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Union Budget 2019: With unemployment rate at 45 year high, what can Modi 2.0 do to create jobs?

Union Budget 2019: From stepping up public spending in labour-intensive areas to giving a fillip to the MSME sector, experts have a host of suggestions for Finance Minister Nirmala Sitharaman at a time the news on the unemployment front is getting progressively worse

twitter-logoBusinessToday.In | July 5, 2019 | Updated 08:42 IST
Union Budget 2019: With unemployment rate at 45 year high, what can Modi 2.0 do to create jobs?
Union Budget 2019: Jobs creation

One of the biggest criticisms against the Modi 1.0 government is jobless growth, especially after the Prime Minister had made it a key electoral promise in 2014. Finance Minister Nirmala Sitharaman's maiden budget comes at a time the news on the employment front is only getting worse. Unemployment hit a four-decade high of 6.1 per cent in 2017-18. It showed that 7.8 per cent of all employable urban youth were jobless, while the figure for rural India was 5.3 per cent. Meanwhile, the country's working age population, or those above the age of 15, is expanding by 13 million a month.

The Periodic Labour Force Survey (PLFS) data also revealed that while the unemployment rate has been going up, the labour participation rate - the proportion of the working age population that is either employed or actively seeking a job - has been falling. The pan-India LFPR figure for all ages in FY18 stood at 36.9 per cent, down from 39.5 per cent in FY12.

The unemployment rate has gone up further in 2019, hitting 7.17 per cent in May, as per a recent report by the Centre for Monitoring Indian Economy (CMIE). The average urban unemployment rate during the first five months of 2019 was 8 per cent, as compared to 6.1 per cent in the corresponding months of 2018. Job seekers have struggled in rural regions, too. The rural unemployed in May 2019 were nearly 44 per cent higher than their count in May 2018, the CMIE added. The delayed monsoon could make the year ahead even more challenging for the labour force in rural India.

So what can Sitharaman do to change things at this crucial junction?

The Confederation of Indian Industry (CII) has called for a National Employment Mission and setting up of an inter-ministerial and all-state National Employment Board for driving job creation in the country. "Employment generation extends to multiple dimensions and a national mission is required to address all aspects holistically. The Government National Employment Mission should include flexibility in hiring, tax incentives, education and skill development, and promotion of labour-intensive sectors," Chandrajit Banerjee, Director General of CII noted in a statement.

For instance, the body has pushed the idea of Fixed Term Employment (FTE), under which a company can enter into a contract with prospective employees for a specific time period on their payroll, ensuring social security and minimum wages. When the contract duration is over, the relationship is over as well. In its pre-budget jobs creation agenda, the body suggests that "states that introduce Fixed Term Employment and other labour law reforms should receive priority in new Central government infrastructure project funding". In other words, unwilling states must be coerced.

Another industry body, Federation of Indian Chambers of Commerce and Industry (FICCI), has also touched upon job creation in its Budget recommendations. It suggested "greater public investments across sectors like infrastructure" apart from additional fiscal incentives to sectors that have the potential to create large employment opportunities, including textiles, leather, food processing, gems & jewellery, footwear and tourism.

In agriculture, such areas could be irrigation, extension services, cold storages and value-addition, expanding MGNREGS to create better quality assets, rural health and education infrastructure, roads etc. It is well-known that the most successful Asian economies pursued an agricultural development-led industrialisation path, be it Japan, the Republic of Korea, Vietnam or China.

An aggressive focus on the Pradhan Mantri Awas Yojana is another good bet since the real estate sector is reportedly the second-largest employer after agriculture. Moreover, not only will it boost demand for steel, cement, commodities and heavy equipment - which have a direct bearing on economic growth - but will also revive the construction sector left reeling following back-to-back shocks of demonetisation, GST and RERA.

Apprenticeships is seen as a quick way to tackle the problem of skilling India's workforce. According to experts, while India needs around 15 million apprentices, the country's largest skilling programme, Shreyas, currently has a capacity for just 500,000 annually. Can Sitharaman address this large gap?

Also read: Budget 2019 LIVE updates: Nirmala Sitharaman to present her maiden budget today

Also read: Union Budget 2019: When and where to watch LIVE coverage of budget

Also read: Sensex, Nifty close higher ahead of Budget 2019

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