Reason badhao

The UPA’s strategy for raising employment rests on very weak pillars. The weakest is the new slogan coined by Prime Minister Manmohan Singh: rozgar badhao (increase employment). It goes with an assurance not to bring in “hire and fire” by changing labour laws. Labour laws may apply only to organised labour which constitute 7 per cent of the work force, but by keeping them in place India has already witnessed an incredibly slow growth in employment in large scale industry. It is not surprising that investors are unwilling to take the risk of setting up industries which they will not be allowed to close down, or hire workers who they cannot fire. The slow growth of employment in the large-scale private manufacturing sector is a major contributor to the growth of unemployment in the country. Today, central and state governments are not in a position to increase employment significantly by more hiring. Therefore, the slogan that employment should be enhanced without a change in labour laws translates into saying that jobs in the unorganised sector should grow. But for these jobs to grow, the country needs growth.

The second pillar of the UPA’s strategy to raise employment is the proposal to give 100 days per year of work to able-bodied rural job-seekers. In this case again there is an analytical mistake. Employment guarantee schemes, designed for coping with droughts, are being sought to be used to solve chronic problems. Unemployment is highest among the highly educated. NSSO data shows that in 1999-00, unemployment among illiterates was just 0.2 per cent. For those educated up to primary school, unemployment was 1.2 per cent. In contrast, unemployment among college graduates was 8.8 per cent. The employment guarantee scheme will not target employment where it is the highest. The pitiful resources of the government can hardly overcome economy-wide labour market issues. If there is a chronic problem in the labour market, a government job guarantee scheme can hardly address it. It is not the job of the government to give jobs. The job of the government is to create an environment where the economy grows well.

If India had succeeded in massive industrialisation, like China, this would have generated a great deal of employment, particularly for college graduates who would be technicians operating machines. This would have further created incentives for people to get education. If the government is serious about the unemployment problem, this is the area where a concerted policy focus is required. What India needs to do is to launch a concerted attack on matching China in the game of globalised production. This includes rationalisation of customs and excise and VAT, removal of small scale sector reservations, easing FDI procedures, as well as reforms to labour law.