GDP rankings are fine, but where are the jobs?
There is some hope in a new digital economy – stretching from e-commerce to a digital payments sector – will save the day. But that remains presently more hope than certainty.editorials Updated: Apr 30, 2017 21:49 IST
It is now becoming commonplace for Indians to read forecasts about how their country’s economy will rise. The International Monetary Fund (IMF) has issued a new set of predictions saying India’s GDP will overtake that of Germany’s by 2022, based on a safe assumption of a nominal GDP growth rate of 9.9% a year. Countries like France and Russia have fallen by the wayside, no matter what measure of economic size is used including dollars equivalents or inflation-adjusted terms. Purchasing power parity, of course, is the most heart-warming as those numbers already place India as third-largest economy. India can expect further statistical good news if the present appreciation of the rupee’s exchange rate continues. This boosts GDP rankings without anything actually having to happen on the home front.
Thankfully, neither the Indian government nor the wider public pay more than passing attention to such rankings. Anyone who inspects the insides of the Indian economy knows that this may be an engine picking up speed but it is also one with many design flaws and dodgy parts. And any of these could overheat or crack, bringing the engine to a halt. The present non-performing asset crisis in the banking sector and the related problem of falling private sector capital expenditure are two clear and present dangers to the economy. Then there is simple good luck. India’s present growth rate has been greatly benefited from the collapse in oil prices – some analysis says two percentage points of the present 7% growth rate is a fallout of the fuel price fall.
However, for the man on the street, the most pressing problem of the Indian economy – confirmed by repeated surveys – is the lack of employment. It is not that the economy has not produced jobs. Urban India saw a net increase of nearly 23 million jobs between 2009-10 and 2014-15. The problem is that these gains have been offset by a disappearance of manufacturing jobs – 2004-05 to 2011-12 saw the economy growth near 8% a year but factory floor jobs shrink by five million – and the collapse of agricultural labour demand.
Three service sectors – telecommunications, information technology and construction – have been the saving grace on the employment front. But all three are now under pressure. GDP rankings are all well and fine, but the truth is that the correlation between growth and job creation is weak. There is some hope in a new digital economy – stretching from e-commerce to a digital payments sector – will save the day. But that remains presently more hope than certainty.