New Delhi: State-owned companies will soon have to mandatorily measure the benefits of proposed investments and the government will approve the same on the basis of how many jobs they will create—directly and indirectly.
The proposal is part of the national employment policy that the Congress-led United Progressive Alliance (UPA) is poised to unveil and is aimed at addressing the issue of jobless growth where the economy grows without creating jobs.
The labour ministry, which is overseeing the effort, has completed inter-ministerial consultations on the policy and will send a final draft to the Union cabinet for approval within a month, said a top bureaucrat in the labour department.
“The main objective of the policy is to make employment the focus area in all economic activities,” said Prabhat Chaturvedi, secretary, ministry of labour and employment.
“Any investment resulting in assured job creation is good for the country. But the government has to decide whether it will go for expansion in manpower intensive sectors or elsewhere,” said E. Balaji, director and president of Ma Foi Randstad, an employment tracking and human resource consultancy firm.
The national employment policy has been in the making since 2008, when the labour ministry came out with the first draft of the policy that said although the Indian economy had achieved impressive growth this decade, growth in job creation had not kept pace. The Indian economy has expanded at an average of 8.44% in the five years to 2009-10.
“This has significantly limited the trickle-down effect and widespread distribution of the benefits of the high economic growth,” it added.
Meanwhile, India’s unemployment rate has been growing steadily. According to the National Sample Survey Office, which conducted an employment survey in 2004-05, around 8.2% of India’s employable workforce is without jobs. According to Ma Foi Randstad, the unemployment rate is 10% in the organized labour market in India currently. India is expected to see 63.5 million people enter the labour market in 2011-16, according to a recent report issued by the labour ministry.
“At a time when India is aiming to achieve double-digit economic growth, commensurate employment growth assumes crucial importance from the point of view of sustaining overall high growth in the medium to long term, distributing the benefits of growth, and impacting the rate of poverty reduction in the country,” the draft policy said.
The new policy will aim to accelerate employment growth in the organized sector and improve the quality of jobs in the unorganized sector. Out of India’s total workforce of 470 million, only 10% are in the organized sector. The rest work in the unorganized sector —unincorporated establishments—and most of them are denied a social safety net.
The policy also proposes providing fiscal and monetary incentives aimed at creating a higher level of employment, another government official familiar with the discussions on the policy said. The official asked not to be identified.
The first draft had advocated that fiscal and monetary policies should be in tune with the objective of employment generation. It had also proposed that exporter-oriented incentives such as tax exemptions should be directly linked to employment.
The proposed policy emphasizes that assessment of proposals at the time of investment approvals should include employment creation as a criterion.
“Whenever an existing public sector unit proposes to build a new unit, it has to declare the direct and indirect employment generation potential while seeking project approval,” Chaturvedi explained.
He added that the government will urge the private sector to disclose the employment potential of new investments as far as possible. But it won’t interfere with their investment decisions, he clarified. Balaji added that the government will also find it difficult to do this in a liberalized market.
The government will also focus on training local people in areas where new projects are being planned.
“Skills training will be provided, as per requirement, to the locals to make them eligible for jobs (in these projects). This is necessary to fulfil the aspirations of the local people,” Chaturvedi said.
The ministry has also identified labour-intensive sectors such as construction, automobiles and food processing that need additional focus under the policy.
“The new policy will also emphasize skill development in a sector-specific manner. We are going to set up skill councils for specific sectors after doing skill-gap analysis. This will be done through public-private partnership mode,” Chaturvedi added.
Pronab Sen, principal adviser in the Planning Commission who has been assigned the task of formulating the approach for the 12th Five-year Plan (2012-17), admitted that employment has to be a focus area for the next Plan, but said the approach of the new employment policy appears piecemeal. “To have a proper labour policy, we need to look at the way the labour market operates?and analyse the structure of employment growth.”