Relevance: GS Paper III (Economy)
Theme of the article
To create jobs, focus on the small sector Improving the ease of doing business for small and medium business is key to job creation.
Introduction
The Indian economy is the fastest growing among all major economies in the world. However, last year the unemployment rate touched a four-decade high.
Present economic situation offers no hope to provide jobs
- With every new generation coming in, fragmentation of farm holdings will continue and migration to urban areas will increase. A sustainable agriculture will have to make do with fewer and fewer cultivators.
- Large-scale manufacturing projects attract big ticket investments and incorporate latest technologies. Cost of capital to cost of labour has drastically come down in recent years, thus raising the attractiveness of bringing in new technology which will kill jobs.
- The current rise in digital technologies, automation and robotics has strengthened these trends further.
- The government sector was once a key source of formal jobs but extensive use of contract employment and outsourcing to private firms, which also hire contract workers, has dealt a severe blow to quality jobs.
- By far the most potent policy weapon for creating new jobs at the bottom of the pyramid which reduces distress is the rural employment guarantee programme (MGNREGA). But here also allocation as well as attention to glitches are inadequate.
How to address this crisis of joblessness?
- The place to look for new jobs is businesses at the bottom of the pyramid and the place to begin is small units, even unincorporated ones where the business and the proprietor are financially undifferentiated. A favourable policy environment needs to be created for them.
- The same potential for growth and job creation exists among the small-scale sector.
- Thereafter come the small to medium size units which are incorporated and form the bottom rung of the corporate sector.
- The maximum policy focus has to be on improving the ease of doing business for small and medium business, contrary to the focus so far on the demands of the corporate sector which wields substantial lobbying power.
- Infrastructure for small businesses has to be available at a minimum. Without adequate and affordable power, water and access to roads, neither business nor jobs can prosper. Here local governments have to take the initiative.
- While the job potential in agriculture and industry is limited, it is the opposite in the case of services. Accounting for the largest chunk of India’s GDP service sector jobs exist not just in urban and semi urban areas but in the countryside too. Infrastructure is needed to take these urban amenities to rural areas.
- The one magic key to job creation is skills creation. In this the Indian administrative system has proved to be woefully inadequate. So policies and programmes are there waiting to be implemented.
