ECO     ECONOMIC HIGHLIGHTS

New      Delhi, 24 November 2005

 Creating More Jobs

NEED FOR LONG-TERM STRATEGY

By Dr. Vinod Mehta

The UPA Government had promised to create more jobs under the Common Minimum Programme (CMP). It has been in power for almost one and a half year and we have yet to see the results.  Generally speaking, increase in the level of investment will generate more jobs in the country, but it will not guarantee generation of more jobs on its own. People are already talking of jobless growth.

 The time, however, is ripe to devise strategies, both at the local and national levels, which lead to the creation of more jobs without resulting in mass migration of population from village/towns to large cities. Manufacturing sector is growing and the rate of growth is around 7 per cent. Many economists are of the view that we can sustain this growth rate in the coming years.

 It is common knowledge that about 74 per cent of the population lives in rural areas and 26 per cent in urban areas. In urban areas the problem of unemployment is not acute; it is serious mainly in rural areas.  The sheer size of the urban population in metropolitan cities like Delhi, Mumbai, Kolkata or Chennai  provide many job opportunities, more so in the unorganized sector. There is so much demand for various kinds of labour and services that anyone looking for a job can find some work even if it may not be to one’s liking; the labour that migrates to these areas is bound to find some work.

 It is a different matter that unregulated migrations leads to many problems in urban areas, like emergence of slums, increase in crime rate and so on but which needs to be checked.  But the real challenge of generating employment is in smaller towns and villages where the size of the population is so small that there are hardly any opportunities for generating remunerative employment. Setting up of factories or small businesses does not make any economic sense; where there are no factories or workshops the demand for labour is almost nil. Again the total population of the area is so small that it does not make economic sense to provide services or generate some kind of a work in these areas.

 According to the latest Census figures, out of a total number of 5,88,781 villages, 2,90,093, i.e. about 50per cent, have population less than 1,000. The number of villages having population between 1,000 and 2,000 is 1,14,395; the number of villages with population between 2,000 and 5,000 is 62,915; for villages with population between 5,000 and 10,000, the number is 10,597 and the number of villages with over 10,000 population is 2,779. It means that for 70 per cent of the villages the size of the population is less than 2,000.

 What impact can it  have on employment generation?  For one you cannot make massive investments as it would not be able to reap any economies of scale. It will not be able to supply the required skilled or semi-skilled labour. The demand for services from the villagers will not be enough to provide job opportunities. This means that the demand factor will also not work. Thus there will be almost nil opportunities for young people of these villages to find jobs even in the unorganized sector. This problem is acute in the North-East.

 In other countries, the rural population is small while urban population is very large. Less than 25 per cent  of the population is in rural areas. A large number of jobs are being created in the service sector, followed by the manufacturing sector. (Even though some of the services are being outsourced by these countries, it has also been noticed that some of the affected employees are also migrating to the developing countries.) Therefore, the employment opportunities are relatively more in these countries than in a country like India where the population is overwhelmingly rural. It is a sheer challenge how to generate employment in areas where the population is less than 2000.

 Therefore, the Government will have to have some kind of a strategy to generate employment in these villages in the coming years. One of the ways to overcome this situation would be to club these villages into viable economic zones on the basis of some economic criteria before making investment in these areas. Most of the activities may be centred around food processing of various agricultural products, including milk and milk products and smaller workshops, production units etc.

 For instance, the Government can help these villages to start food processing and marketing cooperatives, start small repair and maintenance workshops to attend to repair of mechanical equipments, to set up cold storages etc., which in turn will raise employment opportunities for the local people both in the organized as well as the unorganized sector.

 The second equally important point is to link all these villages with towns and metropolitan cities with all-weather good quality roads. This will help the rural people from these villages to take their products to nearby towns and metropolitan cities where there is a market for their  products. Good roads can facilitate the to- and-fro movement  of labour on daily basis to nearby towns where they are bound to find some work.  Once these villages are linked by good roads many of the companies in the private sector may find it economical to procure their raw materials or outsource their work from these places. They may even come forward to set up small units.

 Large-scale investment does not mean that one put in big money and set up bigger projects. Large-scale investment also means that one spreads out investment all over and helps people to engage in meaningful economic activity. Food-for-work programme is not just enough. What is needed is gainful employment on a sustained basis. This means easy movement of agricultural and other products from one place to another and easy to-and-fro movement of labour from village to nearby towns.

 In the long run, however, the emphasis will have to shift from creation of jobs in the agricultural sector to creation of jobs in manufacturing and service sector. The experience of developed countries shows that more jobs are created in the non-agricultural sector. Therefore, the creation of jobs in the rural sector can at best be a medium term solution to unemployment problem.

 The urban renewal mission and the Bharat Nirman mission for rural India, apart from creating assets, need to focus on creation of jobs on a large scale. Mix of appropriate strategies, both at the micro level and the macro level, can do wonders.---INFA

 (Copyright, India News and Feature Alliance)