The post-election, full budget for FY 2024-25 adhered to the principles that underlined the interim budget — fiscal discipline, focus on infrastructure and growth, and a fine balance between short-term individual welfare and long-term investment for collective good. Agriculture, skill promotion and employment generation, and boost to medium, small and micro enterprises (MSMEs) have emerged as priority areas in the wake of voters volatility and clear urge for inclusive development.
In a vast and diverse polity like India it is hard to discern the meaning of the voting patterns. But one message that comes out loud and clear is the hunger for inclusion in economic growth and prosperity. While growth improves lives of all sections of people, it is undeniable that the more skilled and productive people benefit disproportionately from economic growth, compared to those with low skills and low productivity. Therefore the accent on skill promotion and incentives linked to employment should be welcomed by all sections. Mass poverty and democracy often make fiscal discipline and economic growth difficult to pursue. There is often a short-term political price that needs to be paid for pursuing long-term growth. Such a political price is especially high in the face of relative deprivation of a majority of population. The problem is compounded when the bulk of the people have low level of skills, and they see no credible path to ascend to upper middle class status in a reasonable time frame.
This is not merely a challenge confronting the Union government. In a country with nearly 570 million people in labour force, of whom over 80% are in the unorganised sector eking out a precarious livelihood, creating jobs with a decent living wage and a measure of security and predictability in life is herculean task. This challenge should be faced by all of us collectively — the Union and the states, the political parties, the educational institutions, the market, civil society, and the media.
One of the great misconceptions prevalent among ‘educated’ youth is that unemployment problem can be solved by government jobs. Sadly, political parties are assiduously propagating the myth that government is the giver of employment. Even a cursory look at facts will tell us that governments at all levels – Union, State and local – including armed forces, railways and all public sector undertakings employ about 18 million persons. That constitutes only about 3.2% of the total work force in India. Already in many government agencies and departments there is overstaffing. In some States there are thousands of schools with fewer that 10 children; there are even ‘schools’ where the teachers posted outnumber the students! In many states the teacher- student ratio is about 1:18, and student population and enrollment in government schools are declining. And yet educational outcomes are appallingly bad across the country; but the only thing parties can think of is recruitment of more teachers without any focus on outcomes!
Government employment has become very attractive in India for three main reasons. First, given the colonial past, government job was accorded great prestige and power in popular imagination. This was compounded by decades of license-permit-quota raj during which entrepreneurship, market competition and consumer choice were sacrificed at the altar of state control. Second, typically wages in government at low and middle level are 2-3 times the market wages for the same job. On top of it there is a generous pension scheme. In general government does not demand work ethic or accountability, and there are life-time security and time-bound promotions. Third, given our political economy, in many government agencies there are endless opportunities for abuse of power and rent-seeking. Given these attractions there is a desperate scramble for the few government jobs, and most parties are indulging in dangerous populism giving the impression to the innocent, hapless youth that government jobs are for the asking.
Nowhere else in the world do we witness the scramble for government jobs as in India. Railway Recruitment Board conducts online computer based test. In just three years between 2015 and 2017, there were 11.4 million (1.14 crore) applicants for relatively low level jobs. In 2018, in response to two notifications — for 26,502 jobs as Assistant Loco Pilots, and for 62,907 vacancies at Level 1 posts (junior posts earlier referred to as Group D) — a total of nearly 24 million persons applied; a world record! Similarly, in States, for a few hundred government jobs, 2 to 3 lakh persons apply. For the annual UPSC examinations, about 13-14 lakh youngsters apply, and about half of them take the examination to fill about 1000 slots! Obviously government jobs cannot ever be, the way to combat unemployment. 97% of all workers have to find work in the market where almost all the goods and services we need and consume are produced. There cannot be employment delinked from human needs. We pay the producer of goods and services when our needs are fulfilled; that creates wage employment and provides livelihoods to people. The notion that governments can borrow money at the expense our future, employ all people with high wages and allowances for indifferent services is a dangerous delusion that should be dispelled with a sense of urgency and adherence to truth and common sense.
The budget’s focus on skill promotion and employment linked incentives is much-needed. But a lot more needs to be done to promote labour-intensive industry needing low skills. For instance, China and India produce the same amount of cotton. China has five times our GDP, and has fewer workers! And yet China produces and exports garments worth $325 Billion annually, while we are content with $ 40 Billion! If only we remove all impediments to labour-intensive industries, including labour laws that protect existing employees at the cost of creation of employment, we can create more than 20 million jobs in apparel sector alone! Even Vietnam and Bangladesh employ more workers and export more goods in such sectors. India’s share of global exports of manufactured goods is 1.6%; Vietnam, with a tenth of our population, has a 2% share of global exports!
If we do not clean up our act and promote job creation in low-end, labour-intensive manufacturing quickly, we will pay a heavy price. Fruits of economic growth must reach the bulk of the population in the form of formal jobs with a path for vertical mobility. If we fail to do that, we will see rising political instability, social unrest, and economic stagnation. Growth has to include all; it is time to wake up.
The author is the founder of Lok Satta movement and Foundation for Democratic Reforms. Email: drjploksatta@gmail.com / Twitter @jp_loksatta
