In the winter of 2013, Prime Minister Narendra Modi was speaking at a rally in Agra, Uttar Pradesh. Modiji, those days, not only understood every problem the nation faced, he also had a solution for them. Six years and some months later, his promises have delivered little as India faces an unprecedented job crisis.
The Prime Minister, in 2013, knew that 2/3rd of the Indian population was below the age of 35 and their energy could be used in nation building. He promised to upskill the youth, create more employment opportunities so that India would emerge as a global growth powerhouse. The vision was great but six years later, India is living a jobs nightmare as unemployment is at a 45-year high.
While the situation has ballooned into a massive crisis now, it has been building up over the last few years as falling consumer demand has hit our ability to create jobs, more so for our graduates. The latest data compiled by CMIE shows that urban unemployment has now reached 9 per cent and what is worse that only two out of three job aspirants in the age group of 20-24 get a job. This is the group which completes its education and gets into the job market. Data indicates that while unemployment remains in all segments under 30 and then slips to a 2.5 per cent as people take up whatever job comes their way to put food on the table.
“While youngsters in the age group of 20-24 years reported an unemployment rate of 37 per cent, graduates among them reported a much higher unemployment rate of over 60 per cent. 2019 was the worst year for these young graduates. The average unemployment rate for them during 2019 was 63.4 per cent. This is much higher than the unemployment rate they faced in any of the preceding three years. The unemployment rate they faced in 2016 was 47.1 per cent. In 2017, it was 42 per cent and in 2018 it was 55.1 per cent. “2019, therefore saw a very severe worsening of conditions for the young graduates,” the CMIE data proves.
The government had first claimed that youth need to be upskilled for them to become employable and this was one of the key focus areas in Modi’s first term. The scheme has turned out to be disaster as the government’s own numbers show that only about half the people it has trained, have managed to get a job. Of the 34.17 lakh who enrolled for skill development programmes, only 25.77 lakh were certified. Of these, 14.20 lakh could be placed and there are no numbers to indicate how may of them remain employed.
The government has been in denial about unemployment and has been trying to use the EPFO data to indicate that jobs have been created in the formal economy. A report by SBI indicates that the total number of ‘payrolls’ created would be lower by about 16 lakh in the current financial year even as the figure of 74 lakh new payrolls looked unlikely, given the negative growth recorded by the manufacturing sector in the second quarter.
It has now been conclusively established that the government has failed in its efforts to create new jobs in 2019-20 but the bigger problem is that there is not much hope on the horizon either. Capacity utilisation in industry has now fallen to just under 69%, primarily due to low demand. At these levels, it would not make too much business sense for companies to invest in capacity expansion which would help create new jobs.
There is nothing on the horizon to suggest that we can solve the unemployment problem in 2020-21 either. The Budget is expected to be a non-event because the government has already played the only card it had, reducing corporate tax rates. While early Q3 results indicate that corporate profitability would improve, don’t expect an immediate pick up in investment as demand continues to struggle.
The government’s job creation agenda has been caught in a vicious cycle. You can not expect a recovery in job growth unless there is recovery in consumption. The recovery in consumption can not happen unless there is more money at the bottom of the pyramid and that can not happen unless the government spends more on schemes which ensure that money reaches the average Indian.
The corporate tax cut has left the government with a very big hole in its pocket as tax collections are expected to be lower by about Rs 2 lakh crore and we could very well have a situation that Direct Tax collections would be lower than last year. At a time when the government’s fiscal math is falling apart, the government does seem to have the financial resources to invest in a programme that could kickstart demand.
To put it straight, don’t expect a recovery in job growth in the short term. The government knows it but that does not mean they can fix it. The malaise runs too deep now and the country is running out of patience. The clock is ticking.