India’s jobless growth haunts BJP’s 2019 poll ambitions

In 2014, the Bharatiya Janata Party’s manifesto for the Indian general election touted “Development for All.” On the campaign trail, BJP leader and prime-ministerial candidate Narendra Modi promised that the party would create 10 million jobs per year, while the manifesto spoke of generating employment for 250 million over the next 10 years.

Those assurances resonated strongly with young people entering the workforce, and that is a huge segment of India’s population. Roughly half of the country’s 1.25 billion citizens are under 25, and about two-thirds are under 35.

In 2014, the eligible electorate included at least 150 million first-time voters – citizens between 18 and 23 years old – some of whom were, of course, also job-seekers. A majority of those young voters put their faith in the BJP’s economic agenda. Their support helped sweep Modi to power. The BJP won 282 seats in the 543-seat lower house, the first parliamentary majority since 1984.

India’s unemployed millions

In 2019, a new cohort of 133 million 18-to-23-year-olds will enter election booths for the first time. Meanwhile, the still-young voters who backed the BJP in 2014 will measure delivery versus promises as they queue up to vote in their second general election. That’s close to 300 million voters aged between 18 and 28 years, more than the entire population of Brazil (207 million) or Indonesia (261 million). Given a total electorate of about 850 million, it’s impossible to win a general election without substantial support from that age group.

Like their parents, young Indians are heterogeneous in linguistic and religious backgrounds. But they are united by the desire to be gainfully employed, and meeting those aspirations would be the cornerstone of any successful political campaign.

There are other peculiarities about that age group, which may be exploitable by smart political strategy. For example, there is a big gender skew, though the ratio varies from state to state. Overall, there are 941 females to every 1,000 males in that age group. Far more men enter the workforce as well. Many of those young men and women are also under-skilled and undereducated by 21st-century standards. India’s overall literacy rate was just 74% according to the 2011 census.

This young workforce is often referred to as India’s “demographic dividend.” Sustained high growth in gross domestic product is strongly associated with any young workforce. Even if per capita productivity grows slowly, GDP growth can accelerate and stay high so long as the labor force forms a large proportion of the population. But cashing in on this potential presupposes enough skills to do productive work. It also assumes policy that creates sufficient employment opportunities. Unfortunately, there are question marks over both these counts.

According to the Organization for Economic Cooperation and Development Economic Survey of India 2017, more than 30% of Indian youth aged 15-29 are not in employment, education or training. This is more than double the OECD average and almost three times as bad as China. Skilling and educating that force and creating opportunities for it will be a big challenge

Indian labor statistics are notoriously unreliable and dated. But around 13 million people join the workforce every year. Hence, more than a million new jobs are needed every month. Whatever data exist suggest that policy has been unable to reach anywhere near that target.

The Labor Bureau’s Quarterly Employment Surveys (QES) cover units that employ 10 persons or more, in such sectors as manufacturing, construction, trade, transport, hotels, IT/BPO (information technology and business process outsourcing), education and health. According to the latest QES series, 20.5 million persons were employed in these sectors in such units as of March 2016, and this grew to 20.9 million by March 2017. But the QES only covers about 5% of India’s workforce.

Slowdown in job creation

The statistics indicate a slowdown in job creation in those sectors over the last four years. In 2013, under the previous United Progressive Alliance (UPA) government, 419,000 jobs were created. In 2014, there were 421,000 new jobs and in 2015, just 135,000 new jobs were created. Matters actually improved in 2016, with 400,000 net new jobs.

The Centre for Monitoring Indian Economy (CMIE), a private-sector research unit, works in conjunction with the Bombay Stock Exchange (BSE) to gather employment data across a wider base than the QES, including smaller units and more sectors. The CMIE-BSE Surveys reckon 405 million persons were employed as of March 2017, with the unemployment rate running at about 4.7%. The CMIE-BSE data also indicate that 1.5 million jobs were lost between December 2016 (when 406.5 million were employed) and April 2017.

Economic growth has been slow for the last two years. India’s labor laws are tangled, with a multitude of conflicting laws in various states, as well as federal legislation. The trade unions are powerful. Employers are hesitant to hire because they cannot fire. Even major listed companies prefer “casual” labor to formal hires. The Economic Survey, a periodical review of economic trends from the Ministry of Finance, says the temporary nature of work has an adverse effect on wages, job stability and social security.

The shock of demonetization and, after that, the goods and services tax have also hit some sectors hard. Textiles, for instance, is said to have shed anywhere up to 1.5 million informal jobs. The engineering and construction industry employs 30 million to 32 million people, the bulk being temporary unskilled labor. But India’s largest engineering and construction company, Larsen and Toubro, laid off 11% of its workforce in the last 18 months. Job losses have also occurred in the telecom sector, and employment growth has dramatically slowed in the infotech sector because of uncertainty about US policy.

NITI Aayog, the government’s official think-tank, recently released a paper that examined rural employment. It highlighted the problem of underemployment when it estimated that 84 million people would have to be shifted out of low-earning work in the agricultural sector to reduce income disparities.

As the next general elections draw closer, there is an increasing urgency on this front. The “Make in India” initiative, which envisages massive investments in manufacturing, will supposedly add 100 million jobs by 2022. But that might be too distant a future to attract the votes of unemployed 22-year-olds in 2019.

The labor minister, Bandaru Dattatreya, recently spoke about a National Employment Policy “in the next five to six months.” This would be put together after consultations across various ministries, to gauge the needs of various sectors. One part of the agenda would be to generate more stable employment in the formal economy. There are indications that this NEP’s timeline may be accelerated. It could be announced as part of the annual budget on February 1. This would be the last formal budget of the BJP-led National Democratic Alliance, since general elections are due in April-May 2019.

Rumors out of the Commerce Ministry suggest that the NEP will offer incentives and tax breaks for potential employers. There might also be generous loans on offer to medium and small-scale enterprises to encourage expansions. Some optimists are also hoping against hope for radical changes in labor laws. But that’s unlikely, since the BJP would face resistance from its affiliated trade union, the Bharatiya Mazdoor Sangh.

The BJP hasn’t been able to deliver on jobs after it took charge in May 2014. The party strategists must be hoping against hope that now, somehow, it can dramatically accelerate employment creation as it goes into the final year of this term.