Modi’s promise to create 250 million jobs faces challenges

Prime Minister Narendra Modi has promised to create 250 million jobs over the next 10 years, which means 2.5 crore jobs every year, but labour report says that in the last quarter, only 1.17 lakh jobs were created.

India has recently emerged as the world’s fastest-growing major economy. However, the rapid expansion has not done much to improve the lot of the common man. Unemployment rates are still very high.

At least one million people join the workforce in India every month, but opportunities are not opening up as fast. Despite an average annual growth of 6.5 percent between 1991 and 2013, India added less than half the jobs needed to absorb new job seekers.

India’s economic growth is faster than other major economies but not fast enough it seems. A government survey found that job creation fell by more than two-thirds in 2015. Analysts estimate that employment is severely lagging behind the speed at which the economy is growing.

India’s economic growth hit a 15-month low between April and June, with 7.1 percent GDP expansion well below economists’ predictions. The preceding quarter had registered a 7.9 percent growth. However, it was still faster than figures reported by China and the Philippines.

But that does not take away from the challenge Modi faces in delivering on his promise of creating 250 million jobs over the next decade.

The government is targeting average growth of around 8 percent, which economists say is the bare minimum needed to provide jobs to the people who enter the workforce every month.

India’s ability to generate jobs will decide its fate. It’s a major challenge for Prime Minister Narendra Modi, who has promises to keep.

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Nearly two-thirds of India’s 1.3 billion people are under 35 years old. This rising demographic “bulge” will create the largest working-age population in the world. This can be a good thing and create huge economic gains for India as seen in Japan and Korea if job creation is at par, otherwise, there is the danger of a massive collapse.

Since taking office in 2014, Modi has taken a raft of measures to attract foreign investors and revive listless domestic investment.

Under Modi, India has opened up further to foreign investment, hoping to generate more manufacturing jobs. A loan scheme for small businesses has been set up and there are plans for a $1.5 billion fund for startups. Modi has also launched a programme to train over 4 million people in different skills in six years.

Pronab Sen, country director for the International Growth Centre, a British-backed think tank, said such measures were “laudable”, but the efforts should be more geared to creating demands for employees rather than increasing the supply.

“India has become a demand-starved economy,” Sen said. “If there is no demand, there will be no incentive to produce more which, in turn, will mean no new jobs.”

The level of desperation for work is both astounding as well as distressing. To hold up an example consider this: in August, nearly half a million people, including post-graduates, applied for 1,778 jobs as mere sweepers in the city of Kanpur.

This is not the only instance. Last year, in Uttar Pradesh, 2.3 million people applied for 368 low-level government jobs that required just a primary education and an ability to ride a bicycle.

Adding to the problem of unemployment is the fact that two years of drought have caused a major setback in farming making work in that sector scarce.

Also, the construction sector that absorbs a major bulk of India’s unskilled workforce, has suffered a prolonged downturn. Satellite cities around the capital, like Greater Noida that were, until recently, bustling with construction activity are now scenes of half-built, abandoned, high-rises. Cranes and diggers stand idle.

In Delhi and the surrounding National Capital Region, housing starts fell 41 % in the first half of the year, and across India, starts were down 9 percent from a year earlier.

Bhuwan Mahato, a contractor who supplies workers to construction projects around Noida, says demand for labour is down by at least 25 percent. More than half a million workers were let go from sites around India’s capital in the last 18 months, in a stark sign of rising unemployment in the country.

However, there are a few bright spots in this gloomy scenario. The National Stock Exchange index has added 8 percent this year and foreign investors continue to buy shares in Indian firms.

The normal bountiful rains this monsoon season this year is certain to improve growth and relief for India’s 263 million farmers as they recover from two consecutive drought years. That should help lift farm output, which grew 1.8 percent from a year earlier in the June quarter.

Normal rainfall this summer will boost rural consumption by $80 billion in the year to end-March 2017, according to Citibank’s estimates.

Also, the housing sector is showing signs of opening up again. Steady demand for affordable housing and the government’s push to increase its supply has led to a near doubling of launches in this segment in the first half of 2016 from the year-ago period.

The number of new launches in affordable housing has increased by nearly 100% on year to 17,000 units across top property markets Delhi, Mumbai, Bengaluru, Pune, Kolkata, Chennai, Ahmedabad and Hyderabad during this period, a report says.

“Rise in the launch of affordable segment can be attributed to a steady demand for this segment of housing in key cities of Bengaluru, Delhi – NCR and Mumbai. It is heartening to see that demand for this segment, which was neglected for a very long time, is now being catered to as this formed a very large segment of latent demand,” said Anshul Jain, MD, India, Cushman & Wakefield. “The uptake of affordable segment in the market will have a cascading impact on the overall economy at large.”

Perhaps there is light at the end of this tunnel after all.

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