FINANCIAL EXPRESS / 29 MAY 2018 - 2018 - 03:49 / V KUMARASWAMY
If there is one thing that is common to every government since reforms is they all had a growth consciousness, but they all lacked an employment-creation strategy. Employment, it needs to be realised, is like insulin, which delivers the sweet benefits of growth to the citizens. Otherwise, growth accumulates, like sugar in the blood, as inequalities in the society with adverse consequences.
The graph shows employment in the formal sector versus economic growth over last 40 years. Unfortunately, reforms have preferred cost-cuts over ensuring adequate levels of government services and preferred efficiencies over employment in the private sector. If only post reforms had created employment at half the rate as earlier, it would have taken care of the army of the currently unemployed—a ticking time bomb. An employed and hence an engaged mind would tackle several of our social ills far better than investments in tightening surveillance or even infrastructure. Even the 1.3% uptick in the last few years may be more due to informal employment turning formal.
Employment, it needs to be realised, is like insulin, which delivers the sweet benefits of growth to the citizens.
*Unsatisfied needs—the basis of all markets & economic activity: Demand or an unsatisfied need is the basis on which any business is created. Meeting an existing demand with an established market and pricing mechanism is a safer approach to success. But ingenious minds come up with IPL, which fulfilled a latent demand (which perhaps even the customer didn’t know existed) for after-day entertainment. Our telecom sector saw explosive growth by satisfying India’s motor mouth urges, never earlier anticipated. But this requires foresight, some daring, financiers willing to take the bet, besides creative minds to come up with relevant practices.
The demand for government services arises out of public goods, constitutional rights like justice, safety, protection of property, ensuring equality of opportunity, besides some commercial activities. It, sometimes, is required to serve needs where users may not be willing or able to pay commensurate prices.
*The art of creating jobs—an example: Huge negative value is being imposed on the citizens by our unclean surroundings, waste, litter, sewage drains masquerading as rivers, non-cleared urban waste spilling over to driveways. There is sure a demand for neatness, cleanliness and hygiene, even if all those desirous of the service may not have the ability to pay for it.
India’s employment from rag-picking and waste collection is abysmally low, at 0.1% of the population, whereas similar activities employ 0.7% in South Africa, 0.5% in Brazil, 0.6% in Lima (Peru), as per ILO. The GDP from these activities in advanced countries vary from 2.5% to 3.8%. Employing the people required (say, 50 lakh at even 0.4% of population) won’t affect other sectors since these skill-sets are low and there is an excess supply in the labour market in any case.
The main missing link is who will pay for the services? At the macro level, given the direct and indirect benefits, it may be worthwhile redistributing 1-2% of GDP through taxes and expending it in tackling waste.
But there are other ways. Elsewhere, nearly 30% of the value of waste generated is recovered and reused.
There are people in various income classes whose desire for ‘cleaner surrounds, safe drinking water, litter-free zones’ is intense and more can be recovered from them for cross-subsidising the lower income strata.
Hopefully, the net non-recovered portion can be contained to 0.6-0.7% in the initial periods. People taking employment under these schemes could be made to give up all other subsidies. Direct and indirect benefits of cleaner surroundings should also be taught to the citizens, creating, over a period of time, greater ‘demand’ for them and higher willingness to pay for them, or higher willingness to move into areas where such services are recovered at higher charges. The capital required for creation of each job in this sector is way lower than industrial or service sector jobs, private or public sector. The skill-sets can be developed a lot easier with minimal training.
Open sewage in cities, unclean rivers, garbage are all a huge source of opportunity for employment creation.
Of the various links in the supply chain, the only missing link in this case is the poor ability or unwillingness to pay arising out of poor sensitisation of benefits and income. In the case of IPL, virtually all the links were missing or invisible, and it required some genius still to spot the opportunity and put all the links in place to create the ‘market’. Similar opportunities exist where just one or two links may be missing and some creative thinking can add substantially to GDP, welfare and employment.
The disproportionate fatal accidents per vehicle is an opportunity to set right the systems by employing people (may be a lakh or two) and adding positive welfare value. Our ill-disciplined roads, haphazard parking in crowded areas, rampant littering, usage of killer plastics are all potential opportunities of employment at low, incremental capital investments. Our collapsed criminal policing and investigation (in deficit by at least 5 lakh) and delayed judiciary can easily create new jobs for twice the existing number.
Our deficient healthcare, as Dr Devi Shetty of Narayana Health pointed out, has a 50 lakh employment potential at ‘fit for purpose’ doctors, nurses and service levels. Governments at central and state level should identify ‘demand’ and need for its various services, and ways to fulfil them, rather than run after roads, ports or infrastructure—our governance infrastructure for policing, justice, safety, protection of property, education and primary healthcare are in far greater levels of deficit.
Hiding behind our awful deficit of government services and underdevelopment, chaos and disorder is a latent demand that could create 3 crore new jobs at comparatively low-capital investment. This level of additional employment would have, most certainly, returned the then incumbent government in 2014 despite all other troubles and could make a difference in 2019 as well.
This level of employment can be created at 1.8% of our GDP, at Rs 1 lakh per annum wage levels. It requires some ingenious minds in the government to identify and fit the missing links in each case. The government should perhaps leave the return-based (ICOR, IRRs and paybacks) growth to the private sector and chase newer indices like incremental employment per capital invested (IECI) for itself—a compromise of efficiency for employment.
The author is CFO, JK Paper, and author of Making Growth Happen in India
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER