When India’s growth was blooming in 2016-17, it earned the tag of the fastest-growing major economy in the world. Even as the country kept clocking impressive growth numbers for successive quarters, economists were worried about one anomaly — jobless growth.
India’s rate of jobless growth had emerged as a top concern among economists who had repeatedly questioned how jobs were not growing as fast as the country’s GDP.
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They warned that the rate of jobless growth could severely impact India’s economy which depends heavily on the middle class population, engaged primarily in salaried jobs and entrepreneurship.
While GDP growth in India had been falling since the beginning of last year, the coronavirus shock in 2020 had an overwhelming impact on India’s economy and jobs.
The pandemic and consequent lockdown laid bare the fragility of India’s formal job market, which has collapsed.
INDIA’S JOBLESS GROWTH HURDLE
Five months into the lockdown, India has witnessed a sharp decline in the number of jobs in the formal sector — the largest source of salaried employment in the country.
Even after unlocking the economy, there has been no improvement in the salaried jobs space. The government has cited the unprecedented economic crisis behind the job situation in the country.
However, the coronavirus pandemic may not be the only reason why salaried jobs — one of the most secure forms of employment — are losing prominence in India.
Unemployment in the country had been a problem since 2017-18. A government job survey, whose publication was delayed just ahead of 2019 Lok Sabha election, showed how the country’s unemployment reached a four-decade high of 6.1 per cent in 2017-18.
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The report noted that unemployment was higher in urban areas in comparison to rural areas — an indication that salaried jobs have been dwindling in India for at least three years.
FAILED ENTREPRENEURSHIP WAVE
An entrepreneurship wave that started in India a few years ago could be another reason why there has been no growth in salaried jobs in the country, noted the Centre For Monitoring India Economy (CMIE), a Mumbai-based economic think tank.
“Salaried jobs do not seem to grow in tandem with economic growth, or even with an increase in entrepreneurship. But, they are suffering the most during the current economic meltdown,” according to a recent article written by CMIE MD and CEO Mahesh Vyas.
“This structure of the working population does not behove a country that has often boasted of being the fastest-growing major economy in the world,” he added.
Data show that despite India’s rapid growth before 2019, salaried jobs grew at a snail’s pace. Salaried jobs grew from 21.2 per cent in 2016-17 to just 21.6 per cent in 2017-18. It inched to 21.9 per cent in 2018-19. India was clocking a real Gross Value Added (GVA) rate of 6-8 per cent per annum all this while.
But the period of jobless growth hit a roadblock in 2019-20 when salaried employment fell to 21.3 per cent. The CMIE explained that the stagnation in the salaried job market in spite of India’s economic growth in recent years is not the only anomaly. The CMIE found it “equally odd” that India has been witnessing a rapid increase in entrepreneurship without any increase in salaried jobs.
It is no secret that entrepreneurship has been rising in India over the past years. By FY20, India had over 7.8 crore entrepreneurs. But surprisingly, the increase in entrepreneurship did not add more salaried jobs which remained steady at 8.6 crore.
This indicates that much of the entrepreneurship growth in India was self-employed and consisted only of very small-scale businesses.
The government after coming to power in India had introduced several schemes to promote entrepreneurship in the country including the flagship ‘Make in India’. PM Modi had on many occasions encouraged India’s growing youth population to become entrepreneurs.
While entrepreneurship did see a rise in India, it is not the kind that helps sustain economic growth, evident by the low job creation. Besides, most startups and entrepreneurs in India struggle to stregthen their base due to a host of challenges, according to a 2019 Observer Research Foundation study.
THE URBAN JOB MELTDOWN
The fact that all salaried jobs put together account for just 21-22 per cent of total employment in India is worrying as it directly impacts a large share of private consumption.
“There are many more farmers than salaried jobs. And, there are even more daily wage labourers. Farmers and daily wage earners together account for nearly two-thirds of the Indian working population,” said CMIE.
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It indicates that a large part of India’s workforce is employed by the informal sector, where it is easy comparatively easier to get jobs. However, such form of employment heavily depends on demand originating from the urban economy, comprising mostly of salaried jobs.
With the sudden meltdown of salaried jobs in India, the informal economy is also feeling the heat with thousands of small-scale traders and hawkers shutting shop.
Only the rural economy has seen a steady rise during the lockdown period as farming became the last resort for those who lost their urban jobs. Most daily wage labourers who were forced to return to their native places were the main reason behind a 14 million rise in farm employment.
However, rural growth is not enough for an economy which needs at least 10 lakh formal jobs to be created every year to support the country’s rising youth population.
Salaried job holders working in urban areas are among the worst-hit workers during the coronavirus pandemic in India.
This is a key to understand why private consumption numbers are so poor. Indiatoday.in earlier reported how the sharp dip in demand is directly related to the falling income among middle class households in India.
India lost 2.1 crore salaried jobs by the end of August, down from 8.6 crore in 2019-20 to 6.5 crore last month. “[Around] 21 million salaried job losses cannot be confined to only of the support staff among salaried employees. The damage is likely to be deeper, among industrial workers and also white collar workers,” the CMIE said.
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