Between Growth and Ground Reality | What Should be the priority of the Govt?

BY DR SHAKIL BHAT

In the intricate complexity of economic discourse, the interplay between GDP growth and employment generation has been a subject of long debate. The metrics by which we measure a nation’s economic prowess often become the focal point of intense scrutiny and debate.

The recent data released by the National Statistical Office (NSO) has thrust India into the limelight, revealing a GDP growth rate of 7.8% for the first quarter (Q1/2023-224 FY).

Such a figure is not merely a statistic; it is a testament to India’s burgeoning economic might, positioning it as one of the fastest-growing economies in the world. This remarkable growth rate is emblematic of more than just economic vitality; it underscores the unwavering commitment of the Indian government to foster an environment conducive to economic expansion.

Moreover, it serves as an indicator of the robust performance across various verticals of the economy. It is essential to also evaluate the state of employment generation in India during this period. Employment, often regarded as a key indicator of economic health, provides a more holistic view of the nation’s economic trajectory.

According to a report by global recruitment company Michael Page India, white-collar hiring in India saw a significant increase, with the overall number of jobs rising by 23% in 2022 compared to 2021. This growth was spearheaded by job positions within financial services (up by 49%), technology (up by 16%), and FMCG (up by 42%).

However, it’s crucial to note that in developing countries like India, employment elasticity is not always perfect. Multiple factors influence economic activity, and the relationship between GDP growth and employment generation can be complex.

For instance, while the agriculture sector remains the leading industry in terms of employment, with nearly 148 million employees in the financial year 2023, the overall unemployment rate in India stood at 7.95% as of July.

As India, with its vast demographic dividend and promising economic aspirations, stands at this crucial juncture, the question looms large: Should we chase the mirage of fast GDP growth or hook our policies in the fundamentals of robust employment? Historically, India’s economic narrative has been dominated by the tempt of GDP growth.

The appeal of being labeled the world’s fastest-growing major economy has often drowned out the more pressing, albeit subdued, calls for widespread job creation. Ashoka Mody’s seminal work, “India is Broken,” serves as a stark critique of this GDP-centric vision, spanning all the leaders since independence.

However, this emphasis on growth isn’t entirely misplaced. Since the watershed economic reforms of 1991, there’s been a prevailing sentiment that GDP growth, as a precursor to prosperity, would naturally cascade into employment opportunities.

Yet, the empirical evidence, as presented by the “State of Working India (SWI 2023)” report, suggests a more intricate narrative. While the Indian economy has witnessed epochs of robust growth, the employment elasticity – a metric that gauges the responsiveness of employment growth to GDP growth – has been waning. From 1983 to 2017, every 1% surge in GDP has been met with a less-than-commensurate rise in employment.

This divergence, subtle yet significant, prompts introspection: Is our celebrated growth narrative truly inclusive? Contrast this with the United States, where the economic compass points in a slightly different direction.

Under the astute leadership of Chairman Jay Powell, the US Federal Reserve has consistently underscored the dual imperatives of employment levels and price stability. This balanced approach is a testament to the symbiotic relationship between holistic growth and comprehensive employment.

However, a cursory glance at employment figures might be misleading. The period from 2017 to 2021, for instance, witnessed a conspicuous uptick in self-employment in India. While on the surface, this might seem like a positive trajectory, it often masks the specter of underemployment.

Individuals, in the absence of regular wage jobs, carve out roles for themselves, often grappling with erratic incomes and uncertain futures. This trend, coupled with a discernible decline in regular wage employment, especially among women, warrants attention.

So, what’s the road ahead for India? The economic crossroads present multiple avenues.

Some stalwarts advocate a rejuvenated focus on labor-intensive manufacturing, envisioning vast factories humming with activity. Others, with an eye on the future, suggest a strategic pivot towards “green” manufacturing, harnessing the dual benefits of sustainability and employment.

Yet, a third school of thought cautions against endlessly chasing the subtle dream of an industrial renaissance, arguing that the global spirit has shifted. Amidst these multifaceted perspectives, a singular truth emerges: A myopic focus on GDP growth, devoid of a nuanced understanding of employment dynamics, might be a strategy fraught with pitfalls. Growth, while undoubtedly vital, must be underpinned by inclusivity, ensuring that the bounties of economic prosperity permeate every stratum of society.

In opinion, as we navigate the complex system of India’s economic future, the need for equilibrium becomes paramount. Growth and employment, often viewed through disparate lenses, must converge in our national vision. As custodians of India’s economic destiny, we bear the dual responsibility of fostering growth while ensuring its dividends reach every citizen.

The insights from the SWI 2023 report serve as both a mirror and a compass, reflecting our current realities and pointing towards potential trajectories. As we meditate on its findings, it’s also an opportune moment to foster a collaborative dialogue.

Let’s open the portals of discussion, inviting suggestions, insights, and innovative strategies from the vast reservoir of India’s intellectual capital. The odyssey towards a resplendent and prosperous India is a collective endeavour, one that beckons every stakeholder to contribute with both vision and verve.

(The column includes excerpts from the Indian Express’ view on GDP to showcase the stance on the issue.)

Dr Shakil Bhat, Member, Jammu & Kashmir Administrative Services (JKAS)/2019 Batch. He can be reached at: shakilvet@skuastkashmir.ac.in