Unemployment - The gravest economic challenge facing India
- There are three driving forces to build a progressive, prosperous and plural nation: Work, Welfare and Wealth.
- None of the three is less or more important than the other two.
Context changes; not the philosophy
- In the last 30 years, we have seen dramatically different economic contexts in 1991 (near default), 1997 (globalization), 2002-03 (drought), 2005-08 (global upswing), 2008 (international financial crisis), 2012-13 (taper tantrum), 2016-17 (demonetization, drought) and 2020-22 (pandemic, recession).
- Each context will require a different and nuanced response, especially while presenting the Budget, but the basic philosophy of promoting work, welfare and wealth ought not to change.
Significance of work
- In the modern era, work is an integral part of life. In a developing economy, an important indicator is the number of persons aged 15 years and above who constitute the workforce.
- In the workforce, the LFPR (Labour Force Participation Rate) is the proportion of the population that is presently employed or seeking employment.
- In India the current numbers are workforce: 94 crore, LFPR: 37.5 per cent, equal to 52 crore.
- The gravest economic challenge facing India — a young nation where the median age is 28.43 years — is unemployment.
- In the last seven years, unemployment has increased.
- The pandemic and the lockdown brought in their wake more unemployment. 60 lakh MSMEs were closed down.
- Millions lost their jobs, that included salaried jobs and non-regular jobs.
- The self-employed (e.g. tailor, electrician, plumber) lost work.
- Many of those jobs have not come back.
- The current unemployment rates are Urban: 8 per cent, Rural: 6 per cent.
- Besides, those who returned to work faced wage cuts.
- In the last two years, 84 per cent of households have suffered a loss of income.
- In this background, the Budget has promised that 60 lakh jobs will be created in the next five years.
- As against the 12 lakh new jobs a year, the number of persons who enter the workforce every year is 47.5 lakh as per Labour Bureau.
Significance of welfare
- Welfare is a wide concept that includes many aspects such as livelihood, job, food, healthcare, education, social security, rest & recreation, etc.
- Welfare measures are intended to address these challenges.
- For example, MGNREGA is intended to address the challenge of livelihood, National Food Security Act to address the challenge of food, free public health facilities and health insurance to address the challenge of healthcare, Right to Education Act to address the challenge of education and so on.
- The total subsidy bill has been cut by a humongous 27 per cent.
- The Budget’s messages are as follows:
- No cash transfers or free rations to the very poor;
- No increase in social security pensions;
- No interventions to combat malnutrition, stunting and wasting;
- No intervention to overcome the huge ‘learning loss’ among school children in the last two years;
- No tax relief to the middle class; and
- No GST relief to consumers.
Significance of wealth
- Wealth is the source of new capital and, consequently, new investment.
- Rising incomes, after taxes, will result in accumulation of wealth.
- Both income and wealth are triggers for investment, risk-taking, innovation, R&D, charity and other uses.
- What is wrong however is the accumulation of wealth that widens inequalities in society.
- India, according to some studies, is one of the most unequal countries in the world.
- A Budget that is constructed on capital-intensive investment, advanced science and technology, digitization and sophisticated ecosystems to the exclusion of capital, technology and labour that are required to sustain the lives and livelihoods of millions of poor people is a mockery of the poor.
- If more resources are needed to help the poor, the correct approach will be to tap the wealth of the rich and use the resources for programmes and interventions to help the poor.