Job creation

Pakodas & promises

Print edition : March 02, 2018

Zameer Ballari has been selling pakodas for 20 years in Vijayapura in Karnataka, but he does not want his children to follow his trade. Photo: Rajendra Singh Hajeri

Prime Minister Narendra Modi in a Zee News interview. Photo: PTI

Provisions in the latest Budget may neither address the problem of widespread unemployment nor help the Modi government win a losing battle of perception over its track record in job creation.

In his maiden Independence Day address from the ramparts of the Red Fort in 2014, Prime Minister Narendra Modi presented an overall vision and announced concrete governance initiatives that he was planning to implement. Speaking for more than an hour, he declared several sector-specific initiatives and explained the rationale behind them. These initiatives would attract popular attention in the subsequent days and come to be discussed animatedly in public discourse for a long time.

One such initiative on employment generation received global attention. He explained it thus: “If we have to promote the development of our country, then our mission has to be ‘skill development’ and ‘skilled India’. Millions and millions of Indian youths should go for acquisition of skills, and there should be a network across the country for this and not the archaic systems. They should acquire the skills which could contribute towards making India a modern country. Whenever they go to any country in the world, their skills must be appreciated, and we want to go for a two-pronged development. I also want to create a pool of young people who are able to create jobs, and the ones who are not capable of creating jobs and do not have the opportunities, they must be in a position to face their counterparts in any corner of the world while keeping their heads high by virtue of their hard work and their dexterity of hands and win the hearts of people around the world through their skills. We want to go for the capacity building of such young people.”

He then proceeded to draw attention towards the manufacturing sector as a potential generator of jobs: “I call upon the world and call upon the Indians spread the world over, that if we have to provide more and more employment to the youth, we will have to promote [the] manufacturing sector. If we have to develop a balance between imports and exports, we will have to strengthen [the] manufacturing sector. If we have to put in use the education, the capability of the youth, we will have to go for [the] manufacturing sector, and for this Hindustan also will have to lend its full strength, but we also invite world powers. Therefore I want to appeal to all the people world over, from the ramparts of the Red Fort, ‘Come, make in India’, ‘Come, manufacture in India’. Sell in any country of the world but manufacture here. We have got skill, talent, discipline, and determination to do something. We want to give the world a favourable opportunity, and we will say to the world, from electrical to electronics, ‘Come, Make in India’, from automobiles to agro value addition, ‘Come, Make in India’, paper or plastic, ‘Come, Make in India’, satellite or submarine ‘Come, Make in India’. Our country is powerful. Come, I am giving you an invitation.”

He then directed his appeal towards the youth: “Brothers and sisters, I want to call upon the youth of the country, particularly the small people engaged in the industrial sector. I want to call upon the youth working in the field of technical education in the country. As I say to the world, ‘Come, Make in India’, I say to the youth of the country—it should be our dream that this message reaches every corner of the world, ‘Make in India’. This should be our dream.”

This “Make in India” dream introduced a qualitative dimension to Modi’s election-time promise of generating 10 million jobs every year. It has been three years since that Independence Day speech. Instead of any substantive and tangible progress becoming evident in employment generation and domestic manufacturing, a curious phrase mirroring the nation’s current reality acquired currency around the time of presentation of his government’s last full Budget in February—Pakoda Economics.

It was derived from an apparently astonishing claim about employment made by the Prime Minister in a pre-Budget interview to Zee News channel in late January. Speaking in a tone that was far removed from ambitious emphasis on providing modern jobs in the manufacturing sector that was articulated in the Red Fort speech, Modi appeared to project volatile informal sector trades as regular employment that was available to the people thanks to his government’s efforts.

This came up in reference to the Mudra scheme. He said: “In the Pradhan Mantri Mudra Yojana, 10 crore people, without any guarantee [collateral], have received Rs.4 lakh crore worth loans. And three crore among them are those people who received credit from banks for the first time. This means three crore who have become financially able ( jo apne pairon par khade hue hain) are entirely new. They will do some or the other business, employ someone. Among them, some will drive auto rickshaws, set up pakoda, tea or newspaper stalls; do all these things not indicate that facilities to enable livelihoods have been made available? Will we consider this employment or not? If, outside your Zee TV studio, someone is selling pakodas, and in the evening, goes home after having earned Rs.200, will you consider that person as having received some form of livelihood or not? That person will not be recorded in government figures [because it is an informal sector profession]. So, many such arrangements are being made available to people.”

This provoked controversy, and the opposition parties criticised the Prime Minister. Former Finance Minister and Congress leader P. Chidambaram tweeted: “Even selling pakodas is a ‘job’ said PM. By that logic, even begging is a job. Let’s count poor or disabled persons who are forced to beg for a living as ‘employed’ people.” In response, Bharatiya Janata Party president Amit Shah sought to turn the tables on the Congress party. He said in Parliament: “I believe instead of being unemployed, it is better if some young person does hard work and sells pakodas. Thousands, lakhs and crores of young people are working hard to earn a livelihood by selling pakodas and other means of self-employment and you are comparing them to begging?” Terming this a “distortion” of his view, Chidambaram responded thus: “Selling pakodas is honourable self-employment for the poor, but that cannot be counted as a job…. BJP should answer the question: how many certain, regular and reasonably secure jobs were created in the last three years?”

Perhaps anticipating the question from critics, Modi made this claim about formal sector jobs in his interview to Zee TV: “Just now a report has arrived from a neutral agency. That in the past one year, in the formal sector, whoever has EPF [Employees’ Provident Fund], in which [the employee’s] name and Aadhaar number are there and, in whose name, money is deducted and stored, there is no hawabaazi [speculation] in it; that number is 70 lakh. In one year. I am not talking about the informal sector, which is 90 per cent. I am talking about the formal sector. So figures show the ground reality.”

This claim was drawn from a recent study about “Payroll reporting in India” by Professor Pulak Ghosh of IIM Bangalore and Dr Soumya Kanti Ghosh, who serves as the Group Chief Economic Adviser for State Bank of India. The study relied on payroll numbers from the Employees’ Provident Fund Organisation (EPFO), the Employees’ State Insurance Corporation (ESIC), General Provident Fund (GPF) and the National Pension Scheme (NPS). Having analysed the numbers, the authors estimated in the report that “payroll of 5.9 lakh (that is, 7 million annual) generated every month in India in current fiscal”. By current fiscal, they meant the financial year 2017-18. Subsequently, in a piece in The Times of India on January 18, the two researchers claimed: “Based on all estimates, we believe that 7 million formal jobs are being added to payroll on a yearly basis.”

The claim, quite different from the one made in the study, was picked up by Modi, who cited it in his TV interviews, and even by Finance Minister Arun Jaitley, who included it in his Budget speech. Speaking on February 1, Jaitley said that “creating job opportunities and facilitating generation of employment has been at the core of our policymaking. During the last three years, we have taken a number of steps to boost employment generation in the country.”

These steps included the following: a) contribution of 8.33 per cent of EPF for new employees by the government for three years; b) contribution of 12 per cent to EPF for new employees for three years by the government in sectors employing large number of people like textile, leather and footwear; c) additional deduction to the employees of 30 per cent of the wages paid for new employees under the Income Tax Act; d) launch of National Apprenticeship Scheme with stipend support and sharing of the cost of basic training by the government to give training to 50 lakh young people by 2020; e) introducing a system of fixed-term employment for apparel and footwear sector; and f) increasing paid maternity leave from 12 weeks to 26 weeks along with provision of creches.

Cumulatively, the Finance Minister said: “These measures have started showing results. An independent study conducted recently has shown that 70 lakh formal jobs will be created this year.” Clearly, the government latched on to the striking claim made by the authors of the study. However, the claim has not gone uncontested.

Praveen Chakravarti, chairman of the Congress party’s data analytics department, told Frontline: “During the Budget speech, the Finance Minister resorted to citing a spurious claim made by some economists of India having created 70 lakh formal jobs in one year. That alone speaks for the Finance Minister’s policy on jobs. That report that he referred to also claimed that 66 lakh skilled workers enter the labour force every year. Presumably, a formal sector job is the aspiration for every skilled worker. Which will mean, as per their estimates, that every skilled worker in India who wants a job, gets one. That is such a laughable claim, and the Finance Minister chose to cite that in his Budget speech. Evidently, the policy to create jobs is to cite spurious research and deny there is an unemployment problem in the country.”

Conceding that exact estimates of the unemployed were unavailable, Chakravarti argued that this did not, in itself, imply there was no problem of unemployment. He said: “Absence of evidence is not evidence of absence. Various surveys by credible agencies such as the CMIE [Centre for Monitoring of Indian Economy] and the CSDS [Centre for the Study of Developing Societies] point to unemployment as the biggest issue facing the country. The Chief Economic Adviser’s Economic Survey hints at how grave this problem is—87 per cent of all employees registered in Provident Fund have a formal job [in which they] earn less than Rs.15,000 a month. Let’s put that in context—minimum wages in NREGA [National Rural Employment Guarantee Act] are Rs.6,000 a month. If a vast majority of formal sector employees earn so little, it is clearly a sign that there are more jobseekers than jobs. It is basic economics. Then how can anyone claim with a straight face that there is no jobs problem in India and we create more jobs than there are skilled workers? It is absolutely ridiculous.”

It is not just members of the opposition who refuse to buy the government’s self-congratulatory posture on the question of jobs. The tone of the latest Economic Survey was in sharp contrast to the one adopted by the Prime Minister and the Finance Minister. Incidentally, released just a few days after the controversy over Modi’s “pakoda” comment and self-employment gathered steam, the Economic Survey 2017-18 had this to say in its analytical overview and outlook for policy: “The other issue is the challenge of employment. The lack of consistent, comprehensive, and current data impedes a serious assessment. Even so, it is clear that providing India’s young and burgeoning labour force with good, high productivity jobs will remain a pressing medium-term challenge. An effective response will encompass multiple levers and strategies, above all creating a climate for rapid economic growth on the strength of the only two truly sustainable engines—private investment and exports.”

It was this “pressing medium-term challenge” behind wider expectations that the last full Budget of the current government ought to have taken up to give a substantial boost for employment within the economy. Notwithstanding these expectations, as the reputed Delhi-based think tank Centre for Budget and Governance Accountability’s (CBGA) analysis report on the Union Budget 2018-19 pointed out, “On the whole, the budgetary boost for employment mainly comes from low productive construction activities generated through a range of government schemes and promoting self-employment by encouraging credit based entrepreneurship models. There is also an emphasis on formalisation of jobs through several minor concessions, however, those may be termed as new formal sector jobs but are not new employment per se. The much needed boost via increased public investment to labour intensive domestic as well as export industries, which would be the key to revival of the non-farm sectors and create long-term employment opportunities within the economy, does not figure in the budgetary provisions.”

Thus, in the last year of the current government, the challenge of employment creation may not be tackled to any significant extent. As is evident, notwithstanding Modi’s initial promise of growth in manufacturing sector jobs and his stated intention of making the country’s youth skilled enough for global jobs, the grim reality of widespread unemployment is unlikely to improve.