We don’t need no education…

Equally frightening is the finding that, if things carry on the way they are, the unemployment rate will roughly double in the next five years — or, close to 50 million people will be unemployed by then, as compared to around 26 now. While this is bad enough, imagine the situation in states where this is likely to be concentrated. Unemployment in Kerala is 20 per cent right now — 35 per cent among the 15-29 year olds. Imagine this doubling. And that in West Bengal is around 15 per cent right now — 25 percent among the youth.

Worse, the Group points out, the crisis of galloping unemployment isn’t going to be solved by GDP growth alone, not that raising that is anything short of herculean either. Essentially, Gupta shows that the organised sector has no real capacity to absorb labour. It employs just eight per cent of the total work force, and its ability to employ people (or employment elasticity) is a fourth that of the unorganised sector. By the way, Gupta’s findings in themselves are hardly new — it’s pretty well known that the nineties haven’t seen much employment growth, certainly nowhere near what is required.

Now this is not to argue that the unorganised sector needs more protection, or that reforms such as opening up the economy have to be rolled back — Gupta’s report has generally been attacked as a return-to-socialism kind of report. Clearly, inefficient production methods, whether in small farms or in small scale industries, need to be got rid of. And replaced with more efficient production systems, whether those of larger enterprises or even imports. But, at the same time, 50 million unemployed is not something any democracy can live with. This number, by the way, reduces to 40 million if GDP growth picks up (with the wave of a magic wand) to 8 per cent, as opposed to the current 6. But even 40 million unemployed is pretty serious.

So what’s Gupta’s Group really arguing? Essentially, they’re making the point first made by the BJP’s swadeshi gang, of internal liberalisation first, and of the need to seriously strengthen the marketing and technological base of the small and medium sector. But let’s not dismiss the child just because of its parentage. It is a fact that small- and medium-sized firms have to put up with a lot more of inspector raj and red tape than the larger firms, for whom CII bats a lot more effectively than Tendulkar does for India. And the world over (in the US, Germany, wherever), the bulk of employment always comes from the small and medium sector. The Group is also making the point, and this is recognised by almost every serious economic-reformer, that agriculture needs to be freed up from the onerous controls that still govern it — it is only then that genuine investments will be made, and with genuine growth will come genuine employment.

(Okay, the Group’s come out against a hire-and-fire policy which it says will create more unemployment than new jobs. But let’s get real — which government do you know of plans to allow hire-and-fire anyway?)

Whether the report’s recommendations are pro-reform or anti-reform is a debate that will continue for a long time. But let’s understand one thing — we simply cannot afford to have 50 million of us unemployed. Never mind whether that is pro-free market or anti-free market. We’ve got enough fundamentalists in the country, let’s not add free-market fundamentalism to this.