It is
election season and promises galore by all the political parties are making headlines.
For reasons beyond comprehension most of the affirmations are never realised
until unless those issues jeopardise the foundations of parties. Nevertheless,
one of the national party in their election manifesto has promised creation of
10 crore jobs for an inclusive growth if voted to power. If the party could
effectively generate such large scale employment our country can shed the tag
of emerging nation and embrace the status of a developed country.
Mc. Kinsey
Global Institute (MGI) in its 2014 report “From poverty to empowerment: India’s
imperative for jobs, growth, and effective basic services” released in
February, had briefly summed up the India’s economic status and suggested a way
forward. It has credited the wave of
economic reforms initiated two decades ago to be the major game changer in
India’s fight against the abject poverty. With the result India experienced
fastest growth, bringing down the numbers of extreme poverty to 22% or 270
million from 45% in 1994. Though it is no mean achievement to celebrate, there
is still a long way to go. Even a perfunctory analysis of the Human Development
indicators suggest that a vast majority or nearly 56% or 680 million people
don’t have access to 8 basic household needs (food, energy, housing, drinking
water, sanitation, primary health care, education and social security). It
turns out that 680 millions of population or roughly 2.5 times the population below
the poverty line are deprived of essential needs which are measures of standard
of living and this constitutes the empowerment line.
Policies
till now have been targeted towards alleviation and considerable progress has
been made. Now there is need for new aspirations and higher vision to take the
country into the next level. The empowerment gap or the additional consumption of
bringing the 680 million to empowerment line is nearly equal to 4 percent of
GDP. The cost of bridging this gap is seven times higher than the cost of
eliminating poverty. Though public spending has increased to make public
services more accessible, only 50% of government funds are reaching the needy.
Moreover to bring about a sustained improvement in people’s life there is a
need for more ambitious and bold inclusive reform agenda. GDP of the country
can be boosted by reforms includes that stimulate job creation. An estimated
115 million or 11.5 crores are needed to absorb the growing population,
encourage active labour force participation, expedite shifting of labour from
farming sector and improve their standard of living as well.
In order to
kick start job creation, India must make efforts to improve the business and
investment climate for labour-intensive manufacturing, construction and services.
The business atmosphere in India is crippled by poor infrastructure facilities,
red tape across various government organisations, tedious taxation procedures
and antiquated labour laws.
Additionally, for an inclusive growth four key aspects are to be prioritised
and streamlined to set a stage for large scale job creation. They are -despite
lower returns from agricultural sector when compared to manufacturing,
construction, trade and hospitality sector, nearly half of labour force is
currently employed in farm work. Hence bolstering a shift of labour to non-farm
sectors can improve their incomes. Second, data indicates that registered
enterprises are five times more productive than unregistered enterprises. But
India’s unregistered enterprises engage almost 70% of non-farm labour. Thus,
there is an urgent need to increase the proportion of the organised
enterprises. Next, companies with more than 200 employees are known to be eight
times more productive than small and tiny companies working with 5 to 49
employees. Greater economies of scale can be achieved by initiating labour
intensive industries. Nearly 84% of India’s manufacturing enterprises employ
less than 50 workers compared to 24% in China. Finally, building a skilled and trained
work force in our country with huge demographic advantage would give an extra
edge both in domestic and International markets.
China with
its aging population and upward movement of labour towards more knowledge
intensive industries, more opportunities are opening for other countries in the
labour intensive sectors. India should stake claims by creating investment and
business climate necessary to boost its share in global manufacturing labour
market. Further, the job creation within the country must be more diffused and
geographically balanced. Hence small, vibrant and emerging middle–tier cities
with thriving economies which are well connected must be developed to minimise
massive labour movement to overcrowded megacities.
To address
the issue of job creation MGI outlined six critical reforms which if introduced
effectively can ensure substantial employment to millions of Indian youth.
Firstly, greater emphasis should be on improving the execution and productivity
of infrastructure investment. Infrastructure development and job creation are
intimately linked. Better infrastructure enables job creation; which in turn
provides governments with resources to invest in additional infrastructure. In
India, states with better infrastructure tend to create more organised sector jobs
with higher wages. Though the investment in this sector has been almost
quadrupled in 10th and 11th five year plans, the outcomes
have been 63% below the expected outcomes. Except for railway lines and rail
electrification, nearly all other sectors in infrastructure fell short of
delivering. Two strategies have been proposed-one is delivery approach and
other is greater focus on capital efficiency through non-traditional sources of
financing and optimisation of assets. India should focus on “job creation
engines” through targeted intervention in construction of industrial townships,
tourism circuits and food processing parks that can generate 11 million jobs.
Secondly
reducing administrative burden, especially for MSMES (Micro, Small and Medium
enterprises), through government process improvements. India currently ranks
134 out of 189 countries in World Bank’s 2014 ease of doing business
indicators. Due to the complexities of regulatory environment, lack of
transparency and prolonged legal proceedings, businessmen are shying away from
investing in Indian markets. Different countries across the World have
advocated various methods to reduce administrative burden. These can be
effectively replicated in India too. For example: introducing “one-stop shop as
in Columbia” or digitising the file tracking system records or commissioning
specialised commercial courts etc. Thirdly, tax system is India is chaotic as
centre and states levy wide variety of taxes, it is essential to remove tax and
product-market distortions to maximise economies of scale. Fourth, rationalise
land markets by reforming land records and encouraging new models of
acquisition. Recently passed Land Acquisition, Rehabilitation and Resettlement
Bill of 2013 has made the process of land acquisition more difficult and time
consuming. Alternative methods of land acquisition followed in states like
Gujarat and Maharashtra can be put to practice. Fifth India has the second
strictest labour laws regarding the protection of permanent employees in the World.
Labour market should be more flexible though incremental reforms for a
productive business expansion. Industries with more than 100 employees have to
obtain permission from the government to layoff a worker. This kind of
environment undermines competitiveness and forces the industries to stay small.
Finally,
building skills for poor workers through government supported systems would
change the trajectory of their income levels. It is estimated that an
illiterate worker with appropriate training could realise an increase of 40% in
wages, while a literate worker with primary education with requisite skill set
can obtain 70% higher wages. The funds
diverted for MNREGA programme which provide manual work to the unskilled worker
for a period of 100 days in rural areas can be diverted for imparting new
skills. This can empower the rural youth for a life time and have an
everlasting impact on their standard of living.
To sum up, a
culmination of committed leadership and political will is needed to foster India
into a path of progress and prosperity. Further ambitious policies and reforms evaluated
by intellectuals should be effectively implemented to drive India towards path
of betterment and growth. Political manifestos shouldn’t be instruments of
bewitching voters but they must be documents of vision meant for real execution
to beget change.
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