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India’s unemployment challenge is multi-faceted one: Citi report

Job seekers at attend Aspire 2024 jointly organised by District Employment office and Vocational Higher Secondary Department at SRV Government Vocational Higher Secondary School in the city on Saturday.
| Photo Credit: THULASI KAKKAT

United States-headquartered multinational banking group Citi has said India’s unemployment challenge is multi-faceted one and even 7% GDP growth might not be able to fulfil the jobs required in the country over the next decade. In a report, titled “India Economics – Nuances of Addressing the Employment Challenge,” Citi has suggested efforts could be made to fill one million Central government job vacancies to address the situation. The banking group has also recommended operationalisation of the four labour codes and said labour reform could be a significant step towards ease of doing business. The Opposition Congress, commenting on the report, said demonetisation, a hastily rushed through Goods and Services Tax (GST), and rising imports from China are the main reasons for the decimation of Micro Small and Medium Enterprises (MSMEs) that provided employment for a huge number of people.

Depending on employment data from the Centre’ Periodic Labour Forced Surveys and the Centre for Monitoring Indian Economy, a private company, the Citi’s report said a “holistic employment generation strategy” will be a combination of deploying scarce fiscal resources to support labour-intensive manufacturing for export purposes, bridging the skill gaps through more formal vocational training, improving availability of credit through credit guarantees to promote self-employment, a large-scale social housing project to boost construction jobs and operationalising the labour reforms to infuse formalisation and flexibility in labour markets.

Quality of jobs

The report said while official unemployment rate is just 3.2%, details reflect serious issues around quality of jobs and possible underemployment. It said agriculture accounts for 46% of all employment but its contribution to the Gross Domestic Product (GDP) is less than 20%. “Both manufacturing and services sectors absorb lesser share of labour than their share in GDP. Share of formal sector in non-agriculture jobs is still only 25%,” the report said. It added that only 21% of the labour force has a “salaried” job, lower than 24% in the pre-pandemic scenario. “Share of employment in rural areas has remained at 67% between 2018 and 2023, indicating that the rural to urban migration process has practically stalled,” it said.

It said India has created 7.4 million jobs per year in this century. “Job addition has been marginally better after 2012 [8.8 million per year] but with a pronounced shift towards self-employment. Under the assumption of Labour Force Participation Rate increasing to 47% [from 42.4% now], 11.8 million jobs must be created every year for the next 10 years, assuming no significant change in the unemployment rate. Even if employment elasticity remains at current levels and real GDP grows by 7%, India can generate eight to nine million jobs per year, over the next decade,” the report said. “Wherever possible, efforts could be made to fill one million Central government job vacancies,” it said.

Social security benefits

It added that the implementation of four labour codes will extend some social security benefits to the gig economy workers. “There has been no nationwide rollout of the four labour codes that were passed by the Parliament in the previous term,” it said and added that once rolled out, labour reforms could be a significant step towards ease of doing business as the companies would be spared of submitting multiple returns under different labour laws prevailing earlier.

Reacting to the report, Congress general secretary and MP Jairam Ramesh said he had been sounding the alarm on the country’s unemployment crisis for the past five years at least. “The crisis has been accentuated with the decimation of job-creating MSMEs through the ‘Tughlakian demonetisation’, a hastily rushed through GST, and rising imports from China,” Mr. Ramesh said. “With his economic policies that favour only large conglomerates, the non-biological Prime Minister has created India’s highest unemployment rate in 45 years, with the unemployment rate for graduate youth at 42%,” he added.

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