'Why Have The Number Of Jobs Created Fallen?'

'We have to pull 80 million workers out of agriculture and go back to where we were in 2014. That itself is going to be a huge task.'
'We have already lost time, and that is a catastrophe impending.'

We talk about India as one of the youngest countries in the world with 65% of the population below the age of 35 with a median age of 28 years.

But the youngest countries in the world are in Africa with a median age of just 14.5. Countries like Uganda, Angola and Mali have a median age of just 16 years.

In the Middle East and the Asia-Pacific regions, the youngest countries have median ages of around 20-22 years.

The youngest countries in Europe are Kosovo at a median age of 32 years, Albania at 36 years and Iceland at 38 years.

The oldest countries in the world like Japan, Italy, Spain and Germany have median ages between 47 and 50 years!

In the case of India, has India been able to take advantage of its demographic dividend?

According to many economists, NO.

Santosh Mehrotra, the well-known development economist, writes about this and more in his latest book India Out of Work: Rethinking India's Growth Story (co-authored with Jajati Parida).

"The growth rate has fallen, and the number of jobs being created in the non-farm sector has fallen. Why have people gone back to agriculture?", Professor Mehrotra tells Rediff's Shobha Warrier in the concluding segment of a two-part interview.

• Part I: 'India Has Only 15 More Years Left...'

Is jobless growth one reason why we were not able to take advantage of the demographic dividend?

Yes, that is one.

But the point is also what I have been saying, that private industry is not doing enough to invest. That is a responsibility of industry as well.

At the same time, they are not exporting goods enough. The government's policies are such that they are not encouraged to export goods.

We are now talking about multiple trade deals. We have signed FTAs, but we'll have to wait to see whether those deals will lead to an increase in merchandise goods exports.

The problem is that the services exports have continued to grow, but the services exports are all in very high skill-intensive areas.

Two-thirds of our services exports are accounted for by IT services. And IT services are all provided by the highest skilled people in the country.

But it's the manufacturing jobs which have not been growing.

Unfortunately for the last 35 years, the country has not adopted a manufacturing strategy or an industrial policy.

Therefore, the government needs to explicitly adopt a horizontal industrial policy.

PLI or the Performance-Linked Incentive is no answer.

Ease of doing business is no answer.

There are many other things.

Let's put it like this. Some people argued that we have a very heavily regulated regime, and deregulation would help. Therefore, the government created the Rajiv Gauba committee. Then there's the Niti Aayog. They have come up with 700 possible actions that have to be taken.

But these regulations have always existed. Yet the economy was growing fast at nearly 8% per annum between 2004 and 2014. And it was generating 7.5 million new non-farm jobs then.

So why has the growth rate fallen now when the same regulations still exist?

Now you are only thinking about removing regulations. Why have the number of jobs created fallen?

The growth rate has fallen, and the number of jobs being created in the non-farm sector has fallen. Why have people gone back to agriculture?

These are on account of the policy-induced shocks to the economy.

Take, for example, leather and footwear, which is a major labour-intensive manufacturing sector. It suffered job losses, and a very important reason for that is because cow trade is banned.

When you ban cow trade, big centres of leather industry like Agra or Kanpur take a massive job beating, units close down, and they face disruption.

Many of them went away and tried to re-establish themselves in Kolkata, which is another centre.

Anyway, now you can see that there are real problems why jobs are not being created.

Do you think China was able to exploit its demographic dividend because their thrust was in manufacturing, and hence they were able to create a lot of jobs?

Correct, absolutely correct.

That is the reason they were able to focus their early stages of development on labour-intensive manufacturing, and export-orientated labour-intensive manufacturing, which we have not done.

Our manufacturing exports tend to be capital-intensive. Even our PLI scheme, 12 of the 14 sectors are focused on capital-intensive goods, and they are being subsidised. So there are policy design flaws in what we are attempting to do.

It's not just that China focused on labour-intensive manufacturing jobs for the young.

It's also that they invested in school education early in their development process. In the first 30 to 40 years after the revolution, during the Mao era, before their economic reforms began in 1980, they had already invested massively in school education.

By contrast, we did not. We did not do that in 1991 when our economic reforms began, which was 10 to 12 years behind China.

We find in the census of 1991 that half of our population was illiterate then. While in China by 1991, literacy was already 75% plus.

Of course, women had much worse literacy in India. That's a real, real problem.

China, of course, invested further in higher education. So, they have a higher gross enrolment ratio in higher education than we do. Their gross enrolment ratio in higher education is already over 40% but we are still at around 29%.

Even the quality is very bad in India.

China made their universities very highly specialised and made it not very easy to enter a university.

Despite the fact that large numbers of young people were completing school education and higher secondary education, they had to undergo an entrance test to enter a university called the Gaokao, which existed since the mid-1990s.

Look at us by contrast. We have initiated a university entrance test called the UEP combined university entrance test at the national level only in 2022.

So, we are already something like 25 to 30 years behind China in respect of appropriate policies to try and contain too much massification, too rapidly.

We want to be inclusive in enabling our higher education to grow and more people to enrol. But the massification that took place in higher education in our country was on account of the indiscriminate permission granted to politicians, builders, developers, who wanted to convert their black money into white by investing in management colleges or engineering colleges or even private universities.

That's how the enrolment rose; not because of public universities but because private universities were not regulated properly and allowed to open indiscriminately.

Yes, we increased enrolment, but inevitably we were going to create unemployables.

By 2040, if the demographic window is going to close, we are almost in the latter part of the road. Does that mean it can be a nightmare also?

Of course. That is exactly what the warning of our book is.

Even the Chinese are saying their dividend is over between 2012 and 2015. It has been 10 years that their dividend has been gone.

The Chinese leaders are saying Europe became old after they became rich. But we in China have become old without becoming rich.

If Chinese leaders are saying that, then you can see where exactly we are.

We are moving inexorably in the direction of growing old without becoming rich.

We are still at one third the level of per capita income that China is at. They are at least two-and-a-half to three times high per capita income in perceiving per parity term. Their income level is four-and-a-half times ours.

If we are to avoid a nightmare scenario, it is critical that we get a competent and capable government, not the kind of government we currently have which makes policy decisions that has resulted in a slowdown of growth in the last 10 years at 6.2% annum compared to the 7.8% that was prevailing in the earlier years.

Even the 6.2% in the last 10 years is actually questionable. It is questioned by us in the book. It has been questioned by Professor Arun Kumar. It has been questioned for a long time by Dr Arvind Subramanian. He was of the opinion that it was not 6.2%, it was only 4.5%.

That is because there are foundational flaws in the way GDP is estimated in the country.

IMAGE: Professor Santosh Mehrotra

Some people say that we have already missed the demographic bus. Do you think it is not too late for us to catch the bus?

You can say that it is nearly too late, for the following reasons.

Suppose we were in 2014 today. Then, I would have said, there is still 25 years left. But we have lost more than a decade.

Can you imagine how much of a loss that has been?

We have to recover in the sense that we have to pull 80 million workers out of agriculture and go back to where we were in 2014. That itself is going to be a huge task.

We have already lost time, and that is a catastrophe impending.

Feature Presentation: Aslam Hunani/Rediff