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Just a few weeks before the last budget of the much-maligned government, two reports on economic growth and its impact on employment have come to haunt it. The Central Statistics Office (CSO) estimates India will hit the lowest-in-a-decade economic growth rate in 2012-13, coinciding with UPA's two terms. Another report by the Planning Commission's Institute of Applied Manpower Research says India's growth during 2004-05 and 2009-10 has been jobless, coinciding with UPA's first term and India's best years in terms of growth.
The growth brigade is so worried by the new estimate that its members have resurrected the term 'Hindu' growth rate—referring to the 3.5 per cent growth rate during 1970s and 80s. India is plunging into an economic abyss, newspaper headlines suggested. For the government seeking re-election using its aam admi (common man) plank, it is a double whammy: decline in both growth and employment affects its middle class and poor constituencies. India's poor remain insular to the debate; it is as distant as that of Barack Obama's speech on gun control.
Way back in 2004, Down To Earth published a cover story that exposed jobless growth in India. And that was not the high growth era. The Planning Commission report has analysed this period for growth's job potential.
The report shows that during 2004-05 and 2009-10 only a million people got employment. During this period the average economic growth was 8.7 per cent, the highest in the recent past. It means a mere 200,000 jobs a year though 12 million people join the workforce every year. This means we need 23 jobs a minute while the country creates only one in three minutes.
Migration and distress
Ideally, one would argue: if growth is not creating jobs why would a common person be interested in growth? They are not in any case. But growth is changing their lives for worse. There is migration of people from the agriculture sector, which is usually seen as a good sign of an economy undergoing structural changes. These reports, however, point out that in the case of India migration is resulting in more casual jobs, often identified with more distress and desperation.
The CSO estimates that agriculture grew at 1.8 per cent in fiscal year 2012-13, half that of last year's rate. Capital formation in agriculture has also slowed down. But one sector that has shown promise is the construction sector that grew at 5.9 per cent. It is presumed that this growth absorbed many casual workers migrating from the agriculture sector.
“Employment in total and in non-agricultural sectors has not been growing. This jobless growth in recent years has been accompanied by growth in casualization and informalization,” found the Planning Commission report. The report noted that 15 million workers shifted out of agriculture and into the manufacturing and services sector during 2005-10, leading to agriculture's share in total employment falling from 57 to 53 per cent. The new jobs are without any social security. "Out of 44 million total employment in construction by 2010, 42 million (informal labour) hardly have any kind of social security benefit attached with it. In other words, 95 per cent of workers in construction sector hardly have any kind of social security coverage," the study said. So, it is not only jobless growth but a growth with more distress for the poor.
A research paper by economists T S Papola and Partha Pratim Sahu for the Indian Council of Social Science Research shows that constant economic growth has not been able to bring down unemployment rate. In the 1970s, unemployment was considered mostly due to the 'Hindu' growth rate. But this paper finds that the average annual employment growth has come down from 2.4 per cent in the 1970s to 1.65 per cent during 1993-94 to 2009-10. The capacity of job creation per unit of GDP output has gone down by about three times compared to that in the 1980s and early 1990s.
Poor remain poor
This explains the chronic poverty in India. India's absolute number of poor remains stagnant for the past three decades. Poverty is chronic in areas that are traditionally poor. Those who were poor in 1980s are still desperately poor though this period pans over 'Hindu' and post-'Hindu' periods of growth. Rather, the high growth period has been punishing for the poor.
Why is growth not creating jobs? The answer to is not to change the character of growth to create more jobs but to entirely rethink this paradigm. Close to 70 per cent of India's population depend on ecology for survival. Despite agriculture's declining contribution to GDP, 53 per cent people still depend on it. Growth-oriented economists think this is a negative situation as such a high percentage of people create just 15 per cent of GDP. But another argument could be: agriculture is still so dependable that such a high percentage of people depend on it. It is also true that alternative to agriculture is just casual jobs. As has been the case, the employment rate picked up a bit during 2000-2005 not due to economic growth but due to relative agricultural growth.
So, a job creation policy has to refocus on the ecology that has been giving employment. The current growth model, unfortunately, doesn't recognise this. It is not that the government is not aware of it. Way back in 2002 the Planning Commission set up a special group headed by the then member of Planning Commission, S P Gupta, to look at ways to create 10 million employment opportunities every year. This group outrightly junked the idea that growth would automatically lead to job creation. It also said that the 8 per cent growth rate (this is the current magic wand for policy makers) would be inadequate to meet the employment challenges. It suggested an alternative strategy for new job opportunities—agriculture, social forestry, fishing, animal care, horticulture as well as the small and medium industries and the service and financial sectors. This was the only government report in recent times that recognised the fact that India is an unorganised economy where ecology is the economy of the poor. It was given a silent burial as growth overtook everybody with a bang. But with both growth and employment hitting the rock bottom, we should take a fresh look at it.