Home >Budget 2019 >News >Can India spend its way out of its unemployment crisis?

The covid-19 pandemic has exposed existing faultlines and inequities in the economy, but is the way out spending more on social security programmes or cutting back on the fiscal deficit? Would an urban employment guarantee scheme help job creation and spur short-term demand as well as long-term economic growth? These are the questions our panel of experts debated in an hour-long session titled, ‘Pandemic, unemployment, inequality: The way forward’ as part of Mint’s Road to Recovery series in the run-up to the Union Budget in February 2021.

Leading the hour-long conversation on Monday evening were Manish Sabharwal, Chairman and Co-Founder of Teamlease Services Ltd; Dr. Jyotsna Jha, Director of the Bengaluru-based Centre for Budget and Policy Studies; Rosa Abraham, Senior Research Fellow, Centre for Sustainable Employment, Azim Premji University; and Ashutosh Gupta, India Country Manager, LinkedIn with journalist Mitali Mukherjee as moderator.

While the panellists weren’t entirely in accord on the way forward, one thing all four agreed upon was that covid-19 has not created but only reminded us of the socio-economic problems and inequality gaps that India faces. While Sabharwal focused on the need for structural reform to spur growth, Dr. Jha and Abraham emphasised that government spending on health, education and social security was essential for overall economic growth. Gupta, meanwhile, explained why reskilling needed priority in the Budget to take the country forward. “The road to recovery lies in reskilling, especially for those in sectors such as education, healthcare and hospitality, which employ large numbers of women and have been hardest hit by the virus’ effect," said Gupta.

Though employment has recovered in the last few months, incomes have fallen. “People have returned to work [after the lockdown], but our research has found that fewer women are back in the workforce and even among the men, 80% have come back to jobs that pay less or are now self-employed," said Abraham. “People have come back to employment but in more precarious ways." In this context, an urban jobs guarantee scheme could provide the kind of social safety net that less privileged sections of society require.

This kind of spending would benefit the economy at large, said Jha, pointing out that secure employment and income would create demand for private goods, spark consumption and have a multiplier effect on helping small businesses and, in turn, economic growth. “Public spending on social security does not have to be detrimental to the economy. Governance reforms can be socially responsible and yet push economic growth," she said.

Sabharwal made pitch for fiscal prudence, saying, “Spending money won’t create jobs. Schemes like MNREGA are not an employment but a poverty solution. ‘Find the money’ is not a solution; there is a shortage of it in a year like this one where the pandemic has exhausted resources." Instead, he said, the Budget’s focus should be on boosting investment and putting more money in the hands of employees by removing mandatory contributions to Provident Fund and ESI, labour reform, and regulatory changes. “I can think of many non-fiscal ways to create freedom for entrepreneurs," he said.

Jha made the point that signalling is very important for a government. “In addition to gender, caste, urban-rural and other inequalities, this pandemic has also worsened interstate inequalities," said Jha. “States that were in a better position before will recover faster… so the role of the Union government and the Budget is very important in terms of signalling what is important so that states will follow."

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