Any government will struggle to create jobs in future

  • 3 years ago
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Not just Modi! Any government will struggle to create jobs in future

The multiple claims, and counter-claims on job creation numbers make for a fascinating read.

In July 2018, Prime Minister Narendra Modi told Parliament that over a year, nearly a crore or 10 million jobs were generated if both formal and informal sectors were taken into account. Citing a study from an “independent institute”, he stitched the new enrolment numbers from the Employee Provident Fund and the National Pension Scheme while also factoring in the number of new professionals such as chartered accountants and doctors joining the system to calculate formal jobs. Professionals, when they start their own practice, create jobs. For informal job creation, commercial and passenger vehicles sold were cited as a proxy – vehicles need drivers and helpers.

Meanwhile, over the last three years, in the absence of timely publicly released, survey-based employment-unemployment numbers from the government, a private effort gained currency. The Centre for Monitoring Indian Economy (CMIE), which maintains business and economic databases, conducts an unemployment survey with a sample size of over 178,000 households. The company’s survey indicates that in calendar year 2018, the number of people employed had shrunk by nearly 10 million. In December 2017, about 406 million were employed; that number was 396 million by December 2018. The unemployment rate, in February 2019, is estimated at 7.23 per cent, higher than the 5.87 per cent in the year-ago month. Unemployment, in February 2018, was the highest in Tripura (26.1 per cent), followed by Haryana (21.3 per cent) and Jammu and Kashmir (17.3 per cent). Unemployment was the lowest in Puducherry (0.9 per cent), Tamil Nadu (1.4 per cent), and Karnataka (2.1 per cent).

One of the reasons for this divergence is the mega trend of automation driven by newer technologies. This is the reason why all future governments would struggle to show good jobs numbers in either manufacturing or services. Companies are building smart factories that require one-fourth or less of the manpower needed even five years ago. By the time Modi became Prime Minister in 2014, the world had started adopting Industry 4.0, the new industrial revolution enabled by smart sensors, automation devices, new generation of robots, Internet of Things (IoT), cloud computing, location detection technologies, human-machine interfaces, augmented realty, 3D printing, artificial intelligence (AI), big data analytics, and mobile devices among others. Indian manufacturers are adopting smarter manufacturing to close the productivity gap with other countries – India’s labour productivity, compared to world standards, is low with one manufacturer of automobile stating that India was 10-15 per cent lower compared to countries such as Japan, Korea, and the US. Meanwhile, the cost of hardware is falling too. New generation of robots, such as cobots, are cheaper than traditional robots, have higher reliability and thereby need less people to maintain. Manufacturing, in short, would simply struggle to absorb the migration of workers from the less remunerative farm sector.

The second mega trend is anti-globalisation. The book, Jobonomics, states that between 2004 and 2011, global trade was growing almost double the rate of global GDP growth of about 3.5 per cent. In other words, economies were far more open. Trade growth tanked in 2009, after the recession, but recovered for a couple years. However, since 2012, global trade slipped and is growing slower than global GDP growth. The book also quotes Sunil Kumar Sinha, Director of Public Finance and Principal Economist at India Ratings and Research: “Global GDP is back to over three per cent growth rates after the recession, but trade has fallen below three per cent (in most of the years). The fiscal and monetary policies that different countries pursued, by and large, have been able to put their economies back on track. But this has not been accompanied by a similar growth in trade as was witnessed during 2004-2011. Countries are not willing to trade.”

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