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Unemployment rate set to grow
Sunil Jain in New Delhi |
May 31, 2004
One of the reasons cited by the Left parties for wanting to close the divestment ministry is that privatising public sector units has resulted in job losses, and that this has led to a decline in the country's employment growth.
This is just not correct. For one, PSU employment began declining -- from 22.36 million in 1989-90, it fell to 19.59 million by 1997-98 -- long before privatisation began.
In any case, with under 20 million workers in the public sector out of a total employed work force of 336 million, the PSU segment is very small.
The Montek Ahluwalia task force as well as the SP Gupta special group reports agree that the major reason for the decline in employment growth in the late nineties is the sharp dip in agricultural employment.
While the Gupta report talks of employment growth falling from 2.7 per cent per annum in the 1983 to 1993-94 period to 1.07 per cent in the 1993-94 to 1999-2000 period, the biggest fall was in agriculture -- from 2.23 per cent to 0.02 per cent.
Indeed, employment elasticity in the sector fell from 0.7 in the 1983 to 1993-94 period to zero in the 1993-94 to 1999-2000 period.
During this period, employment growth in the manufacturing sector went up from 2.26 per cent per annum to 2.58 per cent, and employment elasticity fell only marginally.
According to employment expert Suresh Tendulkar, had it not been for the sharp industrial slowdown in 1997 to 1999, employment would have risen even faster -- in the four preceding boom years, industrial employment rose by 3 per cent annually.
Based on the current elasticity of employment, the Gupta group forecasts a virtual stagnation in agricultural employment in 2006-07 at the current level of around 191 million people. Based on this, and an 8 per cent GDP growth, the Gupta panel projects an employment level of 373 million by 2006-07.
In other words, according to Gupta, the unemployment rate will jump from 7.3 per cent in 1999-2000 to just under 10 in 2006-07.
Though the Ahluwalia task force's projections differ from Gupta's, its report also shows unemployment rising -- from 2.23 per cent in 1999-2000 to 4.27 per cent in 2006-07. While these projections assume an 8 per cent GDP growth, the unemployment rises to 5.6 per cent if GDP growth is 6.5 per cent.
Gupta's group then does some simulations on shifting the cropping pattern from the present rice and wheat to more labour-intensive oilseeds and wheat, to more horticulture and floriculture, greening of degraded forest areas and wastelands, and so on. All told, the group estimates that around 10 million new jobs can be got from the farm sector if this is done.
Regeneration of 10 million hectares of degraded forest land, for instance, will create at least 1.5 million jobs, and increasing horticulture production from the present 148 million tonnes to 268 by the end of the 10th Plan will require Rs 13,000 crore (Rs 130 billion) of investment and will generate 1.2 million jobs.
"The current price and other policies in the agriculture sector that are focused on just a couple of crops will have to be completely changed," says Gupta.
"It's obvious they cannot deliver the employment levels we need," he adds.
It's interesting to note that when the Punjab government wanted to diversify its cropping pattern along these lines, it asked for cash support to wean away farmers from the usual wheat and rice cultivation for four to five years, but the Centre refused to give this.
A major reason for the decline in farm employment, especially in the last five years, has been the decline in the creation of irrigation facilities.
While the growth of major and medium irrigation works has not changed much (around 0.5 million hectares have been added each year during the Eighth and Ninth Plans), there has been a dramatic fall in minor irrigation from around 1.6 million hectares a year during the Seventh Plan to 1.1 in the Eighth and 0.1 in the Ninth Plan, thanks to the states getting bankrupt after the last pay commission. Based on the Gupta group's rule of thumb, that means 1.5 million less jobs were created each year in just the 9th Plan period.