The International Monetary Fund (IMF) has decided that country surveillance will now include issues of job creation and inclusive growth. Considering that big government usually runs to perdition spouting this mantra it is difficult to figure out how the subsequent IMF led clean up will do any better,if it is also locked in the same frame of reference.
The IMF makes the comment in a conference call in its paper,Jobs and Growth: Analytical and operational considerations for the Fund,released last week. Deputy Director of IMF Kalpana Kochhar discussing the paper said considering issues of job creation and inclusive growth will become a standard element of the IMFs surveillance.
Jobs and the larger labour market issues had largely been kept out by the Fund till now as it focussed on rescue operations for countries that landed in a fiscal mess. But the analysis of the euro crisis has possibly made it realise that getting jobs back is a crucial part of the act. Considering how the pressure of the unemployed in Greece and even France made their governments almost renege on their fiscal plans,the IMF wants to apply some of those lessons.
There is,however,no clear lesson to apply. Advanced countries now face the stickier unemployment problem ageing population with outdated skill sets. In developing countries there is no clear link between faster growth and a rise in employment,for their young population.
Also since the job agenda has been effectively captured by the World Bank with the International Labour Organization (ILO) working as a specialised body on the subject,it is difficult to see what new the IMF can bring to the subject. The ILO for instance has often pilloried India for pushing a growth agenda. The IMF now says it will collaborate with the former for a better understanding on employment issues. As of now the IMF wants to push for robust job creation and promote more equity in income distribution,along with greater protection for the most vulnerable. It says,Fiscal policy,in our view,is probably one of the most effective policy tools to achieve these objectives.
This can be interesting. This week,the Indian delegation will join the IMF spring meeting in Washington DC,where a key result area it will highlight,is the dismantling of the subsidy regime through fiscal policy. Such a large restructuring is bound to create a temporary blip for income equity. It will be interesting to see how the IMF joins the debate this time.
Subhomoy is a Deputy Editor based in New Delhi.