While the rural population has had it better, the value added for rural economic activity is invariably lower than in the urban areas, which implies lower earnings for rural population. The Situation Assessment of Agricultural Households (SAAH) Survey, 2019, confirms this fact. The average monthly income for the agriculture household (not per capita) was Rs 10,084 per month or Rs 121,008 per year, which is less than one-fifth of the average national household income.
In addition, the following factors too point towards the existence of a grim employment and household earnings situation:
· Slowdown in growth of private consumption.
· Decline in the household savings rate.
· Growth in temporary and contractual employment.
· Stagnant real wages for blue- as well as white-collar workers.
· Large scale workforce reduction in the IT and many new age startup sectors.
· Struggle that elite management schools are having in providing even the summer internship jobs for their students.
It is, therefore,important that the government engages with all the stakeholders and makes creation of gainful employment for our young as its most important priority.
What the budget can do
We can start with by articulating a long-term vision for employment in the budget — a vision that focuses on creating employment opportunities with greater earnings through higher productivity. We also need to ensure that the economic risk is not shifted to low-income households, which are in no position to bear that risk.
It would require the government to rethink the following premises that have been governing its policy choices during the recent years:
· Minimum government and maximum governance — the government must not absolve itself of the responsibility to create opportunities for employment of our youth. During the last three decades, the US public sector employment has gone up by 0.77%, against its population growth rate of 0.95%. Slogans don’t help govern; people do.
· Incentives given to large Indian and multinational corporations will help solve the employment problem. The reduction in income tax rates during 2019-20 is yet to encourage private sector investment. Even with a significant increase in government capital expenditure, we are not seeing any signs of “crowding in” of private capex.
· Fiscal, not monetary, policy is the most important instrument at this stage of India’s development. Credit and liquidity can support growth for a few quarters and not for a few years. We need fiscal policy support for building the capability to growth over the next few decades.
Government employment is the solution, not a problem
Our government employment peaked at 1.96 crore during 1996-97, with the central government peaking even earlier — 1990-91. At the end of 2011-12, the last year for which the data is available, government employment had fallen to 1.76 crore. During these three decades, India’s population grew at a CAGR of 1.7%, but our public sector employment declined at an annual rate of 0.7%.
We must go beyond making pious statements about “sabka saath, sabka vikas” and invest to raise the level of employment in the government and start paying fair wages, which would force the private sector firms to accept the fact that they too must pay a fair wage. The private sector can deal with providing fair wages, as it has a much higher ability to drive productivity and value-creation through innovation.
The government must invest to build scale in key economic and social infrastructure sectors and get the private sector to execute these projects with higher efficiency. We need immediate investment in urban infrastructure — an investment that focuses on increasing the productivity of our urban workforce by helping them save on travel time and helping them breathe clean air. Large vanity projects rarely create local employment opportunities — not for a few hundred million youth.
We need capacity for quality education and healthcare and not provision of education loans or protection through health insurance. In other words, we need to add capacity for public service in these sectors – the capacity that creates quality employment for young people with basic (care and administration) to professional (educators and doctors) skills.
Reimagining incentive plans
The Production-Linked Incentive (PLI) Scheme must be replaced with an Employment and Productivity Linked Incentive (EPLI) Scheme. In addition, we must make large investments in building innovation cluster where public, private and education sector come together to build long-term capability for growth through high value-adding work.
We would still be able to build national champions, and they would be globally competitive. We don’t have to encourage lazy manufacturing through PLI schemes that costs thousands of crores without any significant impact on employment or in enhancing India’s ability to grow.
If there are businesses that need government support, they are our MSMEs. We must provide them with equity support through productivity and innovation-linked capital subsidies, as they are the ones who can solve our employment problem.
Both the Prime Minister and the Finance Minister must well know that self-employment is a solution only in situations where the households have sufficient risk capital and support the entrepreneurial activities of their young. The Indian financial sector, despite all the recent effort, still does not provide adequate risk capital for private enterprise. So, here is hoping that energies and imagination will be focused where they must be.
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