Thought for the day
”The new ruler must determine all
the injuries that he will need to inflict. He must inflict them once and for
all.”
-
Niccolo
Machiavelli (Italian, 1469-1527)
Word for the day
Garboil (n)
Confusion
(Source:
Dictionary.com)
Teaser for the day
Should government consider scraping degree as
eligibility condition for all government jobs (including IAS)?
Instead it may
institute an exhaustive eligibility test followed by a 3-12 month orientation
program for all new recruits.
Capitalize on human capital
In a recently published working paper
the Reserve Bank of India highlighted many interesting facts about the status
of employment and its elasticity to the GDP growth. I find it pertinent to
highlight some of the observations made in the said working paper.
In particular the change in occupation structure of the economy
in past 15years is worth noting; because it helps setting up the agenda for
future growth. It is important to note that one of the key promise of incumbent
government is to make growth job oriented (hence inclusive) as opposed to
jobless growth (therefore exclusive) growth achieved during past few years.
The working paper finds that aggregate employment elasticity
(change in employment due to economic growth) of Indian growth has fallen
considerably in post 1991 period. In this period for every 10 per cent change
in real GDP, there had been about 1.8-2 per cent change in employment. The
current statistic is even poor.
Moreover, elasticity varies considerably across sectors. While
agriculture has witnessed negative elasticity, services including construction
have generally been employment intensive. Manufacturing employment elasticity
has hovered in the range 0.29-0.33.
Within manufacturing, the employment elasticity for organized
manufacturing sector based on various estimates seems to be higher, in the
range 0.42-0.57 for 2000s and it has risen over the previous two decades. Given
the huge productivity and wage differentials between organised and unorganised
sectors, greater employment generation in organised manufacturing is crucial as
it has larger multiplier effects.
Subsequent to 2011, India has seen significant moderation in its
GDP growth rates, particularly during 2012-13 and 2013-14. While employment
numbers are not yet available for these years, Labour Bureau quarterly surveys
as well as various private agencies’ information point towards moderation in
employment generation. If these data sources are any hint, then one might see
some changes in employment elasticity depending upon the relative pace of
moderation in employment generation vis-à-vis growth.
The working paper suggests that going forward, it is the
relative cost of capital vis-à-vis labour and the nature of investment demand
that will determine to what extent growth would be job-creating.
Increased capital to labour ratio in the organised sector for a
labour abundant country like India is a concern that has been well-highlighted.
I have also been highlighting this rather frequently and to the annoyance of
some of my government readers.
If India has to meet the
demographic dividend challenge, focus should be on industries where employment
elasticity is higher. On a rough basis, about 10 million people would need a
job every year for the next 15 years. Finding productive jobs for such huge
numbers is a big challenge, and clearly the answer lies in stepping up growth,
and importantly, stepping up the employment intensity of growth….to continue tomorrow
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