4 min read.Updated: 25 Feb 2021, 10:13 PM ISTLalit Bhasin
Our effort to revive GDP growth is laudable, but the generation of jobs needs special attention. State support measures should be aimed at sectors that employ people in large numbers.
Budget 2021-22 was a balanced one, given the difficult circumstances the country faced. Having said that, India’s fast-recovering economy is not doing enough to create jobs. To fix this, the government must focus not just on accelerating growth, but on fuelling employment too. So far, our V-shaped revival of gross domestic product has not translated into a recovery of lost jobs. India’s unemployment rate rose to 9% in December, by data from the Centre for Monitoring Indian Economy, with around 9 million losing their jobs between September and that month. The Union budget made no mention of them, but it is incumbent upon the government to recognize joblessness as a serious challenge and work towards the generation of jobs across sectors.
The fall in employment in certain sectors, despite a quick recovery after an unprecedented year, is a matter of concern and needs urgent attention. While the Centre has focused on the healthcare, banking, agriculture and insurance sectors, the services sector, which suffered a grave setback on account of the pandemic, has been skipped. Tourism, hospitality and the entertainment industry, which are major job creators, need special attention. While the infrastructure measures announced in the budget may boost tourism over the long term, a 19% slash in the budgetary allocation for it and a low allotment of resources for the development of tourism infrastructure have been disappointments. India needs not just greater employment, but quality jobs.
Likewise, current inadequacies of India’s rural jobs programme need to be addressed. Revised estimates for the Mahatma Gandhi National Rural Employment Guarantee Scheme, a lifeline for millions of unemployed migrant workers who had to return home during the lockdown, seem inadequate. The budget allocation of ₹73,000 crore for the scheme is about 35% lower than the revised estimate of ₹1.11 trillion for 2020-21. In the current scenario, the government could look at raising this allocation to alleviate unemployment in rural areas. Additionally, urban job initiatives along the lines of the rural employment scheme could serve well in tackling rising unemployment in big cities. The push for big infrastructure projects is good, but may not result in many jobs in the near term. Given their long gestation period, job creation will depend on how quickly capital-intensive projects like economic corridors take off.
Another area is relief, or the lack thereof, for India’s micro, small and medium enterprises (MSMEs), a sector that employs nearly 40% of the country’s informal workers and serves as the backbone of our economy. The lockdown hit this sector the hardest, with many units facing bankruptcy. While the central allocation for the MSME ministry in 2021-22 has doubled, a major portion of it is for the guaranteed emergency credit line (GECL) facility, which provides liquidity and credit guarantees to MSMEs. Given that most of this sector is informal and unregistered, there is unlikely to be a large uptake of these loans and backstops.
Instead of relying on the private sector alone to generate employment, the government should do more to boost the health of MSMEs. Enabling the digitization of small businesses could help them join the mainstream and prove beneficial from the perspective of accelerating job creation.
The e-commerce sector did a good job of delivering essentials and non-essentials to homes during our lockdown. It was not just online grocery delivery platforms, but a variety of e-retailers that went beyond their field of expertise to meet the needs of citizens. The growth of e-commerce, backed by physical retail, has created new opportunities for scores of local-level retailers. It has also helped them build resilience and new capabilities, aiding their growth. Traditional retailers have also seen impressive jumps in e-commerce sales, either directly or through online marketplaces.
In that context, what has not been adequately explained by the Centre is India’s equalization levy of 2% on foreign e-commerce companies. According to India Brand Equity Foundation (IBEF), the country’s e-commerce industry is projected to reach $99 billion by 2024, expanding at a compounded annual growth rate of 27%. With an increasing number of consumers shopping online after the pandemic, categories like groceries and fashion/apparel are poised to be significant drivers of this projected growth. But not everyone welcomes the trend. We still have groups like the Confederation of All India Traders (CAIT) arguing against the alleged inequities caused by large e-commerce players. But opposition to online retailers ignores the benefits they bestow upon India’s economy. Unfortunately, vested interests often have a reason to oppose online retailing and hinder the sector’s growth by supporting restrictive tax and regulatory measures.
While the government’s Atmanirbhar Bharat and other post-covid relief packages may be seen as ‘mini’ budgets in themselves, they were in response to the pandemic-induced lockdown. The government must now pay attention to India’s long-term growth and overall development. As our economy prepares for a return to normalcy, assistance to crippled sectors that can provide jobs to millions will go a long way in assuring us a balanced recovery. A vaccine is not the only shot in the arm that these sectors need from our government.