The report of a government-appointed Special Group brings into focus the conflict within the establishment between the swadeshi-socialist lobby and the advocates of liberalisation.
GOING by the diametrically opposite viewpoints provided in two reports that the Planning Commission has released in recent times on employment generation, it is apparent that a tussle is on in Yojna Bhavan between the swadeshi-socialist lobby and the advocates of liberalisation. Caught between the swadeshi bias evident in the Report of the Special Group on Unemployment chaired by S.P. Gupta and the pro-liberlisation tilt apparent in Montek Singh Ahluwalia's report is the Deputy Chairman of the Planning Commission, K.C. Pant. He is trying to resolve the issue by stressing that there are two sides to every question. Releasing the Special Group Report on May 28, 2002, Pant said: "The two reports are complementary and should be taken together in order to get a holistic picture of employment prospects."
The Special Group Report came barely a year after the Task Force on Employment under the chairmanship of Montek Singh Ahluwalia submitted its report in July 2001 (Frontline, October 12, 2001). Titled "Targeting ten million employment opportunities per year", the report not only perceives employment generation in a manner that is completely different from the approach of the Ahluwalia report but comes up with recommendations that go against government policies. The tasks before the Special Group were to explore avenues to fulfil the target of the Tenth Plan in order to provide gainful employment to all additions to the labour force over the Plan period, and to create opportunities for gainful employment for at least 10 million persons per annum, on an average, so that the rate of unemployment is reduced significantly by the Eleventh Plan period.
The report calls for the introduction of reforms with a human face. But some of its recommendations in this regard run against the reform process adopted by the government. Some of the reform measures that are opposed by the report include the decision to lower import duties, change labour laws, dereserve the small-scale sector, and permit foreign direct investment (FDI) in retail trade. The report makes no effort to please either foreign or domestic investors. It recommends a calibrated lowering of import tariffs and the dereservation of items meant for small-scale industries on a case-by-case basis.
The two reports not only take diametrically opposite positions in respect of the solutions to the problem of unemployment but differ in their perception of the problem. While the Task Force estimates the unemployment rate in 1999 at 2.2 per cent, the Special Group says that the unemployment rate had risen to 7 per cent. This difference in the figures was the result of the fact that the two groups used different methodologies. The Task Force estimated the movement of employment and unemployment on the basis of the usual principal and subsidiary status (UPSS) method of the National Sample Survey. The Special Group contends that this method is not precise as it leaves out a large number of people who are unemployed over six months or less in a year and sometimes marginally employed for a few hours during their working days. The Special Group has used the current daily status (CDS) method of measuring employment, which, it says, is "widely agreed to be one that fully captures open unemployment in the country."
The Task Force says that it is not necessary to have a target of creating 10 million jobs a year; a smaller number of jobs will meet the Tenth Plan target. But the Special Group says that this calculation does not take into account the large base period pool of unemployment of around 26 million, estimated using the CDS method, which is a universally accepted practice.
The two groups are completely at variance with each other on ways to generate employment. The Task Force advocated that growth in Gross Domestic Product (GDP) would generate employment. The Special group says that GDP may be growing but jobs are not being created at the same pace. The Special Group points to saving and investment constraints, unsatisfactory infrastructure, and the absence of good governance to demolish the Task Force's pipe-dream of achieving a 9 per cent growth rate. The Task Force, as also the approach paper to the Tenth Five-Year Plan, recommended a growth rate of 9 per cent per annum in order to generate further employment.
The Special Group comes down heavily on the organised sector and sees no potential in it to create the required number of jobs. However, it fails to explain why the organised sector is not creating jobs even though the government has removed the major bottlenecks by pushing for licensing and controls over imports, foreign investment and credits. The report emphasises that the unorganised sector needs to be targeted in order to create jobs. It says that at present the unorganised sector provides 92 per cent of employment. In contrast, the Task Force said that eventually the organised sector would ease out the less competitive unorganised sector. The Special Group says that the government has no alternative but to accelerate the growth of the unorganised sector. It points out that in the past, education and skill development had been geared to satisfy the needs of the organised sector, which provided higher remuneration and job security. Now there is a need to be oriented to the needs of the unorganised sector, which includes agriculture, small industry, services and new areas such as Information Technology (IT), tourism and financial services.
The Special Group has emphasised IT and tourism as sectors with the potential to generate both direct and indirect employment. It quotes from a McKinsey study which concluded that India could generate two million additional jobs in the IT sector by 2008. The group warns that it would be prudent to be 'realistic' about the potential of IT in employment generation.
Tourism is important as it is labour-intensive and can give both direct and indirect employment to 66 million persons by 2007. This can be achieved if the government lays emphasis on developing effective marketing plans, creating a world-class infrastructure and positioning tourism development as a national priority.
The Task Force says that agriculture has no future as a creator of new jobs. But the Special Group maintains that the agricultural sector is a 'gold mine' with the potential to create at least 11 million jobs over five years. It emphasises horticulture, floriculture, agro-forestry, minor irrigation and watersheds among others as labour-intensive, high-value areas. The Task Force recommended that agro companies be allowed to buy, develop, cultivate and sell degraded wastelands, but the Special Group says that this scheme should take the form of a time-bound lease in which the interests of local landless labour and marginal farmers are also taken into account. The Task Force recommends the conversion of rural land for urban use and laws to facilitate private development of townships and estates. But the Special Group says that this should be done only on selected stretches of wasteland.
Another area where the Special Group differs with the Task Force concerns labour laws. The Task Force stressed on changes in the laws pertaining to the organised sector. The Special Group's emphasis is on the unorganised sector. It has recommended pension schemes for workers in this sector. On amending labour laws to permit retrenchment, the Special Group says that it would benefit only the organised sector and that only 8 per cent of the labour force would be affected. The Special Group holds that this might create "more firing than hiring." Referring to contract labour, it says that the rate of growth of casual labour was very high in the 1990s. The repeal of the Contract Labour Act, it says, would lead to more flexibility in recruiting contract labour by the employer without putting any responsibility to look after the labour force. It recommends security measures and a regulatory body to oversee the functioning of recruiting agencies to ensure that the jobs provided to the labourers are of the prescribed minimum quality. The Group advocates that labour laws be included in the Concurrent List, enabling State governments to amend them. It favours the formulation of schemes for pension and unemployment benefits for workers in the unorganised sector.
In view of the difficulties faced by the small scale units, the Special Group calls for the simplification of forms and registers of such units. It has suggested self-certification by small-scale industries with regard to labour laws in order to reduce paper work.
The Special Group underlines the importance of universal primary education to eliminate the problem of child labour. It recommends strict penalties under the Minimum Wages Act and reduction of regional disparities in respect of minimum wages.
That the S.P. Gupta Report has been written to counter the big Right idea of the Ahluwalia report is evident in its recommendations for a social security net for workers, emphasis on the farm sector and the unorganised sector to create jobs and the rationalisation of special job schemes. Rushing ahead with privatisation, lowering of import barriers and keeping the doors open to FDI all the way can have an adverse impact on the employment scene, it warns.