Crisis of Unemployment: Horror Prospects
by G B Reddy on 02 Jun 2017 2 Comments

India faces horror prospects to overcome the challenges of the crisis of unemployment. The BJP president Amit Shah for a change hit the nail on the head when he recently stated that it was not possible to give jobs to everyone in a country of 125 crore. However, Amit Shah got the population figure wrong. As per the ‘WorldOMeter’, on 28 May 2017, India’s population has crossed 134 crores and is racing ahead at 1.2per cent annual growth rate to reach 200 crores by 2050, with 5 per cent unaccounted population taken into account.


Instead of catching the bull (population explosion) by the horns, one the greatest strategic challenges facing the nation, and taming or containing it, Indian political leaders, fearing vote bank backlash, excel in making tall promises.


India’s constraints are quite explicit. Land is finite; its load-bearing capacity overstretched. Natural resources have depleted. Capital is scarce. Fossil fuel reserves are quite low unless new reserves are discovered in the Andaman Sea region. The youth bulge is known to all. Robotics is set to dramatically change the rules of manufacturing and make human skills even in the services sector redundant by 2030, if not earlier. Yet, nearly ten lakh enter India’s workforce each month.  


Experts estimate that 28 crore will enter the workforce by 2050. According to labour bureau data, India added 135,000 jobs in 2015; 421,000 in 2014; 419,000 in 2013; 321,000 in 2012, 929,000 in 2011, and 870,000 in 2009.


Job prospects and opportunities are grim with the ongoing massive lay-offs in the Information Technology sector and H1B Visa restrictions in the US, Australia and other countries even for B. Tech qualified students. When employability of technical graduates is a worrisome issue, what is the scope for employability of low quality human resources?


In Telangana and Andhra Pradesh, and also in other States, students are no longer excited about engineering. As per latest media reports, in the 2014-15 academic year Telangana saw 280 engineering colleges reduced to 212 functional in 2015-16. The number may fall to less than 150. And, from a high of 2.4 lakh seats in 2014-15, the number of seats plunged to 1.4 lakh in 2015-16. No more than 80,000 students may enroll for studies, almost one-third, in 2017-18.


This will have a cascading effect on other service sector jobs. It would also adversely reduce remittances of dollars from foreign countries. Jobs doomsday prediction cannot be ruled out!


Let me qualify by highlighting that there is scope for creating jobs in thousands and lakhs in three sectors – Agriculture, Industry and Services. Some economic experts educated on western models of growth and development pontificate theories that cannot be implemented in the Indian environment. Few even claim that if Japan could sustain its growth with a far higher density of population with limited natural resources, India too can do it.


But Japan is Japan and India is India. Japan exploited opportunities available in the post-World War II era; we lagged behind.


The so called liberalisation of the 1990s did little to boost India’s manufacturing industry. Poor infrastructure, labour laws, license raj and uncompetitive labour costs resulted in MNCs opting for other nations, even as rampant corruption ate into all vitals of the nation. Meanwhile, global businesses and trade have become increasingly competitive.


Since the 1990s, experts have been harping on the need for dynamic structural shifts in the Indian economy from agriculture to manufacturing and services sectors. Labour unions remain stumbling blocks for efficient productivity. And the shifts remain a mirage.


Even today, India’s merchandise exports account for just 1.6 per cent of total trade. Ipso facto, domestic driven low cost manufacturing in traditional sectors like textiles to daily usage electronic items were lost to Bangladesh, China, Japan and other South Asian countries, what to talk of high-tech high-cost industries for either export or domestic use.


About 58.2 per cent of India’s total imports by value in 2016 were purchased from other Asian countries. European trade partners supplied 17.5 per cent of import sales to India while 7.4 per cent worth originated from North America with 7.3 per cent coming from suppliers in Africa.


Even after three years, India imported nearly 33 per cent of items valued around $ 85 billion in 2016: Electrical machinery, equipment: $37 billion (10.4 per cent); machinery including computers $32.5 billion (9.1 per cent); organic chemicals $14.8 billion (4.1 per cent); plastics, plastic articles $11.4 billion (3.2 per cent); animal/vegetable fats, oils, waxes $10.5 billion (2.9 per cent); iron, steel $8.7 billion (2.4 per cent); and optical, technical, medical apparatus: $7.2 billion (2 per cent).


Surely, India boasts of technical excellence in electrical machinery, equipment, electronics, computers, and so on. At least, domestic industry must meet domestic demands by offering products at competitive cost as against Chinese or Japanese or other South East Asian countries.


The silver lining is the pharmaceuticals sector. It has continued to boom in the wake of reforms, even if they curbed its freedom. Of late, there is a surge in the iron and steel sector.   


By coining the “Make in India” slogan and campaign, Prime Minister Narendra Modi is keen to boost India’s manufacturing industry. Under the initiative, the government has eased restrictions on foreign investment in the defense, railway, civil aviation, broadcasting, and pharmaceuticals sectors. India has even taken some tentative steps toward liberalising the capital markets.


However, agriculture, mostly seasonal, has lost ground due to a dismal failure to accelerate transfer of modern technologies to include greenhouses, drip and sprinkler irrigation, besides ravages of drought and floods. From 52 per cent of the country’s gross domestic product in 1950, the share fell to 18 per cent in 2014. Since more than two-thirds of India’s population lives in rural areas, agriculture still remains a full time occupation for the majority.


Agriculture has not been given due attention for absorbing unemployed labour in rural areas. One cannot help but highlight the success story of Almeria in Spain where 64,000 acres of plastic greenhouse-like structures constitute the heart of the country’s agriculture industry. The region exports almost three-quarters of its crops to other parts of Europe.


According to data from Extenda (Andalusian Agency for Foreign Promotion), the value of exports of fruit and vegetables in 2012 amounted to 1914.1 million euros (nearly $3 billion), a growth of 9.7 per cent compared to 2011. Fresh vegetables and vegetables contributed 1665.5 million. There were 359 exporting companies, 222 regular. The client countries include Germany, 29.7 per cent of the total; France, 15 per cent; The Netherlands, 13.1 per cent; United Kingdom, 11.3 per cent; Italy, 7.2 per cent; followed by Poland, Belgium, Sweden, Denmark and Portugal.


Given the large number of Indian Agricultural Universities and research institutions, including International Crop Research Institute for Arid Regions (ICRISAT) at Hyderabad, the industrial development of agriculture should have been formulated and implemented in a dynamic manner. After all, they provide job opportunities for rural low skilled labour in large numbers.


Dairy farming, fisheries and forestry should have been given impetus. Yet all of them remain stagnant and import of fruits, vegetable oils etc continue as before.


The redeeming feature of the Indian economy during the past two decades is the growth of the services sector, enabled by relatively low labour costs and large number of English speakers for business process outsourcing (BPO). Exports of information and communication technology make up 17 per cent of the total worldwide. Today, the country ranks fifth among the world’s top services exporters. Personal remittances to India rose from $2.4 billion in 1990 to $70.4 billion in 2014 due to inflows from IT professionals and Indian work force in West Asia. $33 billion trade surplus was created in services, compared with a $126 billion trade deficit in goods.


Now, the IT bubble bust is almost threatening to derail the services sector. In contrast, a nation with a rich civilisational heritage spanning over 7000 years, has huge prospects from tourism. Thus, the focus on development of smart cities, start ups, digitization, infrastructure and other initiatives offer hope, if efficiently and effectively implemented.


But they cannot by themselves successfully overcome the crisis of unemployment in the short and mid-term contexts if the quality of human resources in rural and urban areas is not upgraded.  


If agriculture is developed as an industry to include dairy farming, floriculture, fisheries and forestry, it would be possible to absorb low skilled rural labour. But this requires huge financial investments, technical expertise and marketing infrastructure.


The cost to develop one acre of ‘greenhouse’ depends on the product to be produced and includes cost of planting material/seeds, fertiliser, pesticides, cultivation technical expertise, labour and other costs. Even a farmer owning 20 acres may hesitate to venture into such capital intensive ventures. Currently, state governments give subsidy up to 50-80 per cent, which few farmers avail of due to unaffordable capital investments, red tape and lack of technical expertise resulting in development in penny pockets isolated from each other. 


One solution is to replicate Spain’s Almeria model under Special Agri Zone concept and offer attractive financial subsidies and total technical expertise to interested parties. To start with, a Public-Private-Partnership (PPP) model in collaboration with Israel or Spain or The Netherlands based on Transfer-of-Technology (TOT) model could be considered to develop SAZs in various states.


To sum up, the crisis of unemployment or jobs doomsday is real. The need is to address the challenge of population explosion squarely, for which labour law reforms must be addressed. Excessive focus on urbanisation may not address the issue of providing jobs for all, particularly low skilled rural workers.


A balanced and holistic approach in all sectors needs to be adopted with focus on upgrading of agriculture to include dairy farming, fisheries, horticulture, forests with value addition for both domestic and export markets, exploiting India’s geographical and climate advantages. Else, there is a danger of violent revolution.   

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