Business Daily from THE HINDU group of publications
Wednesday, Aug 30, 2006
Industry & Economy - Economy
Jobs more important than growth
For decades now the government has focussed excessively on growth, leaving its distribution largely to the mercy of the market. Indian socialism too was machine oriented investments in heavy industries, ports, steel plants, auto sector which guzzled what is in short supply, capital, and kept at bay what was needed: Rapid employment expansion to quickly reduce poverty. The reform policies have accelerated this process promoting mechanised wealth-concentrating growth at the expense of wealth-diffusing growth, resulting in the disaffection of many segments. In fact, this `job loss growth' has become the worst advertisement for reforms.
The average annual growth of the economy at 8 per cent in the last few years has not produced commensurate employment. Indeed, it has destroyed jobs in the organised sector. Turn the question on its head: 8 per cent GDP growth has not produced 8 per cent employment growth but will 8 per cent employment growth produce 8 per cent GDP growth? For reasons explained below one can be far more certain it will: Employment generation will more definitely produce growth than growth creating jobs.
Suppose the government budgets and achieves 8 per cent employment growth. This should translate, with some lenient assumptions, into GDP growth of 8 per cent if the average income of the newly employed is near the current average per capita income. Since the average income per capita is so near the poverty line, even creation of jobs that pay only subsistence wages would still result in about 5-6 per cent growth in GDP. An annual 5-6 per cent employment growth can wipe out poverty and the resultant disaffection with the government policies in a matter of a decade.
Shift in focus
It is for this reason that the government should shift its growth fixation to direct employment creation, even if it is at the minimum wage level or average income levels. This would need a shift in quality and nature of jobs than what the government seeks to create. From industrial, mechanised or computerised jobs involving high capital investment to service-oriented jobs. And the capital should be conserved or used to sustain these jobs and not for investment in bank computerisation exercises, modernisation of airports, building high-tech metros, or creating heavy chemical industries and petroleum giants. Private initiative can tend to all this.
There are several services that only the government can provide and these are woefully short on quantity (leave aside quality). Expansion of these will provide meaningful services to citizens while providing even more meaningful employment to the people. For instance:
The Indian Census data get outdated for any sensible marketer (who ideally would be looking for the next five-year projections) by the time they are published with a lag of five years.
The justice delivery system is as famous for its independence as for its delays.
Civil policing is in disrepair; in some places it is well nigh impossible to even register an FIR, not due to political interference but because of the sheer volume of workload thrust on a often poorly-trained staff.
Municipal waste collection in most cities leaves much to be desired.
Needed quality services
Besides improving these and other such services, which are bound to create employment, the government should also aid expansion of manpower-based services in private consumption expenditure. And there are several services that can get absorbed in the private consumption expenditure, if quality services become available. These services will most certainly create employment at a far faster rate and in larger numbers than airports and expressways. It is time the government made employment creation the primary focus of the fiscal policy and Budget making, rather than be fixated on growth.
(The author is Vice-President Finance with JK Paper Ltd. The views are personal. E-mail: email@example.com)
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