Nobel Laureate and economist Paul Krugman has recently remarked that lack of employment poses the biggest risk to India even as he has remained optimistic about the growth story that will be driven by the world’s fastest-growing economy’s young population.
With the fear that India is experiencing a jobless growth and skepticism abounding in the country that the government’s reform measures are failing to create enough new jobs, policymakers are facing a difficult challenge.
India will need to generate 280 million jobs between now and 2050, the year when the working-age (15-60 years) population will peak, according to a new United Nations Development Programme (UNDP) report titled, ‘Changing the Future: How Changing Demographics can Power Human Development’. The report has warned that the country’s demographic dividend could be at the cusp of a disaster unless enough jobs are created to these new entrants.
But 2050 is still a distant future. Right now, the panic of a squeezing job market has become the centre of debate. According to Krugman there are two schools of thought on the state of employment in India. One is the fact that more and more people are coming into formal employment, which could be a trigger for growth while the other is the fact that the mass unemployment in India is a potential trigger for an economic catastrophe.
But despite this dichotomy Krugman is optimistic about India’s economic prospects. His optimism stems largely from Indian technocrats’ ability to catch up on technology with the advanced peers. This probably explains a part of India’s high economic growth without corresponding rise in employment.
Interestingly, if high economic growth does not necessarily create proportionally more new jobs, a lower growth and deceleration in economic activities affect the job creation more than proportionally. Despite remarkable GDP growth in the post-liberalisation period, India witnessed a high discrepancy between the rate of growth of the economy and the rate of growth of employment. Employment elasticity to output has declined over time and the capability of the economy to generate employment has shrunk. As a result, more that three-fifths of Indian workers are still engaged in farm pursuits and more than 90% of the workers are found in the unregistered segment of the economy.
Following the basic economic law of development, every developing country, at some point or other, tries to shift workers or unemployed workers of the agrarian sector to industry. India, too, has tried this, but its record has been an unhappy one due to policy gaps.
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