JOBS are being generated mainly in IT/BPO. However, for all the encouragement this sector is receiving under the Digital India programme, this sector by itself cannot take care of those who are leaving their farms and heading for towns and cities. It is only labour-intensive manufacturing that can do so, especially sectors like textiles and automobiles.
One reliable indicator of how well the Indian economy is doing is whether adequate jobs are being created. What is the benefit of being the fastest growing economy in the world if it does not generate employment and thereby contribute to material well-being? Every year, around 10-12 million people, mostly young and educated, seek gainful work opportunities in the towns and cities. How many of them are absorbed in the manufacturing or services sector? Those who cannot secure work join the growing ranks of the jobless or withdraw altogether from the labour force if they are discouraged by the dismal prospects for gainful employment.
Unlike in advanced countries where up-to-date information is available on the labour market, this information is available in India only with a five-year lag. The last comprehensive survey of the National Sample Survey Organisation pertains to 2011-12. The Labour Bureau, however, has conducted 25 quarterly surveys on changes in employment from October-December 2008 till January-March 2015 in labour-intensive sectors like textiles, leather, metals, automobiles, gems and jewellery, transport, IT/BPO and handloom/power loom. This is perhaps the best source for gauging job creation in the manufacturing sector.
The news is not good from the four quarterly surveys for 2014-15. The number of jobs declined sequentially every quarter: Around 182,000 jobs were generated during April-June 2014, which dropped to 143,000 in July-September, and further to 83,000 in October-December and 64,000 in January-March 2015 although manufacturing growth in value-added averaged a respectable 7.1 per cent over this period. Manufacturing growth thus is not employment-intensive enough, if not jobless in nature. Overall, 521,000 jobs were created during the year which looks respectable when compared to the 276,000 jobs generated in 2013-14.
These numbers don’t indicate any broad-based upswing in job creation in manufacturing. Only IT/BPO and textiles generated the bulk of jobs last year, while it shrank in labour-intensive sectors like leather, metals, gems and jewellery, transport, handloom and power loom. The bleak export outlook for many of these industries also has a bearing on the limited number of jobs being generated. As manufacturing has been prioritised under the Make in India programme, it should concern policy makers that this sector is not adequately absorbing job seekers who are streaming in from the countryside looking for employment in urban India.
The picture remains equally dismal if we focus only on the latest quarter, January-March 2015, and comparable quarters in earlier years. Here again, IT/BPO accounts for roughly three-fifths of employment. Textiles drops out as the 24,000-odd jobs generated do not compensate for the sharp job losses of 54,000 in January-March 2014. This important sector also experienced massive shrinkage in employment in January-March 2010 and January-March 2011. Employment generation is marginal in sectors like automobiles and metals and negative in transport, handloom/power loom when compared to January-March 2014.
Jobs thus are being generated mainly in IT/BPO. However, for all the encouragement this sector is receiving under the Digital India programme, this sector by itself cannot take care of those who are leaving their farms and heading for towns and cities. It is only labour-intensive manufacturing that can do so, especially sectors like textiles and automobiles. The disappointment really is automobiles as there are signs that green-field foreign direct investments have substantially picked up in this sector. According to UNCTAD’s World Investment Report for 2015, India, in fact, accounted for the bulk of FDI in the automobile sector in South Asia.
The country absorbed the preponderant share of green-field investment projects announced by global automakers and first-tier suppliers during 2013-14, including 12 projects larger than $100 million in the region. This major sector alone accounts for 20 per cent of India’s manufacturing value-added with an annual production of 18 million vehicles. India’s auto industry is a global hub in the making. Currently, this sector has acquired critical size with global original equipment manufacturers and strong domestic players that have set up shop in India. This has, in turn, catalysed a thriving auto component industry. But where have all the jobs gone?
The limited employment in manufacturing cannot be addressed through quick fixes. It is not possible to tackle this problem without developing skills that the industry wants. India presents a paradox of skill shortages despite a situation of labour surplus. Around fifteen per cent of India’s trucks are idle due to shortage of drivers. The steel industry is short of metallurgists. The healthcare sector is short of paramedics and technicians. The booming construction sector has a shortage of civil engineers. These skill mismatches must be met by stepping up enrolment in industrial training, vocational institutes and public-funded institutions of learning.
In this milieu, firms in sectors like automobiles are increasingly using capital-intensive technology that minimizes the need for hiring more workers. Or when they do hire, they increasingly prefer contract and other non-permanent forms of labour to perform regular work at much lower wages and without basic rights like forming independent unions. An inflection point in the regard was the violence at the country’s largest car manufacturer’s facility in Haryana a few years ago. The industry has renewed demands for changes in labour legislation to encourage more flexibility and exit (read hire and fire) in the use of labour. The unions, for their part, seek greater protections for their constituents.
India’s labour legislation has not stood in the way of industry’s need for non-permanent workers. Employers have found ways of circumventing such laws to minimise labour costs with contract workers on their rolls. But a dualistic structure of labour utilisation in industry also arises because of high variability in demand on account of cyclical and seasonal factors. Temporary workers are hired in times of peak demand and discharged thereafter. The Labour Bureau’s quarterly surveys also indicate that contract, rather than direct, workers are being hired. The problem on the job front is clearly the poor quality of employment. Unless more regular employment is generated in manufacturing and other sectors of the economy, there are bound to be serious social strains as frustration grows among the jobless educated youth.
(N Chandra Mohan is an economics and business commentator based in New Delhi)
