What is the State of India’s Economy, especially in Creating New Jobs?

While creating 1 crore new jobs was one of the campaign promises of the Hon’ble PM Narendra Modi, unfortunately, the government has not been able to achieve much. More seriously, pace of creation of new jobs is not increasing but actually declining!

What is the State of India’s Economy, especially in Creating New Jobs

In November 2013, the then prime ministerial candidate of the Bharatiya Janata Party (BJP), Sri Narendra Modi promised the people of India that “if the BJP comes to power, it will create one crore new jobs.” At other times, he has promised jobs for every youth, which works out to 2 crore per year. Further, in the BJP’s manifesto for the 2014 Lok Sabha elections, the very first section was curiously titled “Attend the Imminent” which declared that the BJP will “accord high priority to job creation” through “high impact domains such as labour intensive manufacturing, tourism, infrastructure and housing.” Rightfully, creation of new jobs was one of the important promises of the BJP before coming to power. All the macro-economic indicators and indices such as industrial production index, purchasing manager’s index, economic output numbers, etc., are just means to the most important goal of job creation.

It is imperative to gauge the performance of the broader economy through its ability to create new jobs for the youth of the country. It is only job creation that will prevent India’s potential demographic dividend from turning into a demographic disaster. Therefore, it is critical to ask the question – what is the state of India’s economy, especially in terms of its ability to create new jobs? Unfortunately, the answer to this question is marked by significant pessimism. There are nearly 10 lakh youth looking for a job every month in India. Amid such a staggering need and a tall promise, there were less than 1.5 lakh new jobs created in all of FY2016, as per the latest data available from the Labour Bureau.

What is even more depressing is that the pace of creation of new jobs is not increasing but actually declining. As the numbers show, there has been an alarming decline in job creation. It has dropped by nearly 90% from roughly 11 lakh new jobs in 2010 to less than 1.5 lakh new jobs in 2016.

According to the Labour Bureau’s fifth employment-unemployment survey, official unemployment figures rose from 12.9% in 2014 to 13.2% in 2016. Whichever way one looks at official data, it is unambiguously clear that India is headed for a demographic disaster if the current ominous trend is not reversed soon. It is through this prism, that the state of today’s economy in India must be viewed. While the government needs to be mindful of its fiscal deficit target of 3%, and needs to keep the current account deficit within a manageable range, the most important deficit staring at all of us is the two crore jobs deficit every year. This is the real economic target for India.

There can be endless debates over whether the GDP numbers conform to lived reality of economic growth. There can be intense squabbling over real and nominal growth numbers or monetary policy decisions. There can be loud chest thumping over India’s status as one of the fastest growing economies in the world. Behind the slogans of Make in India, StartUp India, Skill India, Digital India and so on lie the stark reality – two out of three Indians are either abysmally poor or jobless or both. It is time the government woke up to the frustration that is building among India’s youth and is manifesting itself partly in various agitations around the country.

Instead of addressing this issue, Prime Minister Modi chose to launch a nuclear first strike on the Indian economy through demonetisation. A slowly recovering economy found itself stunned when the Modi government jammed the brakes on India’s growth. In terms of the impact of demonetisation, a range of experts have produced an array of estimates about the extent of the slow down: from 1% to more than 2%, from six months to over five years. Every percentage point drop in Gross Domestic Point (GDP) growth costs the country 1.5 lakhs crores of rupees. But behind these numbers lies the terrible human cost – the jobs not created, the opportunities to climb out of poverty lost, and the dashed aspirations of India’s youth. It is this harsh reality that motivated the creation of this report.

My aim is to shine a light on the areas where the government has faltered in its management of the economy so that it can correct course and put India back on a positive growth trajectory once again.