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Jobless Growth: Will Modi Have The Last Laugh? – OpEd

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In pre-election mandate, MR Narendra Modi committed 10 million jobs to youth. But the momentum of job creation faltered, after BJP came in power. Three years period of Modi administration witnessed a reverse gear in employment generation. During July 2014 to December 2016, only 641,000 jobs were created. In comparison, during UPA period of July 2011 – December 2013, 1,280,000 jobs were created.

Media and political analysts, who were euphoric over Modi’s Make in India initiative as the trigger for job creation , are now abuzz in blaming Modi’s Make in India a jobless initiative. His several schemes to generate employment opportunities are being mocked . They argued that his Make in India –committed for job creation through manufacturing – had failed. It lagged to stimulate domestic investors. Though foreign investment increased. But job creation was not palpable, given the simmering role of foreign investment in the total manufacturing landscape.

Under the Make in India initiative, Modi administration acted swiftly to Ease of Doing Business, cutting down several procedural hassles, curbing bureaucracy and red tape through enlarging E- systems. Several growth oriented schemes, such as Start-up, Digitization and Smart city concepts, were introduced. But, all failed to impact and show the desired results for employment generation, the media said.

Why didn’t domestic investors respond to Make in India initiative, while the foreign investors were upbeat? Despite big flow of foreign investment during Modi regime, why it failed to generate more employment? Why did the schemes for development and modernization could not catalyze more employment? These are the some of the questions which were thrown for public debate to figure out Modi’s leadership for employment generation.

India achieved a sustainable and highest global growth in GDP during Modi regime. But, it succumbed to catchphrase of “jobless growth”. Why have all the development schemes proved palliative to employment generation? Where lies the fallacy?

The moot point for assessing the lackluster growth of job creation was the time period taken to assess the impact. The first three years of Modi administration is too short to assess the impact on job creation. These are the preparation stages for setting up new manufacturing factories. These three year periods were not potent to generate new employment opportunities.

For example, about 85 percent of the foreign direct investment, which boomed during Modi administration, are in the greenfield areas . It takes about 2 to 3 years or more as gestation period for the new factories to commence production. Employment is generated in the post manufacturing commencement period. Resultantly, the green shoots of employment generation in the foreign invested plants will be visible only after 3 to 4 years. Hence, the rise in the employment generation in foreign invested firms will be visible from 2018-19 onwards.

Domestic investors were shying away. Excepting in investment in 2014-15, domestic investment in new projects dipped to almost zero growth in 2016-17. Ease of doing businesses failed to impact the domestic investors. The factors turning headwinds to their investment initiatives were high rate of interests and easy availability of land due to tough land acquisition regulations.

Start-up is not the major creator of mass employment generation. Digital India and Smart cities are the long term projects to generate employment opportunities. All these schemes are at the native stages in terms of policy formations and implementations. Under the Smart-city initiatives, so far 60 out 100 cities could determine the projects costs. Of these, only 16 projects are in the implementations and the remaining 45 are at various stages of tendering.

Digitization is not the springboard for volume employment opportunities. It is the turf for opportunity for IT sectors and the process for modernization to keep every citizen, especially in urban areas , in the loop through internet-enabled services.

The year 2018 will be the turning point of Indian manufacturing sector under Make in India initiative. With BJP and its allies making a big stakeholders in Rajya Sabha after one-third of the members retire, the two major pending reforms, which are amenable to trigger manufacturing, will find easy access for Parliamentary approval. They are land acquisition bill and labour reform.

Pending land acquisition amendment bill has become the major obstacle for land availability and gear up the new investment in manufacturing. The new Land Acquisition bill under Modi administration, which overturned the mandatory obligations of farmers’ consent of 80 percent and Social Impact Assessment ( SIA) , will now find an easy passage for Parliamentary approval to become the Act. Till now, few State government have enacted their own land acquisition laws, which are effective within the periphery their own state boundaries. These restricted the new investors to invest in the state of their own preferences.

Labour reform is a long pending issue since it was pondered in the first term of BJP at the Centre in between 1999 to 2004. Labour reform in the form of ‘hire and fire’ is a long pending demand of investors. Under the Industrial Disputes Act, a company employing more than 100 workers, is not free to adopt ‘hire and fire’ system. With the fast growth in industrialization and greater participation of bigger houses , this law has become obsolete. A new thinking was brewed to relax the workers’ cap and provide more power to the investors for industrial harmony and growth.

With sustainable growth in the economy, which waned supply constraint , the country has entered into a comfortable zone of inflation. Resultantly, RBI relaxed its tight monetary policy. More easing in the rate of interests are in the offing. These will have positive impact on the domestic investors, who have long been yearning for easing of monetary policies.

Many new challenges are afoot to generate employment opportunities. One such is setting up of Coastal Employment Zones ( CEZs), proposed in Three Year Action Agenda by NITI Aayug. It is a first time challenge to generate more employment in the coastal areas. Presumably, the main motor is to link employment with global growth, based on the Chinese model. Hitherto, coastal areas were neglected because of their peripheral nature to play role in the economy. A large part of these areas are occupied by traditional industries like fisheries and cottage industries.

Therefore, the time has not ripen to assess the impact of Make in India on job opportunities. Will Modi have the last laugh after 2018?

(Views are personal)


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Subrata Majumder

Subrata Majumder

Subrata Majumder is an adviser to Japan External Trade Organization (JETRO), New Delhi, and the author of “Exporting to Japan,” as well as various articles in Indian media, including Business Line, Echo of India, Indian Press Agency, and foreign media, such as Asia Times online and Eurasia Review .

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