Economic Highlights

New Delhi, 13 March 2009

Jobs On Chopping Block

SHIFT TO LABOUR-INTENSIVE INDUSTRY

By Dhurjati Mukherjee

There are widespread reports about job loss in various countries, including India thanks to the global meltdown. According to the Union Labour Ministry, around 5 lakh workers have lost their jobs between October and December last year. The figure is based on a study that covered 2,581 units. The affected workers belonged to 20 sectors in 11 States and UTs, including textiles, metals, gems and jewellery, automobile, transportation and mining. For a labour-intensive country like India these reports are indeed intriguing as unemployment and underemployment has been increasing among a large segment of the working population.  

The biggest knock has, however, been suffered by the export-driven gems and jewellery units – a fall-out of the slump in demand from foreign markets, most of whom are reeling under the impact of the downturn. In fact, the impact of retrenchment has already become evident in Gujarat, which has a large number of diamond units, where even suicides have been reported. But its not just Gujarat, some other States have also been affected by closure due to dwindling orders.

The automobile sector has also suffered badly coinciding with poor demand in the last few months of 2008. However, there are expectations that the economy would improve in the second half of the year and the job loss in this sector may be checked to some extent.

Meanwhile, based on the dwindling export orders, industry inputs have predicted a crore job losses, an estimate that is obviously a cause for worry, specially for the government with elections nearing. The figure, arrived at by the Federation of Indian Export Organizations (FIEO) survey, reflects that textiles, garments and handicraft sectors have been found to be the worst-affected. And it is generally believed that these sectors would find the going tough during the current year.

It may be recalled that a disturbing trend of India’s economic performance has been a deceleration in employment growth of 1.92 per cent per annum from 1993-94 to 2006-07 from 2.61 per cent per annum between 1983 and 1993 although growth in terms of GDP was rapid. Clearly, there has been a decline in employment per unit of GDP growth or employment elasticity of 0.28 from 1993-94 to 2006-07.

Applying this elasticity to the likely GDP growth of below 7 per cent in 2008-09 and around 5 per cent in 2009-10 to project the generation of employment provides an average of 7.5-8 million work opportunities this year and 6 million in the next financial year. This is much short of the 10-million opportunities generated during each of the last five years. In other words, there will be around 6 million fewer jobs during 2008-10. 

However, the job loss has affected other parts of the world more--a staggering 50 million figure by 2009-end, according to the International Labour Organization. The slowdown has already claimed 3.6 million American jobs. High unemployment rates, specially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria, and Iceland and contributed to strikes in Britain and France. In emerging economies such as in Eastern Europe, there are fears that growing joblessness might encourage a move away from the free market and pro-western policies while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Interestingly, in 2008, the 61^st round survey of the National Sample Survey Organization, carried out in 2004-05, covering a sample of six lakh people sin both rural and urban areas, found that the workforce participation rate (the number of persons working as a percentage of the total population) had increased by 2.85 per cent a year between 2000 and 2005. This is well beyond the current population rate. However, things started changing since early 2008 after the global recession set in. 

India has been generating more jobs than any other developing country such as Brazil, Russia and China, as per a study conducted by the Organization for Economic Cooperation & Development (OECD). India generated 11.3 million new jobs annually between 2000 and 2005, which is over 60 per cent more than 7 million jobs created in China every year. The performance looks even more impressive when contrasted with Brazil as the S American giant clocked 2.7 million new jobs annually over the five-year period while Russia added some 700,000 new jobs every year.

It has been estimated that there are 130 million surplus workers in rural India and around 170 million in rural China and the figures are likely to grow as agriculture becomes unremunerative and the farmers’ debt continues to increase. Incidentally, it may be mentioned that as per a government report around 48.6 per cent farmers in India are presently in debt though the actual figures may be much more.

With increased mechanization, the informal sector has obviously been the greatest contributor to employment generation with nearly 72 per cent of workers in cities and 82 per cent in villages engaged in this sector. But various factors, including competitiveness, economies of scale and lack of financial resources may close down many of these units in the coming years unless the government decides to help them.

Importantly, entrepreneurship development has to be a vital tool for employment generation. There are around 33 million entrepreneurs in India today with 45 per cent belonging to the backward community. According to FICCI estimates, with an enterprise to employment ratio of 1:3, creation of five million new entrepreneurs would result in generating 15 million additional jobs for individuals. Thus, it is necessary to promote entrepreneurship in a big way, specially among the weaker sections in the rural areas through easy access to capital, technology and market distribution channels. Meanwhile, the National Rural Employment Guarantee Scheme (NREGS), which has been extended to all the 615 districts, has been allocated Rs 30,100 crores in the interim Budget. This should provide four crore jobs per annum.

Some economists and planners have voiced the need to reverse the planning strategy and concentrate on the rural sector with industries, which would generate adequate employment and at the same time utilize local skills and technology. Remember, Mahatma Gandhi had advocated strengthening the rural sector to upgrade life and livelihood of the vast majority, which languish there. In recent times, our former President, Dr. A. P. J. Abdul Kalam, had echoed the same by suggesting the need for PURA (providing urban facilities in rural areas) to boost up the development process.    

Clearly, if the demand of the right to work is accorded Constitutional guarantee, which may not happen now, one could see a perceptible change in the strategy towards generating employment. Obviously, this would call for giving more incentives to the sectors that are labour-intensive and also have high employment potential. Agro-industries and rural industries come to our mind immediately, but there are many areas in the manufacturing sector which could too generate sufficient employment and become competitive.

Thus, there is a need to change the outlook of our politicians and planners, who concentrate on GDP growth through labour-reducing techniques without caring for the population, which languishes in poverty and squalor. India’s growth strategy in the coming years would need a drastic reorientation aimed towards labour-intensive sectors, where entrepreneurship development could perform the dual task of employment generation and self-employment. The country’s rural sector offers enormous possibilities and a national dialogue is necessary. --INFA    

 (Copyright, India News and Feature Alliance)