With 12 million adding to its young labour force every year, India quickly needs to focus on agriculture, manufacturing, services, housing, export growth and ICT to create new employment opportunities, reports Narendra Kaushik
Naresh Sharma (47) has tried his hands on many a trades and is yet unsettled even over two and a half decades after he dropped out of college. He began with gold polishing, manned a cloth merchandise for a while, drove a taxi, sold groceries and ran a roadside dhaba on national highway 1 in collaboration with a former schoolmate of his who too has hopped in and out of as many vocations in last quarter of the century. Sharma, resident of Kamaspur, a non-descript village on NH-I in Sonepat district, currently supervises transport of a company’s goods to Manesar. With his meagre income, Sharma barely manages to feed his family of four including two grown up sons.
Sharma has hurtled from one trade to another partly because he has not known any skills. Besides, his agricultural land gave way to high rise residential apartments and commercial complexes during his father’s time itself and his village (for that matter even his district Sonepat) has hardly added any new manufacturing facilities. Road infrastructure has grown but power situation is as bad as it was three decades ago. Cooperatives and SHGs are still unheard of in the district. Services is the only sector that has generated some jobs. Sharma is an answer to how and why Indian economy has had jobless growth in last half a decade despite having the largest young population dividend and having grown at an average of over eight per cent. He may tell you why despite Indian government having invested hugely in rural employment programmes the number of persons in the labour force has declined from 470.1 million in 2004-05 to 469.9 million people in 2009-10.
Sharma and other 40 million of his ilk (66th round of NSSO survey) in the country may be an answer to why India’s 10th and 11th five year plans, which aimed to add 50 million jobs respectively, failed to go anywhere near the target and unemployment rate on current daily status, according to N C Saxena, Member, National Advisory Council and Distinguished Fellow, Skoch Development Foundation, has increased from 7.3 per cent to 8.4 per cent in 2009-10. Apparently, the drivers for generating employment – manufacturing, agriculture, housing, infrastructure, export growth, ICT, government investment into employment generation, Cooperatives/SHGs – have left much to be desired in Sonepat and most parts of the country.
Skill shortage has become evident in every sector of the Indian economy in recent years. Mining industry which employs .38 million people for instance has majority of its work force unskilled (39 per cent). It quickly needs an institution to train and upgrade skills. At the same time, it has a shortage of 2,000 executives because the Indian School of Mining only produces 300 graduates. “The private sector needs to do some hand holding with mining for proper pay scales and fast track career progression to make mining more attractive,” calls Zohra Chatterji, Additional Secretary, Ministry of Coal. India is second only to Japan when it comes to employers not finding the skilled labour. 67 per cent employers (up from 16 per cent in 2010) in India complain about not finding the right people. A World Bank working paper, authored by Andreas Blom and Hiroshi Saeki and released in January 2011, also reports that 64 per cent of employers in India are not satisfied with the skill sets of fresh engineering graduates. No wonder, the vocational education stream in India is quite small enrolling less than three percent of students at the upper secondary level.
It was only two years back that Union Ministry of Labour formulated a National Skill Development Policy. Around the same time, Finance Minister Pranab Mukherjee announced the formation of National Skill Development Corporation (NSDC) in his budget (2008-09) speech. A year before this, the union cabinet approved the formation of Prime Minister’s National Council on Skill Development. The Corporation aims to skill 30 per cent (500 million) of people in India by fostering private sector initiatives in skill development programmes and providing viability gap funding by 2022.
Apparently, the NSDC, National Skill Development Coordination Board (NSDCB) and PM’s National Council have an arduous task at hand. They will need to do a lot to bridge the huge gap that currently exists between the skills provided and skills required. They will need to devise a mechanism for proper coordination among different bodies like National Council for Vocational Training (NCVT), Directorate General of Employment & Training (DGET) which govern technical education in the country. At the same time, they would need to ensure that there is emphasis on quality rather than quantity and skill development gains prominence over simple pass courses. They would also need to make sure that the vocational institutes have forward and backward linkages with industry and are conversant with the real demands. The technical education mandarins would need to involve private and public sector industry in the training.
But before all this, we would need to procure reliable data on employment and be on the demand side. After all correct diagnosis is the prerequisite for treating an illness. “We don’t have reliable data on employment and unemployment. This should be as frequently available as data on inflation. (At the same time) we should be on the demand side,” says Sudha Pillai, Member-Secretary, Planning Commission. Pillai points out that those who are looking for employment are bereft of skills that are in demand. For her, it is employment that should drive Indian growth and not vice-versa. There is also need to reorient the education so that focus shifts from white collared jobs to blue collared jobs. We could use Internet to upgrade skills of technicians at their place of work or at home without affecting their wage earning output. “Let plumbers, fitters learn skills through virtual world,” advocates Veer Sagar, President, Selectronics Equipments and Services.
R C M Reddy, Managing Director, IL&FS Cluster Development Initiative Limited, is sure that skill development can be leveraged to attract investment: “Skill development programmes will create employment and help us train youth from below poverty line. We’ve already trained about 20,000 and placed them in apparel.”
Infrastructure development was largely neglected in India since independence with most parts of the country particularly the rural and the semi urban sectors having been deficient in road, rail and air connectivity and power, water and irrigation facilities
The other issue which would need careful consideration of the government is accreditation of skilling institutes. The institutes, responsible for certification of the work force, after all, will have to ensure quality of training. National Skill Development Council (NSDC) is in the process of setting up 40 Sector Skill Councils to take care of training curricula and accreditation etc. “The Sector Skill Council will be led by private sector. The Council will be responsible for making a forward projection of skill requirements and also suggest ways and means of meeting the demand,” reveals R K Khullar, Joint Secretary, Department of Economic Affairs, Ministry of Finance.
Infrastructure is at the core of any economy. Not only does it provide a boost to agriculture, manufacturing, services, housing, export growth and GDP growth but is also a major source of employment generation. It is no secret that infrastructure development was largely neglected in India since independence with most parts of the country particularly the rural and the semi urban sectors having been deficient in road, rail and air connectivity and power, water and irrigation facilities. In the last few years, there has been a greater emphasis on infrastructure with the central government having doubled the infrastructure outlay and launched schemes like Bharat Nirman, PURA (Provision of Urban Amenities in Rural Areas), Jawaharlal Nehru National Urban Renewal Mission (JNNURM), PMGSY (Prime Minister Gramin Sadak Yojaja) and Rashtriya Swasthya Bima Yojana (RSBY) to improve transport, sewerage, irrigation, health and supply of drinking water. The government has also unleashed programmes like Sarv Shiksha Abhiyaan (SSA), Right to Education (RTE), National Rural Health Mission (NRHM) to upgrade education and health, two major constituents of soft infrastructure.
Yet a lot more needs to be done. Barring the four metros and few pockets like Chhindwara district, most parts of the country do not have good roads. The trains in the country are notorious for not reaching their destination on time. Even air travel within the country except one of the economy airlines invariably takes longer than its scheduled time. JNNURM has made an effort to improve on sewerage, supply of drinking water, solid waste disposal, parking and transport in cities where the population is more than a million yet infrastructure in tier II and tier III cities is about to crumble under the population load. Even in Mumbai, the financial capital of the country, infrastructure broke down completely when it rained heavily for a few days in July 2005. A good road network is what has helped Gujarat to attract more investment than any other state in the country. The success of BRT in Ahmedabad can be gauged from the fact that not only has it made life easier for the city dwellers but forced several countries to study its design. Another factor that makes Gujarat an attractive destination for investment is the supply of power. The state government claims to supply 24-hours electricity even in villages. RIDCOR is yet another example of creating a world-class road network in Rajasthan.
Unfortunately, despite having improved on power generation by leaps and bounds, India only adds in five years what China adds every year. The need of the hour is that we should improve infrastructure in tier II and tier III and satellite towns around metros so that the latter’s load goes down. There is a need to scale up cluster development so that the cost of providing infrastructure goes down. Reddy cites the example of Ludhiana and Kanpur to emphasise on cluster development. According to him, while 70 per cent of hosiery emanates from Ludhiana, medium and small tanneries of Kanpur contribute 60 per cent of the leather production. “The MSMEs contribute 2/3rd of the production. We need to scale up cluster development (where MSMEs are concentrated),” Reddy suggests.
A positive aspect of the story is that the central and the state governments have lately realised the importance of infrastructure in employment generation. The central government in particular is now pumping in major amount of its budget into infrastructure creation and has been able to encourage bigger participation of private sector in the cause. “We used to spend in 2003-04 around 4 per cent of the GDP in infrastructure. Today we are investing 8 per cent. In 2004-05, 1.6 per cent of the GDP on infrastructure originated from private sector earlier, today 3.3 per cent is coming from there. Things are changing gradually,” says B K Chaturvedi, Member, Planning Commission.
Despite a major portion of the labour force having shifted to manufacturing and services from it, agriculture continues to be the backbone of Indian economy. 62 per cent of the population still sustains on agriculture and 53 per cent of the work force is employed in it. Unfortunately, the growth in agrarian sector has been exceedingly sluggish in the recent years. In 2010-11, which was the best year for agricultural growth in last six years, the sector grew by 6.6 per cent, much lower than the average GDP growth. In fact, agriculture along with manufacturing has majorly contributed to keep the average GDP growth rate down. Per hectare yield in India in some cases (maize for instance) is four times less than what farmers in United States produce in the same area. This is all the more surprising because the farmers in US use much less water for irrigation than the farmers in India. The labour has become costly partly due to employment provided under MGNREGS. Besides inflation has impacted most adversely on the small and marginal farmers sapping whatever savings they could have had. Considering that small and marginal farmers are the ones who mainly do farming (on tenancy basis or otherwise), the high prices of food items have cut down their purchasing power.
B Yerram Raju, Member, Expert Committee on Cooperative Banking, Government of Andhra Pradesh, lists ‘input quality not assured, increase in input prices and increase in labour cost with MGNREGS contributing majorly to this’ among the factors that has made farming unattractive. Large farmers are moving out of farming, handing it over to tenants. “Demographic dividend is really the dividend time bomb in agriculture. Youth no longer works on farms. Inflation is the biggest tax on farmer. Heavy debts outside the institutions are triggering suicides,” Raju rattles off. Though the dependence of rural labour on rural elite for finances has come down slightly after the introduction of MNREGS, the employment guarantee programme has become a major competitor for the agriculture. According to B K Sinha, Secretary, Rural Development Ministry, the programme has become second biggest employer in rural sector after agriculture. While the agriculture generates 200 men days of employment, MGNREGS has made the provision of 100 days of employment for all able-bodied persons in rural areas who want to work.
Apparently, the agriculture sector is in dire need of finances, literacy and research. There is a need to convince farmers to diversify from general crops (wheat, rice etc) to commercial, horticulture and orchard crops. There is also a need to create linkages of agriculture with agro-industries so that the farmer has assured access to a decent remuneration. There is a need to create food processing facilities close to the villages. Maize for instance can be processed into corn syrup, corn flour, corn flakes and other products. It would help if farmers are encouraged to switch over from sugar cane to sugar beet. Not only does sugar beet give a better yield, the sugar content in it is much more than the sugar cane. The government has unleashed major schemes like Rashtriya Krishi Vikas Yojana, National Food Security Mission (NFSM), Development and Strengthening of Infrastructure Facilities for Production and Distribution of quality seed, National Horticulutre Mission (NHM), Integrated Scheme of Oilseeds, Pulses, Oilpalm and Maize (ISOPOM) to boost agricultural growth. What is needed is implementation of these schemes on the ground.
Per hectare yield in India in some cases (maize for instance) is four times less than what farmers in United States produce in the same area
A positive aspect of the story is that contract farming which takes care of almost all issues related to credit is getting popular by the day. The institutional arrangement that promotes coordination between production and marketing activities brings more profits to the private players as well as the farmer as it reduces procurement cost by doing away with the middlemen. Such farming has been in existence for over two decades in Hoshiarpur (Punjab). Many states have amended Agricultural Produce Marketing Corporation Act to allow their farmers to sell in the open market. PepsiCo, Reliance Life Sciences and Punjab Agro Industries Corporation are into contract farming. The problem is since there is no dispute redressal mechanism available to the farmer he often is at the receiving end in the arrangement. The private companies often reduce the price arbitrarily or reject the damaged crops. Recently Karnataka Government tried to strengthen the farmer’s cause when it allowed him to use his land value as equity in the contract. On the whole, since contract farming creates linkages between the producer and the market or industry, it has more pluses than minuses. “More and more work in agriculture is being done under contract labour,” notes Sinha.
Housing singularly determines whether a person is poor or rich and whether it will be possible to bring him into the financial mainstream. Unfortunately, despite knowing very well how housing triggered a full-scale economic meltdown in America and that 25 per cent of 377 million urban people are living in slums, Indian government has not made much of an effort to address the problem and regulate the real estate market. We have not recognised the role of housing as a growth catalyst. Recently World Bank pegged the housing shortage in India at 70 million out of which 26.5 million are required in the urban sector. The role of housing in creating employment can be gauged from the fact that an approach paper of Planning Commission for 12th Five Year Plan claimed that construction was the sector which generated highest number of jobs during the 11th Five Year Plan. It not only multiplies employment but also gives a boost to consumption of cement, marble, steel, electric material etc. Unfortunately, most of the workforce engaged in construction is unskilled and the sector is unorganised. Moreover, the poor hardly have a share in this construction activity with private builders constructing mainly for the upper middle class. The affordable housing continues to be solely in the domain of governments.
Worse is the scene in the rural sector where, unlike the urban sector, land does not have much value and it is difficult to aggregate the demand as dwellings of poor, unlike slums, are scattered. This is what keeps the private sector off the rural projects. In addition, since the poor lack financial resources and have no access to credit from banking or non-banking institutions, their needs never get converted into a demand. Clearly there is a need to convert the land into equity and register it in the name of the poor so that he can avail a loan by mortgaging it. There is also a need for the government to underwrite loans disbursed to poor. “The latent demand is not being converted into actual demand. There is a need for better market segmentation. We’ve to protect all lending institutions,” demands Vishal Goyal, AGM, National Housing Bank. There is also a need to make low income housing attractive for private players either by sanctioning extra FSI or allotting free land in exchange of units for the poor. “The government can at best create 5 to 10 per cent of the social housing. The remaining 90 to 95 per cent has to come from private sector,” asserts Aruna Sundararajan, Joint Secretary (Rajiv Awas Yojana), Ministry of Housing and Urban Poverty Alleviation.
There is also a need to go for incremental and rental housing and turn to vertical rather than horizontal development of the cities. “Cities are not able to handle influx of people because they are still growing horizontally and not vertically,” reasons Sudhir Rajpal, Commissioner, Municipal Corporation Gurgaon. Hopefully, the housing scene would transform after the parliament legislates on real estate and property rights. The real estate and property rights bills are currently being fine tuned in the Urban Development ministry for introduction in the Parliament. The bills are expected to pave the way for organised and regulated growth of the real estate. There is also a need for the states to pad up the assistance provided by the central government under Indira Awas Yojana (IAY), Rajiv Awas Yojana (RAY) by making innovative use of land and tying up with banks. More than that, there is a need to link up housing with livelihood and increase the assistance being provided under RAY and IAY.
According to National Sample Survey Organisation (NSSO)’s 66th survey, India added only 2 million jobs between 2004 and 2009 and the employment rate declined from 42 per cent to 39.2 per cent. This happened even when India clocked an average of 8.5 per cent growth rate per year. This happened primarily because our manufacturing sector has had a torrid time due to dampening demand, interest rate hikes and rising cost of capital. Vis-à-vis the services sector which contributes 65 per cent to the GDP, the manufacturing adds only 16 per cent to it. Despite having ushered major reforms in 1991 onwards in the Indian economy, the country has enough impediments to thwart micro, small, medium and large industries from setting up shop. One view is that a manufacturing unit has to comply with 70 laws and file 100 returns.
Right from land acquisition and conversion, environmental clearances, regulatory issues, labour laws to taxes – India has plethora of issues to frustrate the manufacturers. The government hopes the recently formulated national manufacturing policy will address all these issues and help it create 100 million jobs. The policy seeks to develop 12 manufacturing clusters (National Manufacturing Investment Zones) where industry will be given all requisite clearances through a special purpose vehicle (SPV) within a stipulated time.
To be set up on land acquired by the states, each NIMZ will be spread in 500 hectares. The physical infrastructure and utility linkages will have to be set up within one year of notification of the zone. The manufacturing policy also envisages rationalisation of business regulations. The government hopes to increase the share of manufacturing in the GDP from 16 per cent to 25 per cent through the manufacturing policy. But a lot would depend on how the policy gets implemented on the ground. It would also hinge on whether and how the government promotes small and medium size industries through it. The small and medium enterprises, after all, contribute 45 per cent of the country’s exports. Another area where there is scope for employment generation is electronics. According to Ajay Kumar, Joint Secretary, Department of IT, electronic manufacturing service has not really flourished. There is a need to create electronic manufacturing clusters. “India is doing very well in chip design. 40 per cent of chips produced in the world pass through Indian hands. There is opportunity to employ 28 million in the sector,” Kumar claims.
“India would need to manufacture not just in India but also in other countries if it really wants to take manufacturing to the next level,” says Alok Bharadwaj, Senior Vice President, Canon Ind
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