Last week there was mild excitement and some hope-filled buzz about whether there was an emergence of the elusive ‘green shoots’, the botanical metaphor that depicts the first signs of a revival of the economy. The hope could be traced to a confluence of positive news — not all of which were related.
International oil prices were at their lowest in five years; the government had cut prices of LPG cylinders for Indians who didn’t benefit from subsidies; and also that of aviation fuel, a move that could eventually help boost air travel. Meanwhile, although GDP growth was sluggish for the second quarter, there was some bright news: eight core sectors of the economy, notably including manufacturing, grew at 6.8% (last October, they’d actually shrunk by 0.1%); and a few demand-based indices pointed to good economic growth.
This was borne out by increased car sales and a sharp rise in demand for office space — both healthy indications that the wheels of the economy were probably gathering speed. But are these the real ‘green shoots’ that precede a full-blown economic revival? Or should we look elsewhere?
I’d say we should look closer to the ground to check whether some other things are beginning to change. Such as jobs. One prominent reason why the BJP-led NDA got a huge mandate in the last Lok Sabha elections was because of the support it got from younger voters, a support that reflected faith and expectations about growth, development and aspirations of young Indians, who also happen to make up the largest proportion of India’s population.
For young Indians those three factors, especially the third, aspirations, have much to do with finding good jobs. Around 15 million young Indians join the workforce every year but not all of them end up with actual jobs. Of the 472 million employed Indians, nearly half work on farms — often that is a euphemism for underemployment or simply lack of other employment opportunities. Clearly so, because although farm ‘jobs’ account for half of India’s total employment, farm output makes up only 14% of the GDP.
In recent years, India has not had a stellar record in generating jobs. Although 60 million jobs were created in 1999-2004 (the NDA was in government then), only 15 million got added in 2005-09 and barely 12 million in 2009-11 (both periods were during the UPA’s regime).
Ironically, 2005-09 was one of the best growth periods for India’s GDP, which grew at an average of nearly 8.5% but, as it happened, it was a period of growth without jobs. In India’s demographic context, the real ‘green shoots’ will appear only when jobs are generated in big numbers.
Has it begun yet? Surprisingly, the answer could be yes. The official labour bureau data since June 2014 are yet to be released but other estimates are available: jobs portal Monster’s India employment index shows a nearly 21% increase in hiring in manufacturing and services in June-October this year compared to the same period last year; and, according to the India Skills Report 2015 prepared by the industry lobby CII and a couple of global employment specialists, India Inc. expects a 23% increase in hiring next year.
Further, a government study has found that between April and June, employment generation in eight key sectors — most of them manufacturing — grew at their fastest pace in more than two years.
Yet there is an oddity about hiring. Recruiters say the drive to hire employees is often triggered not by actual investment or expansion but on the expectation of that happening — a bit like how the Sensex rises on anticipation of good things happening in the near future or what the people on Dalal Street like to call ‘sentiment’.
So if employers have begun hiring in the expectation of better times (read: more investment and expansion), the real challenge will be to ensure that those expectations turn into reality. Only then will we know whether these were real ‘green shoots’ or just a red herring.