Dismal jobs scene blights GDP growth

An article in Hindu Business Line talks about employment scenario in the country; along with inputs from Rituparna Chakraborty.

Low private investments, rigid labour markets feed rising unemployment

The nationwide strike on Friday called by Central trade unions underscores the seething resentment among organised labour, which is accentuated by the poor rate of job creation despite headline GDP growth in excess of 7 per cent.

Economists and analysts acknowledge job generation is dismal, and blame it on weak recovery in private investments, uncertain external demand and inflexible labour laws. It’s not quite “jobless growth”, they claim, but more the inability to create employment for the 70 lakh new entrants to the workforce annually.

“It is wrong to call it jobless growth,” said Rituparna Chakraborty, Co-Founder and Senior Vice President, TeamLease Services.

“Jobs are being added, but not at the pace at which new entrants are joining the workforce,” she added.

“The government promised two crore new jobs per year. But unemployment is rising. Urban rate is 11.24 per cent,” tweeted CPI (M) leader Sitaram Yechury.

There are no official statistics to either validate or contest these numbers; the National Sample Survey Organisation (NSSO) collects data on employment every five years.

However, according to data on unemployment and consumer sentiments gathered by the BSE and CMIE, unemployment rate rose to 9.84 per cent in August 2016, against 8.65 per cent in July and 8.84 per cent in June.

The increase in unemployment in August was spread across urban and rural regions. Urban India continued to face higher unemployment rates compared to rural regions, perhaps owing to a slowdown in hiring in key sectors, including IT and e-commerce.

Dismal outlook on IT hiring

According to Nasscom, hiring by the IT industry in 2016-17 will be slightly lower than last year due to increased automation and pressure on margins. “Last year, the IT industry hired nearly two lakh employees. This year, we expect it to be lower,” said Nasscom President R Chandrashekhar.

Ashishkumar Chauhan, MD & CEO, BSE said, “The rise in unemployment in urban India poses a challenge. It is apparently an outcome of low capacity utilisation… and low investment activity.” The most recent GDP data reveals that gross fixed capital formation, which denotes investment, shrunk by 3.1 per cent in the first quarter of the fiscal.

Mahesh Vyas, MD & CEO, CMIE said the sharp rise in unemployment points to a possible slowdown in rural economic activity. Intense rains and flooding in parts of the country may have impacted agricultural labourers and non-agricultural rural daily wage-earners, he reckoned.