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India Staring at an Impending Job Crisis
Mon, 12 Jun Pre-Open

Recent data from the Central Statistical Organisation (CSO) makes for a grim picture. The number of employees per factory has fallen from 80 in the early 1980s to about 60 in 2014-15.

My colleague Ankit in his 5 Minute Premium mentioned how the job creation rate has been on a constant decline. According to government data, the Indian economy created about 6.5-7 million jobs, on an average, since 1983. However, over the last ten years, this number has fallen to about one million per year.

India is expected to add about 100 million people to the workforce between now and 2025. At the current rate, the rate of job creation versus the people entering the workforce is widening quickly.

Manufacturing sector, which is the backbone of the Indian economy, is expected to bridge this gap in the coming years. The government is providing the necessary push through its 'Make in India' campaign. But, the success of 'Make in India' is far from certain. Serious challenges remain in terms of execution. The bureaucracy remains mired in red tape. Public sector banks are still in a mess. Many pending infra projects are stuck even today, despite getting the necessary approvals. There is also automation to worry about.

One very important factor hindering employment generation is our archaic labour law.

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As Vivek Kaul highlights this issue in his diary:

  • The government has now introduced the concept of the fixed term contract which allows companies to hire workers for a fixed period, instead of offering permanent employment. Up until now companies had been hiring contract workers, who in many cases are not paid as much as permanent workers even though the work being done is exactly the same.

    Companies are reluctant to employ full-time employees due to higher costs. This is one factor which has led to many textile companies not taking on more business in the past because once they had hired workers; they wouldn't have been able to let them go.

Apart from policy changes, mass level employment in the rural sector is a must. There needs to be a dedicated program aimed at mass level skilling of the workforce. Also, skilling in labor intensive sectors such as textiles, healthcare etc need to be prioritized. Incentives in the form of tax benefits can be provided to entrepreneurs who employ workforce in large numbers.

Without these proactive measures, India will be staring at a job crisis in the not so distant future.

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Aug 18, 2017 02:20 PM

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