It was a debate that split the Mint newsroom down the middle, till I decided to intervene. The cause was the release of jobs data by the government that showed, by one calculation, that between 2004 and 2009, only two million new jobs were created in India. In the previous five years, between 1999 and 2004, 62 million new jobs had been created. To put the two million in the correct context, the aim was to create 58 million new jobs between 2004 and 2009.
Some of Mint’s editors were of the opinion that we should treat this data just like we treat all government data: at face value (there is simply no alternative at the macro-level). And we should draw the obvious conclusion from this, they said: that something is wrong somewhere.
Other Mint editors were of the opinion that such a reading would probably harm our pro- reform and for-free-markets credentials because it seemed to suggest that there is something wrong with the growth-will-solve-all-our-problems theory.
Words (and emails) were exchanged, but I am happy to report that there was no chewing gum involved.
Meanwhile, the government machinery swung into action. Editorials discrediting the data and, by extension, Mint’s reading of it appeared in a few publications. The deputy chairman of the Planning Commission told Mint’s associate The Hindustan Times that the data seemed self-contradictory. And the government’s chief statistician, the man behind the data, wrote an erudite op-ed in Mint that defended the data and offered the interpretation that fewer jobs were created because of an improvement in other areas. His argument is that fewer people have multiple jobs now because their primary job is enough to help them make ends meet (and maybe more), and that many children and young women are no longer working because they are in school and college, where they should have been in the first place. This is an elegant argument although it doesn’t explain the increase in the number of casual workers. Nor does it tell us what happened to all those second jobs people have abandoned. Surely, someone needs to do them?
I have a different theory.
The year 2004 wasn’t just the year when the United Progressive Alliance came to power, but also the year that marked the end of first-generation reforms. Maybe it was because the communists were supporting the government; maybe it was because the new government was keen to focus on entitlements and benefits for the common man, the electoral promise that had won it a surprise victory in the election; or maybe it was because all the easy things that could be done had already been done.
I lean towards the last explanation. That by 2004, there was no longer any reformist measure that could be undertaken without upsetting a lot of people. For some time in the mid-2000s the Indian economy expanded, foreign investors (and India bores) waxed eloquent about the India story, and all seemed well, but this was the result of all that had been done since 1991 and, indeed, since the early 1980s. The improvements in social indicators that are intrinsic to the chief statistician’s argument are also the result of this.
That means both theories have merit. It also means that while a focus on economic growth is the only solution, we are probably yet to reach the stage where an economic engine that is cruising at a growth rate of anything between 6% and 8.5% will do the trick for us—at least not until other issues are addressed. Our woeful infrastructure and still dismal social indicators—worse than Bangladesh’s on some parameters—aren’t as much proof of the inability of economic growth to make things better as they are of the need for sustained high single-digit rate growth. Like all real-life regression equations, the cause and the effect are mixed up some in that assessment: high infrastructure and good social indicators, on health and education for instance, are both results and drivers of economic growth.
So, what should the government do?
I can think of a few things the government can do that will definitely add jobs, both in the medium-term and in the long-term.
The first is to review labour laws so that companies are happy to create new jobs.
The second is to make it easier for firms, especially those in manufacturing, to do business in India. Recent numbers released by the Reserve Bank of India that show an increase in foreign direct investment (FDI) by Indian companies in other countries even as FDI flows to India have declined indicating that it isn’t always easy to do business in this country.
And the third would be to refine the job guarantee scheme. It should have a best-by date and also include a module that tries to impart some skills to the people under the programme.
The jobs data released by the government indicates the need for more reforms, not less, for economic growth to translate into more jobs.
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