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From the Editor: Growth and Jobs

Business Today's editor Prosenjit Datta introduces the magazine's March 1, 2015 issue.
twitter-logoProsenjit Datta | Print Edition: March 1, 2015
Business Today Editor Prosenjit Datta
Business Today Editor Prosenjit Datta

It is impossible to get accurate employment data in the country. The government statistics are based on sample surveys, and also do not cover many employment-generating parts of the economy. Private sector jobs, especially in new sectors, generally do not reflect in the government's employment data. There is no private agency either that collects and collates data on jobs created, the number of working-age unemployed people, salaries being paid, etc., for the country as a whole. Different agencies focus on different slices of data and sectors. As a result, labour and employment statistics in the country are, at best, good estimates.

Despite those weaknesses, we can work out some conclusions by looking at the overall data trends. By looking at the GDP growth and slices of employment data, we can conclude that job creation has generally accompanied high economic growth. While that seems obvious, it is not a given. Many western countries have seen periods of jobless growth in the past - where the economy has continued growing without actually adding many new jobs.

Even in India, the growth in job creation and the GDP growth rate do not have a linear relationship. Sure, in general, economic growth creates multiple new jobs, but the two do not dance in step for a number of reasons. The most basic reason is that not all economic activity is equally labour-intensive.

For example, the financial sector or the IT sector can grow rapidly and add a lot to the country's GDP, but they will not create as many jobs as, say, an equal growth in textile manufacturing. In fact, a criticism of India's economic model has been that it is overly dependent on the services sector and not manufacturing, which is more labour-intensive.

Why is this important? The big reason is what some economists call India's demographic dividend, while others call the demographic curse. India is at a stage where a record number of young people are joining the workforce - unlike in Europe where the ageing population is far greater than the working-age people. The large number of people joining the workforce in India has in the past decade powered much of its economic growth. But a million people are joining the workforce every month - and the jobs being created are far fewer, no matter which source of data you look at. This has the potential of creating enormous social tensions.

This government seems fairly conscious of this problem. One of the goals of the Make in India programme announced by Prime Minister Narendra Modi is to create jobs, lots of them. A lot of expectations are riding on what Finance Minister Arun Jaitley's first full-year Budget will do to give a boost to the twin goals of high economic growth and high job creation. Our cover story looks at the signals coming from government quarters.

Do not miss our pre-Budget panel discussion where some of India's most eminent economists discuss and debate the priorities for the finance minister.

Also, read Reserve Bank of India Governor Raghuram Rajan's interview where he speaks extensively on the monetary policy framework and the state of the economy.

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