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Going up in smoke

This striking shrinkage of employment opportunities when 9 to 10 million people join the labour force each year looking for work will certainly result in a spike upwards in unemployment and exacerbate social tensions, writes N Chandra Mohan.

india Updated: Feb 09, 2009 22:47 IST

It’s official. Joblessness is fast rising in India. With overall economic growth sharply slowing down, the ranks of those without work are growing by the day. Five hundred thousand people were rendered jobless between October and December 2008, according to a first of its kind survey conducted by the Ministry of Labour and Employment. With the global slump, the fortunes of those who work in the export industry have become equally bleak. India could lose up to 1.5 million jobs in this sector in the six months to March 2009.

The labour ministry’s numbers are based on a survey of 2,581 units covering 20 centres across 11 states. Eight major sectors like the textiles and garment industry, metals and metal products, information technology and business process outsourcing, automobiles, gems and jewellery, transportation, construction and mining industries were included. The total employment in these sectors had come down from 16.2 million in September 2008 to 15.7 million by December 2008 due to the R-word stalking Indian industry.

India’s exports, too, have been contracting every month since October 2008 due to demand destruction in the US and Europe. Many units have downed their shutters and laid off staff. If these projections continue, it is quite likely that you can expect another 500,000 job losses before March 31, stated G.K. Pillai, commerce secretary, after announcing earlier that 1 million jobs had gone since August.

Interestingly, more up-to-date economy-wide estimates of unemployment — based on extrapolations from recent trends — are consistent with the above numbers for job losses this year as growth is likely to decline to 7 per cent as compared to 8.8 per cent per annum during the last five years. But with India’s growth expected to plunge to 5 per cent next year, the incidence of joblessness will, of course, be more severe than before.

A disturbing trend of India’s economic performance is a deceleration in employment growth to 1.92 per cent per annum from 1993-94 to 2006-07 from 2.61 per cent between 1983-1993-94 although growth in terms of gross domestic product (GDP) was rapid. Clearly, there has been a decline in employment per unit of GDP growth or employment elasticity to 0.28 from 1993-94 to 2006-07 from 0.52 over the years 1983-1993-94.

Applying this elasticity to the likely GDP growth of 7 per cent in 2008-09 and 5 per cent in 2009-10 to project the generation of employment provides an average of 8 million work opportunities this year and 6 million the next. This is much short of the 10 million opportunities generated during each of the last five years. In other words, there will be 2 million fewer jobs than before this year and 4 million fewer jobs next year.

Official number crunchers would perhaps suggest that a better measure is to focus only on non-agriculture. Even on this basis, the economy would turn out 1 million fewer non-agricultural opportunities this year and 2 million fewer the next than the average of 5.6 million jobs per annum during the growth boom of the last five years. This striking shrinkage of employment opportunities when 9 to 10 million people join the labour force each year looking for work will certainly result in a spike upwards in unemployment and exacerbate social tensions.