Rangarajan sets the record straight on jobless growth

Rangarajan sets the record straight on jobless growth

Last week the chairman of the Prime Minister’s economic advisory council (EAC), C. Rangarajan, enjoined the debate that has broken out ever since the National Sample Survey Office (NSSO) published the findings of the 66th round of survey on employment—which reported a dramatic drop in the creation of jobs.

However, he may have, while holding true to the laudable credentials of academic integrity, revived a politically vexing issue for the Congress-led United Progressive Alliance (UPA), which otherwise has positioned itself as the champion of inclusive growth.

He goes on to make a politically sensitive conclusion: “The 66th round results do leave us with an unanswered question: How do we explain a decline in the labour force in a period where both population and GDP (gross domestic product) were growing strongly."

Coming from the EAC chairman, this is significant. All the more, as it was preceded by some disingenuous efforts by sections of the government to deny the politically damaging revelation—reported in Mint on 25 June as the phenomenon of jobless growth. Most distressingly, some, including official statisticians, raised questions on the validity and methodology of the survey.

Now, the wheel has turned full circle with Rangarajan weighing in with his own assessment.

It is very counter-intuitive and hence needs to be analysed. However, this was virtually impossible given the high-decibel interventions that emanated from the UPA immediately after the survey results were published. The debate became rhetorical, eschewing analysis.

The significance of the NSSO numbers can be understood by the fact that as many people are joining the workforce every month in the South Asian region as was created in five years by the Indian economy. According to More and Better Jobs in South Asia, a World Bank report released last week, an estimated 1–1.2 million new workers will join the labour market every month over the next few decades—an increase of 25–50% over the historical average. “The employment challenge for the region is to absorb them at rising levels of productivity," the report said.

Worse, the NSSO data showed that the quality of the employment that was generated too was questionable: casual employment far exceeding regular jobs. Between 2004-05 and 2009-10, the number of casual workers grew by 21.9 million, while growth in the number of regular workers nearly halved (compared with the period between 1999-2000 and 2004-05) to 5.8 million. The number of the self-employed, dominated by agricultural workers, declined by 25.1 million, an employment pattern that Manish Sabharwal, chief executive officer of leading staffing company TeamLease Services Pvt. Ltd, so succinctly summed up in an earlier interview with Mint: a taxi-cab relationship, short yet intimate.

The tragedy of South Asia is that all the countries in the region, with the exception of Sri Lanka, are in the midst of a demographic transition—when the people in the labour force outnumber dependants. To harvest this so-called demographic dividend, the population has to be equipped with a desired skill set and then the economy has to be in a position to absorb them. In the Indian context, an additional factor has been that the aspirations of the growing additions to the labour force have been given flight following rapid growth, and particularly the evolution of the consumer economy.

So Rangarajan, like some other commentators, is right in flagging the problem. Particularly distressing is the sharp shift in circumstances when compared with the previous five years. It will have to be researched, but the intuitive argument is that the spurt in generation in employment was the outcome of the initial rush of investments as the economy opened up, essentially a harvest of low-hanging fruit. For quality job generation on a sustained basis, the economy needs to undergo a structural change, implying serious reforms of the policy and investment climate that would position the economy to grow at 8% plus on a sustained basis. And these are not easy reforms and are politically hardnosed. Hopefully, Rangarajan’s candid observations may break the policy paralysis.

Like they say, better late than never.

Anil Padmanabhan is a deputy managing editor of Mint and writes every week on the intersection of politics and economics.

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