Budget 2019: Any Hope for the Jobless, Mr. Modi?

An estimated 47 lakh jobs have been lost in the past two years while the number of jobless people has exploded to a stunning 4.2 crore, according to data collected by the Centre for Monitoring Indian Economy (CMIE) through its surveys. Out of this army of jobless, over 68% (that is, about 2.84 crore) are youth between the ages 20 to 29 years. Their numbers have increased by about 1.1 crore between 2017 and 2019 (January to April both years).

These are the headline numbers of the unprecedented jobs crisis that India is facing today. As pointed out earlier by NewsClick, the economy is in doldrums, growth rate is slowing down, manufacturing sector is stagnating, crisis-ridden agriculture is wilting further with deficient rainfall, and trade deficit (exports minus imports) is widening. This means that no invisible hand is at work to create jobs.

According to CMIE data, the absolute number of employed persons has come down from 40.89 crore in 2017 to 40.43 crore in 2019 (January-April both years). [See chart below] What this indicates is that far from creation of jobs, even existing jobs are disappearing. This is happening because with stagnating demand, the industrial and service sectors are reducing their workforce to save their profit margins. Agriculture, it appears, has been performing its usual role of absorbing surplus labour, although productivity has not increased. The same returns are presumably getting distributed amongst a larger number of people.

Modi and his ministers spent most of the past five years explaining that jobs were actually growing in various sectors like transport, tourism etc. They alleged that numbers were not capturing the reality. But repeatedly, surveys of different kinds – including the government’s own Periodic Labour Force Survey have demolished this fantasy. As the chart below shows, the absolute number of jobless (those available for work) has shot up from 3.3 crore in 2017 to 4.2 crore in 2019 (January-April both years).

Youth make up over two thirds of these unemployed people. This is what has been the fate of the great ‘demographic dividend’. Rather than gaining anything from the large proportion of youth in the country’s population, Modi has presided over the dissipation of their productive energies. Over 1.1 crore youth were added to the army of unemployed in the past two years [See Chart below].

Budget Vision

So, the tasks for Prime Minister Modi and his new Finance Minister Nirmala Sitharaman seem to be cut out. In order to turn things around, the most important thing is to learn from the past five years. What went wrong? Primarily, it was a grossly erroneous vision or ideological mooring. They thought that they could boost employment by getting more foreign capital (remember ‘Make in India’?). That failed because the global economy was flagging, and the only people willing to invest in India were “hot money” owners who fly in and fly out, investing only in stock markets. Not in productive capacities. Modi and co. thought India’s private sector would create more jobs, especially if public investment was not ‘crowding them out’. Nothing of the sort happened. They thought if skills were given to people (remember Skill India?) then all they had to do was go to the market and pick up the most suited job. This ludicrous idea soon fell flat because there were no new opportunities. They thought that if small loans are doled out en masse (remember Mudra?), India would see a wave of entrepreneurial animal spirits. Nothing happened, because the loans were too small and in any case, there is depressed demand, notably after Modi’s own twin strikes of demonetisation and Goods and Services Tax. They thought fancy investment summits with promises of cheap labour and tax freebies would boost investment. A pile of promises resulted but only a fraction materialised. And so on.

Also read: Budget Blues for an Economy in Red

Clearly, Modi and his think tank need to unlearn the follies of the last term and start afresh. And the biggest thing they need to get rid of – and fast – is the ideological blinkers of neoliberalism which posit a restraint on public spending. It is this that leads to bizarre ideas like the ones described above because none of them involve real and effective public spending to make any worthwhile difference.

So, what Mr. Modi and Ms. Sitharaman need to do is boost public spending in expanding the public sector, especially in manufacturing, agriculture and infrastructure. This will have the effect of kickstarting the economy by injecting large funds into the economy, and more importantly, put money in the hands of people rather than cronies. The new government also needs to hike farmers’ incomes by giving remunerative prices for their produce and distributing the procured goods through a universal public distribution system. The government also needs to hike wages for agricultural and industrial workers. There is no better way than this to boost demand, which in turn will boost expansion of productive capacities and hence, employment. There are various other dimensions of this approach that will supplement this strategy.

Will Mr. Modi and his illustrious colleagues rethink their economic strategy, placing the country’s people at the centre – as their own much talked about “nationalism” should make them do? Or are they going to stick to making policies that ease the way for big corporates? This Budget will show which option they choose.

Also read: Over 4 Crore Are Jobless Now, Much More Than Earlier