Employment Crisis | Quotas in Private Sector
Video Summary

[RSTV Policy Watch] Employment Crisis | Quotas in Private Sector

Private sector has to create jobs in its own pace, but just because government policies are unable to create jobs, the demand in private sector for quotas is a matter of debate.
By IT's Video Summary Team
November 06, 2017

Contents

  • Introduction
  • What are the concerns?
  • What are the factors leading to alarming unemployment?
  • Challenges
  • What is Inverted duty structure?
  • Role of MSME sector and job creation
  • Is there an imbalance in employment and growth?
  • Quota in Private Sector
  • Solutions
  • Conclusion

Employment Crisis | Quotas in Private Sector

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GS (M) Paper-3: “Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.”

 

Introduction:

  • According to latest available employment data collected by the labour bureau, the employment growth in India slowed down drastically during 2012-16 after a marginal improvement in 2010-12.
  • There are concerns for the deficiency in job creation across the country, governments efforts for creating more jobs and row over the job quotas in private sector.
  • The credibility of the data shown by the labour ministry is fair as there are also other surveys conducted that shows the deceleration in employment.

What are the concerns?

  • The rise in unemployment is amongst the youth which is the most worrying thing.
  • Unfortunately, the jobs are not growing and as a result the number of youth in agriculture is rising which is apposite to that of 2012 conditions.

What are the factors leading to alarming unemployment?

  • Though India is a fastest growing largest economy in the world, the growth rate of the economy is consistently declining.
  • The global economy is itself also growing slower.
  • The economy till 2011-12 was growing at 8.4% per annum but presently it is growing much less than that.
  • The young population are getting more and more educated and there is a silent revolution across the country in terms of education.
  • There is a dramatic increase in secondary enrolment during 2010-15, from 58% to 85% along with gender parity which shows that the girls are also getting educated.
  • Inevitably many of these young population would want to join the labour force but only in the situation when the jobs were growing.

Challenges:

  • There are serious jobs issues which is an established fact.
  • The challenge will be to expand the job market, which has not happened much, coupled with slowing of economy.
  • In many of the new programs of the government, the designing and bidding process has taken a lot of time perhaps.
  • Schemes like Smart Cities Project have the potential to create huge amount of jobs but such steps cannot be unilateral as states have to also come on board.
  • Even the flagship programs of government like Make in India & Skill India has not been able to generate employment opportunities.
  • There is also a lack of industrial policy since the economic reforms began, though there has been a National Manufacturing Policy in 2011 but it never got implemented due to policy paralysis.
  • The Department of Industrial Policy in Promotion (DIPP) is currently working on Industrial Policy, but there is a need of an Industrial policy that is in consonance with trade policy.
  • Due to deindustrialisation, the share of manufacturing in total output has not grown in 25 years nor has share of manufacturing in employment grown.
  • Government is having cluster development programs, but it is severely underfunded and face lack of better infrastructure provision by the government.
  • There is a lack of synergy between Ministry of Urban Development selecting the cities under AMRUT program & the clusters having the jobs.
  • The manufacturing sectors like chemicals, steel, capital goods etc have been decimated by inverted duty structure.
  • So inverted duty structure has to be the critical dimension of Industrial Policy combined with trade policy.

What is Inverted duty structure?

  • Inverted duty structure is a situation where import duty on finished goods is low compared to the import duty on raw materials that are used in the production of such finished goods.
  • For example, suppose the tariff (import tax) on the import of tyres is 10% and the tariff on the imports of natural rubber which is used in the production of tyres is 20%; this is a case of inverted duty structure.

Role of MSME sector and job creation:

  • It is actually the MSME’s & self-employment, that creates the employment along with the government and organised sector.
  • They are important sectors for jobs as their weightage is very large because the unorganised segments of manufacturing and services is very large.
  • In informal sector, the small enterprises lost jobs in huge number due to severe cash crunch during demonetisation.
  • People shifted away from informal sector due to job loss in large numbers because the business went down severely.
  • There was increase in the number of people looking for work in MANREGA from 3 million to 8.2 million during demonetisation.
  • Most of the non-agricultural employment across the country is in clusters (modern and traditional manufacturing) i.e., MSME’s.

Is there an imbalance in employment and growth?

  • There is a slowdown in the economy but in contrast India is growing steadily. At the same time the employment is also slowing down steadily as well.
  • As per the Centre for Monitoring Indian Economy (CMIE) data of 2016, the number of people unemployed rose from 401 million people to 406.5 million people both in organised and unorganised sector.
  • It also shows that 1.4 million people have lost their jobs post demonetisation than at the same time what does the growth is attributed to.
  • There is no correlation between GDP growth and job creation but still there was a lot of debate during past 15 years that, should India get inclusive growth or jobless growth.

Quota in Private Sector:

  • Private sector has to create jobs in its own pace, but just because government policies are unable to create jobs, the demand in private sector for quotas is a matter of debate.
  • The responsibility cannot be given to the private sector and they cannot be restrained just because there is lack of jobs in the public domain.
  • The private companies must be allowed to run on their own without any interference and sanctioning the quotas otherwise the open market economy will not function the way it has to be.
  • Jobs in government is not growing in last 20 years.
  • The jobs in the government can be grown as there is a dire need in police force, doctors & nurses, judges, secondary school teachers etc. which will provide jobs in reserved categories.
  • Currently the jobs in government for reserved categories goes unfilled so the problem has to be fixed in the education sector so that the youth can get the skills that is required and not to rely on quota.

Solutions:

  • India needs to grow fast if it needs to absorb the rising youth population and the educated people, who are joining the labour force.
  • If this trend of growth continues and extends to agricultural sector, then the situation can be handled, and the economy can be revived.
  • Steps can be taken that doesn’t require large fiscal stimulus but increase in expenditure would be necessary and redesigning & improving the programs.
  • The projects have to take off to create large jobs and also to build the conducive environment for private companies to invest.
  • Economy cannot run only through public expenditure for job creation, so the private sector jobs must be created through private investments.
  • Agriculture sector have to sustain the growth of 4% to stop the people shifting to agriculture for jobs.
  • Exports have to be given big thrust especially to Latin American & African countries as unless the export manufacturing picks up the jobs will also be affected.
  • Government should give packages for all the labour-intensive manufacturing sector (Woods & furniture, leather, food processing, textiles, & garments in apparel) that account for about 50% of the manufacturing jobs in overall economy.
  • If the government carefully plans the program with proper investment, it can be beneficial to the MSME sector in providing the jobs.

Conclusion:

  • There are several such issues related with employment where the government and all the policies in general till date have been lacking.
  • The economy can just be optimistic in revival from the employment crisis as there are opportunities in the Indian economy but it just needs proper planning and initiatives from the government.

 

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