Glaring dichotomy

Amid claims of becoming an economic powerhouse, India is facing a serious unemployment problem, as the unemployment rate increased to its highest level in over two years, in October. The overall unemployment rate rose to 10.05 per cent in October, up from 7.09 per cent in September, marking the highest rate since May 2021. Rural unemployment jumped to 10.82 per cent from 6.2 per cent while the urban rate eased slightly to 8.44 per cent. In 2014, unemployment rate was 5.44 per cent, which rose to 8 per cent in 2020. As per a report by Forbes, in 2022, India’s unemployment rate was 7.33 per cent, and in October 2023, it has crossed 10 per cent.

According to the chief executive of the Centre for Monitoring Indian Economy (CMIE) Ltd, despite growth, India’s workforce has remained stagnant, a little over 400 million in the past five years, and only 40 per cent of people aged 15 years and above offer themselves for work. The rest 60 per cent are dependents. The quality of jobs in India is very low.

The unemployment status of the young (15-24 years) job seekers is grimmer. Citing the ILO Modelled Estimates and Projections Database, the World Bank has reported that youth (per cent of total labour force aged 15-24) unemployment in India was alarmingly high at 23.2 per cent in 2022. The world average in that year was 15.6 per cent. In 2013, this rate was 21.5 per cent, which then climbed to 26.4 per cent in 2018. In 2020, it rose steeply to 30.9 per cent, and in 2022, eased to 23.2 per cent, which is higher than the 2013 figure. The corresponding figures of Bangladesh (12.9 per cent), China (13.2 per cent), Malaysia (11.7 per cent), and Pakistan (11.3 per cent) are much lower, reports Scroll.

Informal sector crushed

Three major structural changes in the Indian economy — demonetisation (November 2016), introduction of the Goods and Services Tax (July 2017), and the COVID-19-induced lockdown (March 2020) — have crushed the informal sector of the Indian economy, where more than 80 per cent of the workforce is engaged. For a cash-intensive unorganised sector, an unplanned demonetisation led to a loss of at least 95 lakh jobs between January to April 2017. Only a few months after the announcement of demonetisation, employment rates had fallen to 42 per cent.

Quoting economic analysts, Reuters reports that more and more job-seekers, especially the young, are looking for low-paid casual work or falling back on unreliable self-employment, even though the broader Indian economy is seen growing at a world-beating 6.5 per cent in the financial year ending in March 2024. In 2022-23, the Indian economy grew a stronger-than-expected 7.2 per cent, boosted by the government's capital investment. But private consumption, which forms 60 per cent of India's GDP, grew between 2-3 per cent in the second half of the year, as pent-up spending and base effects faded. "Unemployment is only the tip of the iceberg. What remains hidden beneath is the serious crisis of underemployment and disguised unemployment," Reuters quoted Radhicka Kapoor, fellow at economic research agency ICRIER.

Explaining this paradox of simultaneous increase in growth and unemployment, economist Kaushik Basu commented: “India's GDP is growing well but it's all going to the top. We must correct this. World Inequality Report 2022 shows India has ‘one of the most extreme increases in income & wealth inequality observed in the world.’ Inequality is back to where it was ‘under British colonial rule’".

FDI in Low-tech industry

In a recent interview, Infosys founder NR Narayana Murthy suggested offering whatever incentive is required to attract foreign investment for the creation of employment for rural and urban poor in low-tech manufacturing. However, it is not clear why Indian investors are not interested to invest. The possible reason could be the low level of productivity of Indian labourers.

To offset this low productivity and remain competitive in the international market, the captain of the India Inc has suggested Indian youth to be more disciplined and work 70 hours a week, though ILO’s Convention No 1 (1919), which entered into force on 13 June 1921, had limited the hours of work in industrial undertakings to eight in the day and 48 in the week. Commenting on this suggestion, economist Biswajit Dhar has reminded that the level of productivity of a country depends on the strength of its innovation system, which is very weak, as revealed in the India Innovation Index 2021, produced by NITI Aayog. It shows that India’s gross expenditure on research and development as a percentage of GDP was 0.65 per cent in 2018, one of the lowest in the world. In 2020-21 the figure dipped further to 0.64 per cent. In 2012-13, India’s private sector’s share in the country's R&D was 45 per cent, which declined to 41 per cent in 2020-21. In that year, the private sector’s share was 79 per cent in Japan and Korea. In China the corresponding figure was 77 per cent.

The much-hyped Make in India programme, launched in 2016, has failed to boost manufacturing. Rather than rising to 25 per cent, the share of manufacturing in the overall economy plunged to 14 per cent in 2020-21 from 17 per cent in 2015-16. Quoting a study by Ashoka University’s Centre for Economic Data and Analysis, BQ Prime reported that rather than adding 100 million manufacturing jobs, India lost 24 million jobs between 2016-17 and 2020-21, out of which 11 million jobs had already been lost before the pandemic.

Export of low skilled labour

As the demand for white-collar knowledge workers is declining, dot.compradors are currently aiming at the export of low-skilled labourers who are plenty in supply. Moreover, demand for such workers is also rising in a few countries.

It is reported that over the past 12 months, 96,917 Indians were caught entering the US illegally. This is shocking and an all-time high. It is also reported that the Israeli construction industry has asked the government to allow companies to recruit 1 lakh Indian workers to replace the 90,000 Palestinians whose work permits had been cancelled since a war on Gaza began. Media reports suggest that as India and Taiwan seek to strengthen relations to counter China’s threat, the two nations will sign an employment mobility agreement by next month. Taiwan is planning to hire over 1,00,000 Indians to work in factories, farms and hospitals, reports Firstpost.

The plea to the youths by the captain of India Inc to work 70 hours a week may be analysed from the above developments that have created an opportunity for exporting low-skilled jobless youths of India to risky war zones for employment.

Views expressed are personal