Union Budget 2018, Guest Column: Whither employment?

If we are generating 7 million formal jobs in a year then surely there should not be any employment problem. If this is so, then the government’s continuation of its jobs-creating schemes further into the future beats logic

Written by Mahesh Vyas | New Delhi | Published: February 2, 2018 5:24:21 am
Budget 2018 Budget 2018 News Budget 2018 Live Budget 2018 Income Tax Budget 2018 Date Rail Budget 2018 Union Budget 2018 Income Tax Slab Rates 2018 Indian Budget 2018 Union Budget Rail Budget Railway Budget Income Tax Slabs Central Budget 2018 Budget 2018 Expectations Arun Jaitley Narendra Modi Modi Government General Budget 2018 Arun Jaitley Speech Budget 2018 Speech The government believes that these measures have started showing results as a study has shown that 7 million formal jobs will be created this year (File)

The finance minister’s speech seems to imply that there is no problem of employment in the country. And if there were any problems, then they have been solved and sufficient employment is being generated in the country’s formal sectors today. The budget focuses on the agricultural sector (which does require a lot of attention), but it fails to recognise that there is a serious jobs problem in the country.

The finance minister listed six measures taken by the government in the past three years to boost employment generation. As a result the government contributes 8.33 per cent of the employee provident fund for new employees for three years; for new employees in the textile, footwear and leather industries it contributes 12 per cent to EPF for three years; employers of new employees get an additional deduction of 30 per cent of the wages; government shares the cost of stipend under an apprenticeship scheme; introduction of fixed term employment for apparels and footwear sectors; and increased maternity leave from 12 to 26 weeks.

The government believes that these measures have started showing results as a study has shown that 7 million formal jobs will be created this year. The finance minister has, however, extended the schemes further. The government will now provide 12 per cent of the wages of new employees in the EPF for all sectors for the next three years. Further, contribution of women employees to EPF is reduced to 8 per cent for the first three years of their employment.

If we are generating 7 million formal jobs in a year then surely there should not be any employment problem. If this is so, then the government’s continuation of its jobs-creating schemes further into the future beats logic.

The extension of sops for creating employment raises an important question. With the introduction of GST and other tax rationalisations in recent years it was expected that the several tax exemptions to companies and individuals would be withdrawn. But here, we see a continuation of a scheme that gives employers an additional deduction of 30 per cent of wages paid to new employees.

The government has chosen not to look at other data sets on employment that paint a very different picture. For example, the BSE-CMIE effort at tracking employment/unemployment has shown a 1.4 million increase in overall employment during calendar year 2017. This implies a negligible 0.35 per cent increase which almost contradicts the 11.7 per cent increase seen in the EPFO numbers.

The author is MD & CEO, Centre for Monitoring Indian Economy

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