India's unemployment dilemma

The Indian economy may be near an inflection point where the gross domestic product growth of the economy may move out of the 5 per cent to 6 per cent orbit and move in to the 7 per cent to 8 per cent orbit in the medium to long term.

At least this is what a section of policymakers have led us to believe. While the government's contention may be true to an extent, a lot more has to be done in order to realise this dream.

A decade of reforms and competitive pressures has matured India Inc and the Indian economy. Therefore, it is now in a position to compete with global players in manufacturing and services sectors.

So what is missing at this stage? The answer lies in significantly improving the investment scenario in the country, both domestic and foreign. The importance of investments cannot be emphasized enough. They have an indirect impact that helps any economy to sustain high growth consistently.

We refer to the benefit of employment here. Investments create employment, which in turn creates a consumer class, which spurs demand further, thus helping maintain the demand, which is vital for economic growth.

				Growth per annum (%)
(m)	1983	1993-94	1999-2000	1983 to 1994	1994 to 2000
Population	718	894	1004	2.0	2.0
Labour force	261	336	363	2.4	1.3
Work force	240	316	337	2.7	1.1
Unemployment rate (%)	8.3	6.0	7.3
No. of unemployed	22	20	27	-0.1	4.7

Source: Planning Commission

In the Indian scenario, employment has been very sensitive issue and has been the key poll plank by almost all political parties. Let us look at the employment scenario existing in the country in the last 17 years, ending 2000.

The table above shows that while the unemployment rate fell between 1983-1994, the trend reversed in the following decade. The Planning Commission envisages that GDP will grow in the Tenth Plan period (2002-2007) at an average of 8 per cent. While this may sound good, it still is not good enough from the employment perspective.

The table below indicates the expected trend in population age groups in the next few years.

	Age distribution in percentage
Age group	2001	2006	2011	2016
0-14	35.6	32.5	29.7	27.1
15-59	58.2	60.4	62.5	64
60+	6.2	7.1	7.8	8.9
All age groups	100	100	100	100
Population (m)	1,027	1,134	1,194	1,266

Source: Planning Commission

The Plan panel has indicated that, despite an average 8 per cent growth, the unemployment rate is expected to go up to 9.8 per cent from the current base of 9.2

per cent. This is because, while the growth in employment would stand at 1.7 per cent in the Tenth Plan, the labour force growth would be higher at 1.8 per cent.

This presents a worrying picture to the state planners, as lack of adequate employment opportunities may stifle the economic growth of the country. The commission has suggested various measures to completely eliminate this problem. They include:

• Reforms in the agricultural sector.
• Promotion of food processing industry.
• Promotion of village level small-scale industries.
• Reforms in the small and medium scale industries segment.

While these suggestions are exhaustive (not elaborated here) and the reader can view the same on the following link https://planningcommission.nic.in/plans/planrel/fiveyr/10th/volume1/v1_ch5.pdf, the crux is that the Planning Commission has advocated the promotion of more labour-intensive industries in order to tackle the unemployment issue. These measures will help generate additional employment in the country apart from what will be generated on a continual basis.

The recommendation also calls for higher investments in all these sectors in order to generate the required level of employment. One aspect is certain that major reforms have to be conducted in the agricultural sector in order to generate employment in the same.

This assumes a lot of relevance, as this sector is the largest employment generators in the country.

The plan to tackle the unemployment issue seems to be in place. However, in the Indian context, planning was never the issue, implementation always was. If this plan has to be implemented a significant change in mind set is required.

The track record of successive Indian governments has not been too impressive. Also, Indian labour laws are most archaic and require to be amended, as this would encourage foreign investors in various sectors.

Let us hope that unemployment is taken up as the most important issue in the Indian context because only if this issue is tackled, can India Shine on a consistent basis.

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