Barely a fortnight before the Union budget, thousands of students in Bihar burnt effigies of Prime Minister Narendra Modi, vandalised trains and gathered in protest to show dissatisfaction with the Railway Recruitment Board’s exam for non-technical popular categories staff, conducted a few months ago. There was a replay of the scene in poll-bound Uttar Pradesh, where six police officers were suspended in Prayagraj after videos of them thrashing job aspirants went viral. The protests are a sign of rising unemployment – a problem that the Modi dispensation has been unable to dent even after presenting eight successive budgets.
Unemployment in India mainly refers to educated young people looking for jobs in the formal economy – though the informal economy employs 90 per cent of the workforce with no social benefits and generates half the economic output. Of late, the jobs crisis has been escalating. The situation has come to such a pass that there were 12.5 million applicants for 35,281 Railway jobs. “That’s 354 applicants per job,” points out Ashwini Deshpande, professor of economics, Ashoka University. “For every person selected, 353 will not be – not because of (caste-based) reservations but because there aren’t enough jobs.”
India is simply not producing enough jobs for its youth. That fact is well known. What is now not so well known is that the number of active job seekers in the working age population has fallen: only 27 per cent of people aged 15-24 are either working or looking for a job. The more educated the person is, the more likely it is they'll remain jobless and unwilling to take up low-paying and precarious informal jobs. The proportion of women, aged 15 and older, in the workforce is among the lowest in the world.
The unemployment rate crept up to nearly 8 per cent in December, according to the Centre for Monitoring Indian Economy (CMIE). It was more than 7 per cent in 2020 and for most of 2021 – far higher than anything seen in India, at least over the last three decades.
Touching upon the overall unemployment problem, the government’s latest Economic Survey, which comes out on the eve of the budget, said that, while unemployment rose sharply during the lockdown imposed by the pandemic, the unemployment rate fell as the economy opened up. While the unemployment rate rose to 20.8 per cent in the first quarter of 2020-21, it gradually dipped to reach 9.3 per cent in Q4 of 2020-21. Both – the labour force participation rate (LFPR), as also the worker population ratio (WPR) for males as well as females, aged 15 and above – reached almost their pre-pandemic levels during the last quarter of 2020-21. Also, as Covid-related restrictions eased and economic sectors opened up, all three labour market indicators – LFPR, WPR and unemployment rates (UR) – showed a ‘swift recovery’.
However, “The problem still is on a net basis,” says Devi Prasad, labour economist, formerly with the Gokhale Institute of Economics. “Job creation has lagged and comparison with the pre-pandemic levels does not help because employment has been a big problem since 2016 onwards, when growth began tapering off.”
Also, unemployment rate remains above the 7.8 per cent level witnessed in Q2 of 2019-20, which was unaffected by the pandemic. Even the LFPR at 47.5 per cent during Q4 2020-21, is still a tad below the level of 48.1 per cent seen in Q4 2019-20.
Two years of Covid-19 have deepened the dichotomy in India’s production networks. Informal activity, which supports 90 per cent of jobs, was under pressure to come into the fold of taxation and social security, even before infections and lockdowns. Since March 2020, it has retreated into a shell. Organised activity has stepped into the breach and lifted output back to pre-pandemic levels, though not yet to its previous growth path.
The revival of jobs is proving to be even more challenging because the same output can be produced in the formal sector with less labor. Hiring is muted outside of a few white-collar pockets like computer software. For India’s employment-to-population ratio to be at the global average, nearly 600 million people need to be at work. Currently, only a little more than 400 million are.
With the imperative to support jobs and create new employment as the country recovers from the pandemic, the Confederation of Indian Industry (CII) suggests that the Budget add a job-creation component to the PLI incentives for 13 sectors
Ahead of the Budget 2022-23, Indian industry has urged the government to offer incentives for creating jobs, including special sops under the ‘production-linked incentive’ (PLI) schemes already announced. The plea assumes significance amid growing concerns about high unemployment levels in the country.
“With the imperative to support jobs and create new employment as the country recovers from the pandemic, the Confederation of Indian Industry (CII) suggests that the Budget add a job-creation component to the PLI incentives for 13 sectors,” says Chandrajit Banerjee, the industry chamber’s director general. CII has also argued for raising outlays on the MGNREGS to help rural unemployed workers hit by the Covid-19 pandemic and spur consumption. It has also mooted a hike in the Rs25,000 monthly wages ceiling under the Income Tax Act for granting benefits to firms hiring new workers.
None of these demands were met. The situation doesn’t promise to get better. Separately, a FICCI survey of manufacturing firms showed that 75 per cent of firms don’t plan to hire in this quarter despite a marked increase in business volumes and orders in the October to December 2021 quarter.
FICCI’s quarterly survey revealed that the average capacity utilisation was in the range of 65-70 per cent in the third quarter of 2021-22, but firms’ outlook towards hiring remained ‘subdued’ with three of four firms not looking to hire in the current quarter. “The cost of doing business remains a cause for concern (with) high raw material prices, cost of finance, uncertainty of demand, shortage of working capital and logistics costs, combined with low domestic and global demand due to supply chain disruptions,” the survey found, adding that large volumes of cheap imports and high power tariffs are further constraining business expansion plans.
The pre-emptive SoS by the industry apart, India is facing a unique situation. The youth – 18 to 29 years – have traditionally borne the brunt of joblessness in India. And, as more of the young go to schools and colleges, the educated youth have the highest unemployment rate in India, affirms Radhicka Kapoor, a labour economist. "This is not a new problem and has been brewing for a long time."
Labour surveys have shown a quarter of the youth are sitting at home doing ‘unpaid family work’, essentially lending a helping hand to family members and preparing for exams. Only a third had regular jobs, but 75 per cent of them had no written contracts and 60 per cent were not eligible for social security.
The scramble for government jobs – in the railways, for example – also showed that young Indians preferred those steady, protected jobs over the much-vaunted gig economy work, informs Kapoor. "Gig economy work is precarious and volatile with no steady career path. That's not what an educated young person wants. Glamorising gig economy work as a solution is not an answer to the jobs crisis".
Gig economy work is precarious and volatile with no steady career path. That's not what an educated young person wants. Glamorising gig economy work as a solution is not an answer to the jobs crisis
In places like Bihar, a state in which the BJP is a ruling coalition partner, the jobs crisis has been exacerbated by the growing crisis in the farms. Land holdings are small and farming is becoming non-remunerative. Farming families are selling land and borrowing money to send their children to the cities to take up private coaching. Many of them are first-generation literates, aspiring for white-collar jobs in a jobs-scarce economy.
The abysmal standards of state-run schools and colleges do not inspire confidence. The skyline of Bihar's capital, Patna, is cluttered with adverts of private coaching schools that promise to help aspirants pass tests for government jobs. Now, the teachers are telling their students there are no jobs in sight; and six coaching school teachers have been named in police complaints for instigating the riots.
This week's largely leaderless and spontaneous riots were rude reminders of our political parties failing to grapple with the crisis of jobs. Bihar's agitating students say they took to the streets after nobody paid heed to their protests on social media.
Studies in Indian cities have shown that lack of jobs in households leads to high levels of domestic violence. It would be wise to bear in mind that much of the civic unrest that sparked the Emergency – when Prime Minister Indira Gandhi suspended civil liberties and jailed thousands of people – in 1975 began with unrest over lack of jobs and high prices. Gleaning through surveys conducted during that period, one finds that some 24 per cent of young Indians of 18-24 were out of work then. Bihar and Gujarat were the epicentres of these protests.