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dna edit: Growth sans jobs

Wednesday, 2 April 2014 - 6:10am IST Updated: Tuesday, 1 April 2014 - 8:15pm IST | Agency: dna

While Congress and BJP leaders spar over India’s economic trajectory, the country’s demographic bulge is on the way to becoming a liability

The back-and-forth between finance minister P Chidambaram and BJP leader Yashwant Sinha comes as a welcome break from the vitriolic rhetoric of the past few weeks. Neither could resist slipping in an ad hominem attack or two, but they also managed to focus on substantive policy issues, a rarity on the campaign trail. Expectedly, they took maximalist positions on the UPA’s economic legacy: Sinha condemned the current dispensation for bungling on every front while Chidambaram sought to offload the blame for the speedbumps in India’s growth story onto global factors. But in light of the dismal picture the latest National Survey Sample Office (NSSO) data have painted about the employment scenario, both — while they did speak about job generation — paid insufficient attention to perhaps the most important economic issue.

Chidambaram’s claims that enrolment in schools and colleges has increased over the past decade and the unemployment rate has declined are technically correct. But it is a specious defence. The NSSA data show that the rate of unemployment has been increasing with rising levels of education: 28.8 per cent of urban males up to 29 years old who are graduates and diploma/certificate holders are unemployed, while women are worse off. The trend holds true for both sexes in rural areas as well. Given this, rising enrolment figures mean little; they represent investment without due returns. Likewise, the fall in the unemployment rate that Chidambaram points to has come about because of the rural uneducated poor who have taken up subsistence-level employment in construction and other service sector jobs. The country’s demographic bulge is not best utilised by providing more grist for the informal sector mill — it already claims over 90 per cent of the country’s working population — however the finance minister spins it.

The failure to build a manufacturing base that can absorb the overabundance of labour has been among the UPA dispensation’s biggest failures. Corruption, sclerotic approval processes and an uncertain policy environment because of measures such as retrospective taxation have made investors leery of putting in the money required to develop that base. For all of the government’s belated course corrections over the past year or so, matters have not really improved. Chidambaram may have capped the fiscal deficit at 4.6 per cent of GDP, but he has achieved this by cutting Plan expenditure necessary for growth and deferring around Rs35,000 crore oil subsidy to the next fiscal. The next administration will find these chickens coming home to roost. And as RBI Governor Raghuram Rajan made clear in his monetary policy speech yesterday, there is no certainty that inflation has been put to bed either.

The UPA government has repeatedly pointed to its social welfare schemes as signal achievements. For all that a section of economists and politicians have slammed such spending — and there is plenty to criticise in terms of implementation — it is a necessary outlay. But it must be paired with employment generation if it is not to create a permanent welfare populace.

The BJP can point to a better track record. Compared to the 15 million jobs its successor generated over two terms, the NDA government created 58 million jobs between 1999-2000 and 2004-05. But the failure of its ‘India Shining’ plank in 2004 should caution it against leaning on those figures too heavily. Much like Chidambaram’s claims, the statistics masked an ambiguous reality. Booming employment levels in niche industries like the IT sector represented growth that excluded the vast majority of the country’s youth. If it comes to power this time around, it must look beyond the trickle-down trope to models of genuinely inclusive growth.

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