High unemployment remains a challenge for India and one of the biggest criticisms of Prime Minister Narendra Modi’s government.
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India is increasing spending on infrastructure, a move the government says will create much-needed jobs.
At the annual budget announcement in February, the finance ministry said it would increased capital spending by 33% to 10 trillion rupees ($120.96 billion)like India is set to become the world’s fastest growing economy.
However, economists who spoke to CNBC were not so optimistic. They say the number of jobs that could be created from an increase in infrastructure investment could be less than the government expects.
Arun Kumar, a retired economics professor from New Delhi’s Jawaharlal Nehru University, said the government’s focus was “totally misguided” and its policies were “completely anti-job creation”. .
“Capex is not the answer, it’s how capital is invested,” said Kumar, noting that not enough money is being pumped into creating “labor-intensive” jobs in India.
What is the problem?
Employment in India is divided into different sectors: organized and unorganized.
Businesses in the organized sector are usually licensed by the government and pay taxes. Employees are usually full-time employees and have a stable monthly salary. Companies in the unorganized sector are often not registered with the government, and employees work special hours with irregular wages.
When people in India are “too poor to not work”, Kumar said, they will have to do “remaining jobs” with very low income such as driving rickshaws, carrying luggage or even selling vegetables. on the street.
According to Kumar, the organized sector accounts for only 6% of India’s workforce. On the other hand, 94% of jobs are in the non-organizational sector — with half of the jobs in the agricultural sector.
As India’s infrastructure sector becomes more dependent on technology and automation, the coming boom in projects will create jobs for the organized sector, Kumar said. As a result, the lack of investment in the unorganized sector leaves many people stuck with unstable jobs and no fixed income.
Kumar said those working in the agricultural sector are also “stuck” with low wages due to inadequate investments leaving them with little opportunity to improve their skills.
High unemployment remains a challenge for India and one of the biggest criticisms of Prime Minister Narendra Modi’s government.
According to the Center for Economic Monitoring of India, an independent think-tank, the unemployment rate rose to a 16-month high of 8.3% in December 2022, but fell to 7.14%. in January.
CNBC has reached out to the Treasury Department and is awaiting a response.
Chandrasekhar Sripada, professor of organizational behavior at the Indian Business School, said a more technologically advanced infrastructure sector also means fewer jobs for those working in the sector. organization.
“New generation manufacturing is not labour-intensive,” said Sripada. The number of jobs it can create at the unit level will not be as high as it used to be.” “In the 1950s, if we had set up a steel mill, we would have employed 50,000 people. But today… we would employ 5,000 people.”
Who is most affected?
Sentiment in India’s job market remains weaker than that of some countries in the region due to skills mismatch.
India’s labor force participation rate — or the number of active workers and those looking for work — will reach 46% by 2021, according to the report. data from the World Bank. This rate is lower than some other developing countries in Asia, such as 57% for Bangladesh and 68% for China in the same year.
Women’s work participation rate also fell from 26% in 2005 to 19% in 2021, data from the World Bank shows.
“We have seen a very inexplicable drop in the proportion of women entering the workforce during Covid,” said Sripada. “The responsibility to care for women has increased even more and many have left the workforce, and perhaps that hangover is still ongoing.”
Even young people with college degrees struggle to find work.
The youth unemployment rate, or those in the 15- to 24-year-old labor force without a job, stands at 28.26% in 2021 — 8.6% higher than 2011.
Sripada said many young people living in rural areas are “semi-educated” because they have a degree in hand but don’t have the skills to get a job. It’s also been a challenge for employers to create jobs that target these people, he added.
“We have enough universities to offer bachelor’s degrees, but these degrees… don’t prepare them with enough skills to get a job,” he said.
