Modi 3.0 and employment – Opinion News

By Biswajit Dhar

For the past decade, the Bharatiya Janata Party (BJP) enjoyed an absolute majority in the Lok Sabha, India’s lower house of parliament. This time, it has fallen too far from that point. His reduced numbers likely reflect his failure during previous terms to address the economic distress of a significant section of society, particularly the youth and farmers.

The next government in New Delhi should change its approach towards increasing employment, especially youth employment, by making direct interventions. The most effective starting point for such a process would be the adoption of a National Employment Policy that was on the fringes of policy discussions when the Congress-led government was in power before 2014. By 2022, the National Democratic Alliance government (NDA) led by the BJP said in parliament that it had no plan to develop a National Employment Policy.

The most consistent feature of India’s labor market is the high level of informality. More than 90% of the workforce is in the informal economy. It needs a comprehensive view to allow everyone to participate in the talks on the concrete measures that can be taken to create jobs and provide social security for workers. In addition, the government should recalibrate the incentives offered to the private sector, linking these to their ability to create jobs.

Perhaps the most troubling aspects of the NDA government’s economic policies relate to its relationship with the farm sector.
Agriculture remains the mainstay of India’s workforce. According to the 2022-23 Economic Survey, 65 percent (2021 data) of the country’s population lives in rural areas and 47% of the population depends on agriculture for their livelihood. Adequate income for them is missing, which is a big problem for rural workers.

In 2020, the government introduced three controversial farm laws that would have eased the entry of large traders to procure agricultural produce. This was an attempt to replace the government agencies that have bought all the major commodities from farmers since the 1960s. Although farmers’ agitations forced the government to withdraw the legislation, farmers’ demands to address the problems facing crisis-ridden agriculture of India was never heeded.

One of the most intriguing anomalies of Indian policymaking over the past 80 years has been the lack of political will to formulate a National Agricultural Policy. It is ironic that while the United States and members of the European Union have passed the Agriculture Act and the Common Agricultural Policy respectively, every Indian government since independence has avoided enacting a domestic equivalent, even though agriculture employs a very small proportion of the workforce in the US and Europe.

Doing so would ensure that everyone, including farmers’ organizations and state governments, is fully involved in agricultural policy-making. A comprehensive policy aimed at improving the sustainability of Indian agriculture, improving the lives and livelihoods of 47% of the country’s workforce, can provide the impetus needed to sustain high and inclusive growth.

India has a relatively young population. The country can trigger a strong cycle of development by engaging young people in its workforce. The benefits of the demographic dividend, which has long been discussed in the context of the Indian economy, can then be reaped.

But this demographic dividend seems a long way off given high levels of youth unemployment. Over the past few years, and especially after the Covid-19 pandemic, this has been a major pain point for the Indian economy.

While official statistics show high levels of growth, this growth has not increased employment to the desired extent.

India’s labor market exhibits two worrying features. First, official statistics show that the country’s youth (15-29 years old) have unemployment rates consistently higher than the overall labor force. Second, there are high levels of gender inequality and the employment opportunities available to women have shown no signs of improvement.

The youth unemployment rate during the first quarter of 2024 was 17%, two and a half times higher than the corresponding figure for the working age population. The unemployment rate for young female workers was even higher at 22.7%. These figures suggest that India is wasting a large part of its labor force and that the prospect of realizing the demographic dividend is extremely bleak.

The NDA government’s response to addressing labor market stress has typically been to encourage the private sector to increase investment in the hope that this would create jobs. In recent years, it has done so by offering a host of fiscal and other incentives.

In 2019, the government cut corporate taxes significantly, arguing that this would stimulate private investment and thus create jobs. This cost the government Rs 1 trillion in taxes in the next financial year.

After the fall of Covid, the government pumped additional liquidity into the economy, expecting that this would enable the private sector to increase investment and jobs. It also launched a Manufacturing Incentive Scheme to encourage private sector investment in 14 key manufacturing sectors.

The continued high levels of youth unemployment show that these measures have not worked.

Instead of addressing these problems, the overwhelming focus of the NDA government was to create a “desperate economy” by giving freebies to the desperate, an approach it itself had criticized a few years back. The BJP’s election manifesto, titled “Modi ki Garancia” (Modi’s guarantee) was essentially a “guarantee” to continue with these freebies, the most important of which was the extension of free ration to more than 800 million people , covering almost 60%. of the population.

The election verdict shows that Indian voters are not satisfied with handouts alone. They are seeking what the International Labor Organization calls “decent work,” meaning productive work for women and men under conditions of freedom, equality, security and dignity.

The author is an honored professor at the Council for Social Development.

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