Vijay Kumar Gaba

Continuing from last week

 Continuing from yesterday.

If the job crisis is so severe, why is the incumbent government so popular, especially among the youth?

The incumbent prime minister, reportedly, enjoys the highest rating amongst the popular leaders of the world. In particular, he is very popular amongst the youth and women in India.

India faces one of the worst youth unemployment rates globally. Indian homemakers are facing serious challenges in managing their household budgets due to inflation. According to the World Bank, the youth unemployment rate in India could be comparable to war-torn economies like Syria, Yemen, Lebanon etc. The unemployment rate and household inflation have worsened or failed to improve in the past 10 years.

The question thus arises, why is the incumbent government still popular amongst youth and women?

I have discussed this aspect with numerous common people, like myself, nationwide over the past couple of years. My conclusion is as follows:

(a)     Contrary to common perception, the incumbent government is not very popular with the people. It is the Prime Minister who is popular, not his team or the administration. A majority of people defend the prime minister, arguing that he sincerely wants to make life of the people better, but the administration is corrupt and not supporting him fully.

(b)     A majority of the prime minister’s supporters believe that he is a divine incarnation and he could only salvage them from their misery and distress.

(c)     The popularity of the incumbent government and the prime minister is significantly higher in West and North India, as compared to South and East India. He is also relatively less popular in the states where there are strong local leaders.

(d)     The lower middle-class youth is increasingly becoming kind of masochist. They appear to be comfortable with their pain and misery, so long as their neighbors are more miserable and are in deeper pain.

(e)     Above all, the welfare schemes of the government have benefitted poor households. The campaign to promote these schemes is very strong and effective, strengthening the connection between beneficiaries and the prime Minister.

(f)      Overindulgence with social media is making youth delusional.

(g)     Partisan reporting by electronic media has affected the judgment of gullible households to a material extent.

(h)    The lack of a visible opposition leader with a pan-India appeal, and the lack of any competition from within the BJP to the prime minister’s supremacy, are helping the prime 

Continuing from Tuesday (Nine years of continuity and low growth), I must say one key area of sub-optimal by the incumbent NDA-2 government is management of human resources. Despite massive public campaigns, the investment in education, skill developments, and employment generation opportunities have been found lacking. Meager budget allocations have been made for capacity building in the areas of education and skill development. In fact, the capital expenditure budget was sharply cut for school & higher education and skill development in the union budget for FY24. A meager sum of Rs99.2cr was allocated towards capital expenditure on skill development.

The successive governments in India have been consistently ignoring the fact that the global community has always valued resource rich nations and expected them to behave in a responsible manner to preserve the global order.

·         The capital rich western world is expected to help the poor and starved of the world. The world looks forward to funding technological advancement, preservation of cultural heritage, assisting global growth and development. Even after taking full cognizance of the blemished legacy of imperialism and suppression, I believe that financially rich communities have worked for the betterment of human life by funding technological innovation, life science research & development, productivity enhancement, and development assistance to the economically underprivileged world.

·         Similarly, nations rich in natural resources like minerals etc. have been expected to prospect and exploit these resources in optimum manner to assist the sustenance and growth of the global economy. For example, in spite of frequent allegations of cartelization and supply manipulation, OPEC has been mostly successful in maintaining petroleum market equilibrium.

The point is that since India now possesses the largest pool of prospective workers for the world, it is our responsibility to prospect, grow, and develop this resource for the benefit of the global community! This becomes even more pertinent in the context of the current global financial conditions. In places like Europe and Japan the root cause of the crisis could be traced to the aging demographic profile. China is also likely to join the club soon. Under the circumstances it is the responsibility of India to provide educated, skilled and trained workforce to the global economy.

A number of research papers and surveys have shown that (a) Child and mother nutrition level in India is sub-standard consequently child mortality rates are poor; (b) higher and professional education standards are extremely poor consequently a large number of Indian graduates are unemployable even in routine jobs; (c) There is acute shortage of competent scientists to scale up research and development (R&T) activities to make Indian businesses competitive at global stage.

The consequences are low proportion of labor force and even lower labor force participation; especially in case of female workers. As I highlighted last week (see here), for urban females in India, labor force participation rate is a dismal 18%. Even for young females (15-29yrs of age) it remains materially lower at19.3% (vs 57.6% for males). Youth unemployment in urban areas is very high at 17.3% (22.9% for young females). In some states like Assam (41.7%). Himachal (49%), Kerala (42.8%), Rajasthan (43%), and J&K (59.3%) urban unemployment rate amongst young female workers is running at over 40%.

It is cause of grave concern that the unemployment remains materially higher amongst the young workers (17.3%) as compared to overall unemployment level in urban areas (6.8%). The reasons for this may include unemployability (skill mismatch and/or sub-standard education), reducing employment intensity of GDP, and poor employment growth in manufacturing sector. Besides, persistently, high ratio of self-employed and casual labor, inter alia, indicates (i) lower employment elasticity in the organized sector and (ii) skill mismatch.

Unfortunately, the results of the latest (7^th) Economic census launched in 2019 are not yet released, so we will have to rely on the outcome of 6^th economic census (2013-14) for the sake of argument sake. Anecdotally, I can vouch that the trend has not reversed in the past one decade. In fact, the conditions are more likely to have deteriorated, if we consider the latest Annual Survey of Industries (2019-20).

As per the 6^th Economic Census, there were 58.5mn business establishments (excluding public administration, crop production & plantation, defense and compulsory social service activities) operating in the country. Of these ~96% establishments were privately owned while just ~4% were government owned. These establishments employ 131.29mn people (52% in rural areas and 48% in urban areas).

·         Out of total ~58mn establishments about ~72% were Own Account establishments (meaning with no hired worker). These Self Owned Establishments (SOEs) grew 56% during 2005-2013. About 63mn people (48% of total employed people) are employed in these SOEs.

·         The government or public sector employs only 7% people. 79% of people work in proprietary establishments. Organized private and cooperative sector employs 14% people.

·         About 36% of business establishments were operated from the home of the Self Owner, while another ~18% operated from outside the home without any fixed structure.

·         Retail trade (~35%) and Manufacturing (~23%) were dominant non-agricultural activities.

A June 2014 working paper released by RBI, concluded that aggregate employment elasticity (change in employment due to economic growth) of Indian growth has fallen considerably in the 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 statistics are 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 organized and unorganized sectors, greater employment generation in organized manufacturing is crucial as it has larger multiplier effects.

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 organized sector for a labour abundant country like India is a concern that has been well-highlighted. If India has to meet the demographic dividend challenge, focus should be on industries where employment elasticity is higher. Roughly, in India over 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.

In this context, the findings of the latest Annual Survey of Industries (ASI-2020) are noteworthy.

As per the ASI-2020, the addition of net new manufacturing units in India has been very low. Moreover, the factories have become more relatively capital intensive. The average fixed capital per factory increased 43% from Rs12.78cr in ASI-2013 to Rs18.33cr in ASI-2020 (a part of higher amount could be attributable to cost inflation); but the number of employees per factory increased only 17% from 56 to 66. Net value-add per factory in operation increased ~27% in this period from Rs4.82cr to Rs6.11cr. This barely covers the inflation. 

The worst part is that only ~6.6% operational factories were located in the most populous state (Uttar Pradesh); while Tamil Nadu accounted for ~16% of total operational factories.

Three trends could be reasonably deciphered from this Survey:

1.    In the past 10yrs the capital-intensive large industries have grown at the expense of labor intensive MSME and household sector industries.

2.    The employment intensity of the Indian manufacturing sector continues to decline. The employment intensity of the agriculture sector is already negative. These are the areas where over 70% of the workforce is employed or seeking employment.

3.    The government incentive schemes to promote industrial growth (e.g., PLI) are yet to show any meaningful impact. Some recent reports indicate that against a total budget outlay of Rs 1.97 trillion, so far only Rs29bn have been disbursed under 14 PLI schemes.

In conclusion, the solution for the unemployment problem in India lies in promotion of cottage and MSME units and not fancy large manufacturing plants. The government’s focus should be on skilling youth and enabling the setup of high-quality cottage and MSME sector that could become ancillary to large OEMs in India and abroad. The development of the Auto industry during the 1990s and 2000 is the classic template that should have been adopted for overall industrial growth. Unfortunately, it does not seem to be the case so far. 

The latest Periodic Labor Force Survey (PLFS), released three weeks ago by the National Statistical office (NSO), provides some very useful insights into the current employment conditions in the country. The following are some of the key observations from the Survey report.

 Recently, the growth in per capita GDP of India has been in the news. The government statistics claim that per capita income of India has almost doubled in the past nine years. This claim has generated intense discussion over the economic performance of the incumbent government; especially relative to the previous UPA government (2004-2014).

Without getting into a political argument and keeping the statistics aside for a while; I would like the popular debate to take the following into consideration:

·         The last census of India was done in 2011. Therefore all “per capita” data points are using an estimated number of the population. There is a possibility that the actual number could be different from the estimates.

·         In the past twelve years there have been significant changes in the socio-economic and demographic structure of the country. The youth population has increased materially. Millions of professionals (engineers, doctors, management & accounting professionals etc.) and other graduates have passed out of colleges and millions have dropped out of colleges. Not all of these are fully or partially employed.

Besides, demonetization of high value currency (2016), implementation of GST (2017), and Covid-19 pandemic (2020) accelerated the trends towards formalization the economy and digitalization of trade and commerce stressing millions of the micro and small businesses (mostly self-owned) and migrant laborers.

The rise in inequalities and dispersion of income and wealth must be factored while using “per capita” data to measure the welfare, quality of life and purchasing power of the bottom 75% of the population.

·         Traditionally, the primary sources of data on the workforce and employment have been the (i) decennial population census and (ii) nationwide quinquennial surveys on employment and unemployment by the erstwhile NSSO under the Ministry of Statistics and Programme Implementation. The latest Census data is available for the year 2011. Similarly, the quinquennium NSSO data on employment and unemployment is available up to the year 2011–12 only.

From 2017-18 National Statistical Office (NSO) of MoSPI started publishing Periodic Labour Force Survey (PLFS). PLFS data is published annually for both rural and urban and the total population; and quarterly for the urban households.

For the purposes of PLFS, the Labour force includes persons aged 15-60yrs who were either working (or employed) or those available for work (or unemployed). Some persons in the labour force may be abstaining from work for various reasons. Subtracting that number from the labour force gives the number of actual workers. These workers are further categorised as persons who are engaged in any activity as self-employed or regular wage/salaried and casual labour. The difference between the labour force and the workforce gives the number of unemployed persons.

As per the latest data NSO PLFS available (FY21), India has a low labour force participation rate of 41.6%. The rate is lower for urban labour force (38.9%) vs Rural labour force (42.7%); and for female workers (25.1%) vs male workers (57.5%). In urban India the female labour participation rate is dismal 18.6% vs still poor but higher 27.7% for rural female workers.

Clearly, (i) the data availability and quality is of not very high quality; (ii) employment conditions cannot be termed as good; and (iii) India is wasting the demographic dividend.

·         Unlike other developed economies, we could not create enough unskilled and semi-skilled jobs in the manufacturing and construction sector during the transition of economy from agrarian to industrial. In fact, unlike the US and Europe, we jumped from agriculture to services mostly skipping the industrial part. Now we are trying to fill the gap by encouraging manufacturing. However, the unfortunate part is that manufacturing is no longer labor intensive now. It is not feasible to transit a large number of unskilled or semi-skilled agriculture workers to industry or even construction. Consequently, there remains massive disguised unemployment in agriculture.

At the same time we do not have enough highly skilled people needed for globally competitive manufacturing. The corrective action to encourage manufacturing is thus not working well, at least so far. 

The only feasible way to correct the occupational structure of the country is to focus on accelerated development of the agriculture sector and make the farm workers more productive.

 The latest data published by the National Statistical Office (NSO confirms that India’s economic activity in FY22 has reached the pre pandemic levels of FY20. The Real Gross Domestic Product (GDP at FY12 prices), private consumption, government consumption, and gross investments in FY22 were at a marginally higher level than FY20. The exports and Imports in FY22 were more than 10% higher than FY20.

The Real GDP in FY22 grew 8.7% vs a contraction of 6.6% in FY21, and a growth of 4% in FY20. The growth in Real GDP in 4QFY22 was much slower at 4.1%.

Media and government officials have reported the growth numbers in a context of their own liking. Some have taken pride in India achieving the fastest growth rate amongst the larger global economies. Some have expressed relief that the Indian economy has recovered fully from the pandemic impact and attained the pre pandemic level of economic activity. Some celebrated this as a “V” shape recovery of the economy. Some expressed concern over slower growth in 4QFY22 and poor growth outlook for FY23. Many global agencies have downgraded their estimates of FY23 growth for India.

In my view, comparing India’s growth trajectory to global peers is meaningless, as the socio-economic profile of India (particularly demography and people living below poverty line) may be very different from the developed or even developing economies like China. A fair comparison, if at all needed, would be to compare with the growth rate of those economies when they had similar demographics and poverty levels; adjusted for the available resources (financial, human, and other natural resources) for future growth.

Our competition is with ourselves only

Also, it is important to note that this 8.7% number is a purely statistical phenomenon that is impacted by the base effect. Since the growth in FY21 was a negative number (-6.6%), the FY22 growth is statistically looking stronger. There is no denying that the Indian economy has shown resilience. The government has been able to limit the impact of the pandemic to a material extent. But a better way to look at growth would be to compare it with the “Required growth Rate” (RGR) to achieve full employment and eliminate poverty in, say, the next two decades. The RGR must also account for the costs to be incurred over the next couple of decades for improving the sustainable quotient of the economy, and achieving the sustainable development goals (SDGs).

Urgent need to exploit the demographic dividend

The demographic profile of India warrants extreme urgency in accelerating the growth rate to RGR. As per the latest available Periodic Labour Force Survey (PLFS 2018), almost one third of skilled youth in the country are unemployed. The rate of unemployment amongst skilled female workers is even higher. The situation is widely believed to have worsened in the past three years due to the pandemic.

My experience indicates that if a college graduate does not get employed in accordance with his/her skill level within 2yrs of graduating, the probability of his remaining underemployed for life increases manifold. It is therefore important that India achieves RGR urgently so that 8 to 12 million youth who are joining the workforce every year get employed appropriately. Else, we will continue to lose the benefits of demographic dividend, which has been one of the primary factors in many countries graduating to the middle class of wealthy economic status.

Focus on long term growth trajectory

Rather than focusing on quarterly numbers that may be materially impacted by some non-recurring factors (Drought, flood, lockdown, monetary or fiscal action etc.) it is important that we focus on the long term growth trajectory of the economy. For example, a 5yr CAGR of real GDP may be a better indicator of sustainable growth potential of the economy. This long term growth rate may adequately account for the sustainable level of economic activity and capacity building for the future growth.

The long term growth (LTG) trajectory (5yr GDP CAGR) has been declining since the global financial crisis (GFC 2008). It had shown some signs of improving in FY15-FY19, but the pandemic has pushed it down again. The economy had a LTG of 9% in FY08, which declined to 7% - 7.5% during FY13-FY19. The present LTG is less than 4%; and the Indian economy is expected to regain even the 6% LTG trajectory not before FY27.

For record, the LTG during the past 8yrs (FY15-FY22) is 5.2%.

Obviously, the economy has some serious challenges to surmount, and there is no scope for any complacency.

Last week, I mentioned that unemployment in India is a multidimensional problem and it would require a multipronged strategy. The traditional “industrialization” strategy may not yield much significant results in the modern Indian context as the industries are now mostly capital and technology intensive and offer significantly lower opportunities for unskilled and semi-skilled workers, which form a large part of the Indian workforce. Implementing the traditional Keynesian model of creating employment through public spending is also challenging due to stressed fiscal conditions, focus on privatization of public enterprises, and diminishing labour intensity of construction activity.

In the past fifteen years MNREGA (Rural capacity building) and PMGSY (Rural roads to improve accessibility) have been extremely successful in generating rural employment. These two schemes have not only supported the rural economy during the period of stress, but also created much useful capacities in the rural areas. Especially, the connectivity provided through roads built under PMGSY has been transformative for the economy of numerous villages in hinterlands and remote hills. However, these jobs are mostly seasonal and meant for unskilled rural labour. Their productivity and sustainability has been questioned by various studies.

Surfing through social media for a couple of hours, one could easily find out how the youth of our country are dissipating themselves in frivolous activities. It is therefore imperative that more productive and sustainable solutions are found to solve the unemployment problem of the country.

I would like to make the following three suggestions for improving the employment situation in India. Admittedly, these are random thoughts based on my personal explorations and understanding of India’s socio-economic milieu. In a typical bureaucratic manner, these ideas could be rejected as impractical or even flimsy. Else, these could be evaluated as starting points for developing something useful.

1.  Bring factories to farms

The employment elasticity of growth in manufacturing, agriculture and construction sectors has been decreasing consistently. This trend shall only accelerate in future. Most of the growth shall come from higher productivity through automation, innovation and consolidation. Elimination of redundancies and economies of scale shall lead the growth effort. The number of jobs, especially unskilled and low skill jobs shall remain limited.

Implementation of a common GST, nationwide agriculture market, ecommerce, automation (AI) etc., is leading to business consolidation in a major way. This may also potentially eliminate millions of unskilled and low skill jobs in the next decades or so.

The historical transition of farm workers to industry during the developing stage of growth may not work in the current Indian context. The so-called developed economies have transited the labour from farm to factories, when industry and mining were still labour intensive and global competition was not much. The productivity gains were immediate and tangible. It is no longer the case. The industry in India is already capital intensive. Even traditional labour intensive industries like gems & jewellery, textile, leather, mining and construction are becoming increasingly automated to stay viable against the global competition.

The ambitious Make in India program mostly aims to substitute imports. We are trying to compete with manufacturing powerhouses like China, Vietnam, Taiwan, etc. This defies the basic principle of making economic decisions, viz., everyone should do what they can do best to optimize the resource utilization.

Emulating China model may not work in India, as our political and economic model is entirely different. Moreover, the skill and training requirements for modern industry do not allow a straight farm to factory transition. So the options get limited to unskilled construction sector jobs and building industry around farms where the skill of the farmers could be suitable employed.

While MNREGA and the ambitious rural road program is taking care of unskilled construction jobs, there is little effort to take factories to farms. Encourage industry to partner with farm cooperatives to set up food processing units at the farms. The farmers' cooperative allots land and provides farm produce, whereas the entrepreneurs contribute capital and undertake marketing and sales responsibilities. Both share the profit in pre-agreed ratio. This should maximize profit of both the industrial enterprise as well farmers, and create ample employment opportunities close to villages.

Allow corporates to develop waste and barren land for farming purposes. For example, many corporates from India and the Arab world may be interested in developing Rajasthan and Gujarat desert and barren lands for growing dates, palm, aloe etc.

2.  Initiate public sector agriculture

Since independence the government has focused on development of industrial infrastructure in the country. It has actively participated in the endeavor through a large number of public sector enterprises; besides offering a myriad tax and other concessions to the private entrepreneurs. Now, the country has a reasonably strong industrial base. Many of our industries are globally competitive. We have a strong set of entrepreneurs and risk takers. It is therefore high time when the government should reset its priorities and turn its primary focus on agriculture. To meet this end, the government may consider:

·         Exiting all industrial and banking activities and actively undertake agricultural activities. It should develop barren lands; develop water bodies and irrigation facilities; develop and use technology for enhancing productivity; give employment to landless farmers; take risk with new technologies & crops; partner with marginal farmers in consolidating their land and do farming on that land - just the way it undertook industrial activities immediately after independence.

·         Undertake, on mission basis, the task to re-skill the underemployed farmers and farm labor. The farmers and their family members may be trained as dairy workers, domestic help, nurses, tourist guides, artisans, etc. Expecting the construction sector to absorb all surplus farm labor is a bad idea.

·         Develop at least 5 very large special agri export zones in rocky and desert areas of central and western India and undertake export of farm produce as a commercial activity. These zones may be developed in public, private or joint sectors. Besides, it may acquire farm assets, especially rice farms, overseas to reduce water intensity of Indian agriculture.

·         Encourage various states to make bilateral or multilateral agreements for procurement, processing and trading of farm produce and movement of labor within states.

·         Nationalize all rivers. Develop a national water grid. Set up a national water regulator, who shall work out a water sharing formula for all states and union territories every three year and maintain adequate provisions for managing droughts. The idea should be to ensure that not a drop of river water flows into sea from India. Develop a water distribution grid on the models of roads and power grids on a mission basis.

It has taken seven decades for Indian industries to reach a stage where the government may consider fully exiting the industrial activities. It may take 2-3 decades for Indian agriculture to reach a stage where the government will be able to exit farming activities completely.

Please note that I am also not suggesting nationalization of the agriculture sector. I am just saying that the government should undertake the activity on a commercial basis to provide the sector with much needed escape velocity in terms of capital, technology, and risk taking capability.

3.  Engage youth in nation building

The government must on priority prepare a comprehensive strategy for engaging youth in the nation development endeavor. A nationwide MNREGA type scheme may be launched for youth, whereby they could be engaged in socially useful productive work (SUPW). Millions of jobs like traffic management, night patrolling in areas susceptible to crime against women, enforcement of cleanliness of public areas, old age care, social forestry, teaching & skilling to unschooled, etc. could be assigned to the youth not having a regular job. This shall help in developing a sense of nationalism, belongingness, and responsibility amongst youth, besides keeping them occupied in productive jobs rather than leaving them on their own to waste time or take to the path of crime and unlawful activities.

Also read

Five shades of unemployment

Unemployment – misdirected policies

Few random thoughts on unemployment in India

 As I mentioned yesterday (see here), unemployment in India is a multidimensional problem. Unemployability (skill deficit), underemployment, disguised unemployment, gender disparity, regional disparities, are some of the contours that define the state of unemployment in India. The genesis of the reasons responsible may be traced to traditions, education system, colonial legacy, economic policies, and demographics. Obviously, the solution for a multidimensional problem also needs to be multidimensional. The classical solution, i.e., industrialization alone is definitely inadequate for managing the complex unemployment situation in India.

Employment framework in India

As per 6^th Economics Census (2013), there were 58.5mn business establishments (excluding public administration, crop production & plantation, defense and compulsory social service activities) operating in the country. Of these ~96% establishments were privately owned while just ~4% were government owned. These establishments employed 131.29mn people (52% in rural areas and 48% in urban areas).

·         About 60% of business establishments were in rural areas while about 40% operated in urban areas. Out of these, about 78% establishments were engaged in non-agriculture activities, while ~22% were engaged in agriculture related activities (excluding crop production and plantation).

·         During the 8yr period between 2005-2013, the business establishments grew by ~42% from ~41mn to ~58mn. In this period agriculture establishment grew ~116% while non-agriculture establishment grew ~29%.

·         Out of total ~58mn establishments about ~72% were Own Account establishments (meaning with no hired worker). These Self Owned Establishments (SOEs) grew 56% during 2005-2013. About 63mn people (48% of total employed people) are employed in these SOEs.

·         About 96% of establishments had less than 5 workers. Another 3% have 6-9 people employed.

·         The government or public sector employed only 7% of the people. 79% people worked in proprietary establishments. Organized private and cooperative sector employed only 14% people.

·         About 36% of business establishments were operated from the home of the Self Owner, while another ~18% were operated from outside the home without any fixed structure.

·         Livestock accounted for ~87% of the agriculture activity.

·         Retail trade (~35%) and Manufacturing (~23%) were dominant non-agricultural activities.

·         Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From this data, I decipher that—

(a)   About 96% establishments have less than 5 workers. Another 3% have 6-9 people employed. Only three states - Tamil Nadu (13.81%), West Bengal (11.07%) and Maharashtra (10.02%) have more than 10% establishments with 10 or more workers.

Most of the legislations relating to employment and social security provisions (ESI, EPF, Gratuity, Bonus etc.) apply only to the establishments with 10 or more hired workers. Implying that only ~1% of the total private workforce is eligible for statutory social security benefits. Even the new labour code (The Code of Social Security, 2020 that would subsume most of existing laws) covers only the establishments with 10 or more workers.

(b)   Livestock accounts for 87% of the agri sector related establishments. The whole of it cannot be dairy farming. Obviously, meat (including bovine meat) is a big business in terms of employment.

(c)    Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From my experience I know for sure that a large number of these establishments employ household children as workers. In my knowledge none of the legislative provision or policies designed to prevent child labour and promote child safety and security deals adequately with a parent employing his child for his business, as the child is not a hired worker in this case.

The worst part is that if the parent business is impacted due to any adversity, the children are affected most, as they are mostly unemployable in other businesses.

(d)   About 36% of business establishments were operated from the home of the Self Owner, while another ~18% are operated from outside the home without any fixed structure.

From my experience I know that most of these business establishments may not exactly be "authorized" from civic and town planning view points. This creates a number of problems from everyone. Grocery and other daily need shops operating from homes; tailoring shops; automobile repair shops create nuisance for the neighborhood; pose environment and safety hazard; put pressure on civic amenities like power, water and sanitation; motivate corruption; and above all lead to serious problem of child labor, underemployment and disguised unemployment. Town planners, civic administrations, and government often fail to recognize & accept this phenomenon and therefore are unable to find acceptable solutions.

(e)    Retail trade (~35%) and Manufacturing (~23%) are dominant non-agricultural activities in the country.

Organized retail and automation in manufacturing are a potent threat to these traditional sources of employment to traditionally skilled and semi-skilled workers. The redundant traditionally skilled and semi-skilled workers would obviously be competing with the unskilled labour in construction and “gig work” space, leading to massive underemployment, mis-employment and unemployment.

Some more on this on Tuesday.

Trivia

Regardless of the government data, the telecom sector may have created most of the incremental employment opportunities in India in the past two decades. From Gangotri to Kanyakumari and From Tawang to Kutch, wherever you go, it is common to find small shops selling telecom products (prepaid cards, mobile phones and accessories) and phone repair services. Telecom is also at the core of the entire new economy and startup ecosystem. However, unlike the traditional employment provider textile, the government has never promoted the telecom sector. To the contrary, efforts have been made to weaken the sector.

Shade 1

Subhash Pandey (45yrs commerce graduate) was working as an account assistant at a small shoe factory in Kanpur when the nationwide lockdown was imposed in March 2020. He lives in a rented house, and has two daughters aged 12yr and 9yr. Jyoti, his wife (39yrs, political science graduate) undertakes tailoring assignments from a local boutique to help in meeting household expenses. Post lockdown, Subhash lost his job, and tailoring assignments for Jyoti have also reduced. The expenses on education of the daughters have risen; and kitchen expenses have also gone up due to food inflation. Subhash now works as a delivery agent for online retailers and food delivery services. He gets Rs7-10 per delivery he makes. He needs to make at least 80-100 deliveries per day to earn (net of fuel expenses) what he was earning before lockdown. Jyoti is now working 8hrs (against the earlier 4-5hr) doing miscellaneous jobs (tailoring, pickle making, packaging etc.) to earn the same amount. Their savings have mostly evaporated.

Shade 2

Rajiv Saxena, earned his Bachelor of Arts degree from CCS University (Merrut, UP) in 2020. He unsuccessfully searched for a job in Merrut for one year. He came to Delhi in 2021 and worked as a “gig worker” for six months. The money he earned was insufficient to meet his rent and food expenses. He decided to return home on Diwali and felt depressed. His father, a retired Army man, drew from his savings and converted the street facing room of their two room house into a small dailies shop, and constructed an additional room on the roof. Rajiv now sells eggs, bread, milk and toffees to the people living in his street. He competes with 2 more similar shops and 9 online suppliers. In the past two months he has earned Rs700 (before paying the electricity bill for his shop). The shop keeps him busy for 2-3hrs in a day. He spends the rest of his time watching “stuff” on his phone. His mother is worrying about his marriage already.

Shade 3

Om Pal Yadav (46yr, matriculate) is a marginal farmer in Shahjahanpur district of UP. He owns 10 bigha land (~1.5acre) and does sustenance farming, i.e., grows wheat, pulses, millets for self-consumption. His wife 42yrs and two sons (22yrs and 19yrs) help him in farming. In his spare time Om Pal works as gardener in some houses in Bareilly, 55kms away from his village. His son also undertakes MNREGA jobs in his village. The wages pay for their non-food expenses. They have no savings; a semi pucca house and no private transport. They are expecting to get a motorcycle in dowry when the elder son gets married later this year. Last year, their total family earnings were Rs1,88,000 (including the market value of their farm produce). If all three male members had worked in industry or construction, the minimum wage they would have earned is 2.5x their present earnings.

Shade 4

Vivek Gupta (38yrs IIT, IIM), worked with a multinational investment bank for 7yrs, before he decided to take the plunge and join a B2B startup as partner in 2016. His wife Ritika (37yr MBA), also a banker, fully supported him. His father, a retired civil servant, was initially against the idea but supported him nonetheless. After 5yrs, the startup has burned more than US$7.5mn in cash and has reached the end of the road. Vivek is broke – financially, psychologically and emotionally. Ritika is not able to take it anymore. She wanted to start a family, but it was getting too late. She has filed for divorce. Vivek also lost his father to Covid in 2020. There are some debts to repay. His friends are trying to find him a job, but things are really tough. The best offer so far is 75% lower than what he drew as his last salary in 2016.

Shade 5

Aditi Shekhar, (29yrs, CA, CS, Coimbatore) was happy being married to Rajashekhar who managed his own ready to eat snacks factory. The business is doing well. After their marriage in 2017, she attended the family business for a few months. The option of her working for someone else was never discussed. However, after the birth of their son in 2019, she has become a fulltime housewife. The decision of her non-working was not discussed within the family. It was simply assumed that she does not need to work now as her domestic responsibilities have increased. Unsurprisingly, the state of affairs does not seem to be bothering Aditi even a bit. She is happy managing the kitchen and raising the kid. Of course she is not alone; there are millions of professionally qualified women who have accorded higher priority to household responsibilities over pursuing a professional career. Not all of them may have chosen house over office voluntarily. Many of them may be unhappy, frustrated and feeling wasted.

Unemployment is one of the most pressing problems that the Indian economy is facing. As per latest data published by Center for Monitoring Indian Economy (CMIE), “India's unemployment rate reached a four-month high of 7.91% in December as compared to 7% and 7.75 per cent in November and October 2021”.

As per CMIE, the urban unemployment rate is now 9.30% while rural employment is 7.28%. Both urban and rural unemployment saw significant rise from 8.21% and 6.44%, respectively, in the previous month.

The government spokespersons have vehemently rejected these figures arguing that the government schemes have resulted in better self-employment opportunities; farmers’ income has increased materially and public sector hiring is improving. The massive infrastructure building thrust of the government is creating a significant number of new jobs. The production linked incentive schemes, incentives to startups etc. are creating new job opportunities in the private sector also. Often the EPFO data is cited to showcase improving employment conditions in the country.

During my recent visits to UP, Punjab and Uttarakhand I did not find much evidence that would support the government contentions. Moreover, the debate on unemployment is ignoring the serious problem of unemployability, underemployment, and disguised unemployment that are rising even faster than the “unemployment”, as defined by the official agencies. The lower woman participation rate must be a serious policy concern; but we are yet to see a concerted policy action on this.

Some more thoughts on this tomorrow.