India’s position in global value chains is changing thanks to government incentives and a digitally savvy economy
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NEW DELHI — As India prepares for the second phase of general elections, unemployment is increasingly in the spotlight, with opposition leader Rahul Gandhi accusing Prime Minister Narendra Modi and his ruling Bharatiya Janata Party of turning the country into a “Unemployment Center”.
Unemployment is particularly high among young people in India – according to statistics, people aged 15 to 29 account for a staggering 83% of all unemployed people in India. this”India Employment Report 2024,” released last month by the International Labor Organization (ILO) and the Institute of Human Development (IHD).
“Modi has exacerbated unemployment in the country. Those who could provide employment opportunities have been destroyed due to demonetisation and the wrong goods and services tax system,” Gandhi say saturday At a rally in the eastern Indian state of Bihar.
in an action widely criticizedIn 2016, during his first term in office, Modi announced that 500-rupee and 1,000-rupee notes would be demonetized, or cease to be legal tender.
Demonetization, aimed at curbing black money, or money earned through illegal activities such as tax avoidance, was called “huge mismanagement” by Modi’s predecessor Manmohan Singh.
However, this did not prevent Modi from being re-elected in 2019 with a stronger mandate.
Arun Kumar, an economist and former professor at New Delhi’s Jawaharlal Nehru University, told CNBC that the country’s unorganized sector is yet to recover from the impact of demonetisation, adding that this is the One of the key reasons for the country’s high unemployment rate.
India’s unorganized sector consists of millions of private small businesses, Accounting for approximately 93% of the country’s total labor force.
The opposition has cornered Modi’s ruling Bharatiya Janata Party over unemployment, the president of the country’s main opposition Indian National Congress said. unemployment The situation is like a “ticking time bomb.”
The issue resonated with voters: An earlier survey This month, research by the New Delhi-based Center for the Study of Developing Societies and Lokniti, a research program of CSDS, showed that unemployment is a top concern among Indian voters.
As many as 32% of respondents said that the rise in unemployment is The key reason why they won’t re-elect the BJP. Some 62% of respondents said employment has become more challenging in the past five years.
However, the same survey also showed that 44% of respondents were willing to give the Modi government another chance, compared with 39% who were unwilling to re-elect the current government.
India’s labor ministry did not immediately respond to CNBC’s query about the country’s unemployment situation.
Kumar said the shift from the unorganized to the organized sector, and from labor-intensive industries such as leather goods and textiles to capital-intensive industries such as e-commerce, has led to a decline in India’s ability to create jobs. explain.
Raghuram Rajan, former governor of the Reserve Bank of India also expressed similar concerns Employment in labor-intensive industries such as leather goods fell last week.
Rajan talks about making India an advanced economy at George Washington UniversitySaid: “The unemployment rate is very high, and the disguised unemployment rate is even higher. The labor force participation rate is low, and the female labor force participation rate is indeed shockingly low.”
Slowing hiring in India’s vast information technology industry is also to blame for the lack of high-paying white-collar jobs.
create problems
Kumar quoted the mobile phone industry as saying that due to limited added value and increasing mechanization, India’s manufacturing development has so far failed to solve the employment problem.
“We’re assembling phones here instead of making parts that create more jobs. If an iPhone sells for $1,000, we’re adding $50 to $60 worth of value, and the jobs created are equal to the value added.” Proportional,” he told CNBC.
Manufacturing has become capital-intensive and labor-saving. The ILO-IHD report shows that as mechanization increases, job creation in India has become capital-intensive, with fewer workers employed between 2019 and 2000 than in the 1990s.
“We are going downhill in those (labour-intensive) areas. No wonder we have more employment problems,” Rajan said, questioning the government’s priorities. “Think about these chip factories. There are billions of dollars going into subsidizing chip manufacturing. “
Economists such as Kumar said the government has been taking measures such as production-linked incentive schemes to help boost manufacturing, but these have yet to translate into meaningful job creation as mechanization increases.
According to India’s finance ministry, the PLI scheme, with an outlay of 1.97 trillion rupees (nearly $24 billion) over five years from 2021-22, is likely to create 6 million new jobs. indian government.
Is it just a “political narrative”?
While headline figures from the ILO-IHA on youth unemployment have become a major talking point this election season, some key indicators of improving employment conditions have been overlooked in the debate.
The ILO-IHD reports that youth unemployment was 17.5% in 2019 and will fall to 12.1% in 2022 and 10% in 2023. Overall, the unemployment rate will fall to 3.1% in 2023 from 3.6% in 2022 and 4.2% in 2021, According to government data.
Surjit Bhalla, former executive director of the International Monetary Fund and former member of the Prime Minister’s Council of Economic Advisers, told CNBC that much of the noise around job losses is just a “political narrative.”
While unemployment is at the forefront of voters’ minds and a key issue raised by the opposition parties that has the ruling Bharatiya Janata Party in trouble, overall Survey host It turns out that Modi is likely to win this election with another strong mandate.
If Modi is indeed reelected for a third term, he will become only the second prime minister after the country’s first prime minister, Jawaharlal Nehru, to achieve the feat.
—CNBC’s Naman Tandon contributed to this article.
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