grows, machines are replacing human labour. This is a phenomenon that economists describe as low employment elasticity of output. In other words, for every additional unit of output in manufacturing, the number of jobs created is diminishing not growing."

"As Jean Drèze pointed out to this writer in an interview in Farmers’ Forum (June-July 2014): “What is unusual in India is the large share of services in total employment, and the small share of the manufacturing sector. No doubt the share of employment in agriculture would be smaller today had there been faster growth of the manufacturing sector and especially of labour-intensive industries. But the share of agriculture in total employment today would look abnormally high only to someone who thinks of India as some sort of middle-income country"

"Santosh Mehrotra, who heads IAMR, explains that between 2000 and 2005, although 60 million jobs were supposedly created, 20 million of these were in agriculture."

"The estimates vary but anywhere between one million and two million young people (who are 15 years of age or older) are entering India’s job market every year. Put differently, over the next five years, employment opportunities for between five and 10 million people would need to be created even if one ignores the backlog of those who are already unemployed, underemployed and/or engaged in work that is far from certain or “decent” as defined by the International Labour Organisation."

"There has been much talk of reforming labour laws. There is a view that once the provisions of the Factories Act, the Industrial Disputes Act and the laws relating to engaging contract labour are liberalised (as is being sought to be done by the Rajasthan government), this would automatically kick-start the economy and create jobs. But, contrary to what neo-liberal economists argue, changing labour laws will not kick-start the economy."

http://wwv.asianage.com/columnists/modi-s-job-challenge-771