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Job creation in Modi govt's one year: Is feel good glide path coming to an end?

india Updated: May 28, 2015 17:20 IST
Economic Reforms


If a week is a long time in politics, then a year is but a flicker when it comes to creating jobs. There is little doubt that the government of India under Prime Minister Narendra Modi has achieved quite a bit in its first year. India has done spectacularly better in foreign relations.

The government introduced a reformist budget in February 2015 that, unfortunately, has been somewhat blemished by counterproductive acts aimed at maximising tax revenues. And the Prime Minister has announced a slew of measures, from campaigns like Clean India and Make in India to setting up 100 “smart” cities.

All this notwithstanding, creating jobs for 10–12 million people each of the next four years is a different kettle of fish. Although economic growth has rebounded in 2014–2015, it is nowhere near enough to absorb the millions of people searching for a secure livelihood.

Meanwhile, in the manufacturing sector, technology is steadily reducing the number of workers needed to produce a unit of output. Thus, though the share of manufacturing certainly needs to grow in India, it is not the sector that can provide all the additional jobs.

To bring about significantly higher levels of employment, India needs to see much more infrastructure and construction activity plus a serious kick-start to the services sector.

Unfortunately, despite the government’s encouraging fiscal allocations, investments in infrastructure and construction have not yet taken off, nor have transportation, telecommunications, banking, insurance, hotels and restaurants, real estate, education, health, community, and social services.

For these sectors to start firing on all cylinders, India needs continuous public and private investments, a far better investment climate, a rekindling of animal spirits across all entrepreneurial groups, and a clear path to 8% or more growth.

These are not easy changes to make, and, as any economist will vouch, they are virtually impossible to achieve in a year. But that does not give license to the Modi government to take its eyes off the ball. The speak great, feel good glide path is coming to an end; soon the rubber must meet the road.

(Omkar Goswami is the founder and current chairman for CERG Advisory, an economic research and corporate advisory firm. He was formerly an academic and the editor of Business India.)

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