Business - India;Pink Slip is showing

N.Chandra Mohan

The spectre of joblessness haunts India’s economy. Having grown at a rapid clip of 8.8 per cent a year during the last five years, growth is likely to slow down to 7 per cent this year and 6.9 per cent next year. The economy, thus, will generate much fewer jobs to gainfully absorb the millions who seek work. The only thing worse than being exploited by capitalism is being exploited by unemployment.

Ahead of the Assembly elections and a national one in 2009, the Congress got jittery when a mere 1,900 uniformed young employees of a private airline protested against being sacked. Imagine what the repercussions would be if those numbers went up to, say, a million or more? Already there are reports that in other emerging economies, the economic slowdown could cost them a million jobs. According to the Federation of Thai Industries, for instance, output will be slashed early next year.

India may face a worse fate if its growth declines sharply. If it drops to 7 per cent, there will be as many as two million fewer jobs this year and the next. Such a conclusion is based on workforce projections published in the Planning Commission’s Eleventh Plan (2007-11). A disturbing feature has been a deceleration in employment growth to 1.92 per cent per year from 1993-94 to 2006-07 from 2.61 per cent between 1983-1993-94 due to a sharp drop in job-creation in agriculture.

What has also been observed is a sharp decline in the employment elasticity of our growth or the increase in employment per unit of GDP to 0.28 from 1993-94 to 2006-07 from 0.52 over the years 1983-1993-94. Applying the elasticity of 0.28 to the likely GDP growth rates since 2007-08 to project employment provides an average of eight million-odd work opportunities this year and next. This is two million short of the ten million opportunities generated during each of the last five years.

Official number crunchers would perhaps suggest that a better measure is to leave out agriculture and focus only on non-agriculture. The rate of growth of the non-agricultural workforce divided by the rate of growth of non-agricultural GDP throws up an elasticity of 0.48 between 1993-94 and 2006-07. Due to slumping growth this year, the economy would turn out a million-odd fewer non-agricultural opportunities than the average of 5.6 million jobs per year during the growth boom of the last five years.

This striking shrinkage of employment opportunities when as many as nine-ten million people join the labour force every year will result in a spike upwards in the rate of unemployment. In these uncertain times, it is also possible that many people may chose whatever employment is available — temporary, casual in the unorganised sector — to get by. Others may prefer to remain at home hoping for better times. The ranks of the reserve army of the underemployed and unemployed are bound to grow.

Disturbingly, employment is beginning to contract across the country. Take a look at some of the recent headlines in this paper: ‘Dubai-based company fires India staff’; ‘Meltdown comes to small towns’; ‘Global financial crisis is taking away export orders and jobs’. The latter stories indicate how thousands of skilled workers in two small towns — Moradabad in UP and Panipat in Haryana — have been laid off after orders from the US and Europe dried up.

The experience of Moradabad, famous for its brassware, is indeed poignant. The lives of artisans have been seriously been disrupted following the global economic crisis. The report states that skilled artisans have begun plying rickshaws as their incomes have plunged, thanks to declining export orders. There are around 500 export units in this town. Imagine their plight as the downturn could continue till 2009. The bustling textile hub of Panipat is also facing a winter of discontent as factories have fallen silent.

Metropolitan India’s plight is no different from small town India. As the economy gets impacted by the global recession, an ‘uncertain future’ is the biggest worry of a cross-section of people in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad and Ahmedabad polled by Hindustan Times-CNN-IBN. Nearly half of the respondents were worried over losing their jobs. Exemplifying this gloomy mood is the fact that 80 per cent across the various metros felt that companies shouldn’t cut jobs.

So, what must be done about the growing joblessness? Prime Minister Manmohan Singh said last week that the government will undertake large-scale public expenditure in infrastructure to sustain domestic demand in an economy that is slowing down. These ideas are from John Maynard Keynes who argued that greater State intervention is necessary to boost demand.

Singh’s prescription to pump-prime the economy comes when the private sector is not able to invest substantially. Greater State intervention is, no doubt, needed to sustain the growth momentum and generate more employment. But does the government have the necessary fiscal headroom to initiate such a bold plan? Where are the internal surpluses to invest when the combined fiscal deficit or overall borrowings of the Centre and states has touched levels reached during the 1990-91 crisis? Unless there is decisive action, the rising tide of joblessness will prove costly for the government at the hustings.