UP Govt Allots Rs 250 Crore To Start-Ups, But Need Of The Hour Is Salaried Employees, Says World Bank

The UP government in its budget, decided to allot Rs 250 crore to youths who wish to open a start-up, besides bringing 1,37,000 vacancies for teachers & 1,62,000 vacancies in police department.  The move to allot Rs 250 crore, Chief Minister Yogi Adityanath said, is a first of its kind in the state to promote the central government's agenda of self-employment. 

However, even as the government is advocating for self-employment and entrepreneurship, the need of the hour for the blooming Indian economy is regular salaried employees, says a report by the World Bank.  

 A transition into the middle class is essential for a developing economy like India, but that transition calls for the creation of salaried jobs, and that is in order to join the ranks of the global middle class by 2047, the report said.  

In its draft Systematic Country Diagnostic (SCD) for India, the World Bank said regular jobs remains the "most urgent priority" in India where the public sector, the largest provider of good jobs, employs only 5% of the working population. The 'rare privilege' of attaining a salaried job is limited to only 20% of the total working population. 

India's Job Deficit

India is facing a growing job deficit, as salaried employees are only limited to the urban set-up, the lack of which, counters the growing working class population and their needs. "In a young, more educated, and increasingly aspirational society, this jobs deficit has the potential to turn the much-awaited demographic dividend into a demographic curse," the report says, adding that in the absence of vibrant job creation in large villages and small towns, where most of the Indian population lives, building a large middle class will remain an elusive goal.

"Currently, less than a fifth of workers in India have a salaried job, and their share in the workforce has increased by a meagre 4 percentage points since the mid-2000s..India faces a jobs deficit, with job growth primarily in sectors such as construction that offer irregular employment."

The shortage of suitable jobs for women contribute to another job-deficit. Scarcity of good jobs, gender discrimination, and 'sticky social norms' points to limited job creation overall for women. Disadvantaged section of the caste-conscious society adds another aspect to the job-deficit and overall employment. 

"Analysis of earnings of household businesses shows that less than half (45 percent) of the gap in earnings between SC/STs and other groups can be explained by observed differences in endowments, education levels and demographic characteristics."

The issue is not just the number of jobs, but also the type of jobs

Between 2005 and 2012, over 13 million population entered the working age, while only 3 million jobs were created.

According to the draft diagnosis, India lags behind other developing  nations like Bhutan,  Vietnam, and Bangladesh in the number of its salaried employees.  Agriculture still, however, employs nearly half the workforce., but is it enough?

Despite agriculture being one of the biggest employment generator in the country,  home to nearly half the workforce, its output per worker is less than half the economy’s average, the report said. 

Other than agriculture, employment is also rapidly growing in Construction and Retail, but they too, have below-average output per worker and a low labor productivity.  

"Even in manufacturing, and in the organized sector more broadly, employment contracts have been shifting towards greater informality, as production is outsourced and new hires are taken on as contract workers without job security or social security, " the report adds.

 Ease Of Doing Business? 

Despite undertaking major economic reforms to pave way for industrial growth, with the dismantling of the “license raj,”-a draconian system of licensing requirements for the entry and expansion of firms- in late 1980s, and liberalisation of foreign direct investment, to encouraging small-scale industries, the World Bank said 'India is still a difficult place to do business'. Not only that, in terms of employment generation, businesses in India offer little relief. 

"India’s stunted firm dynamics are a key constraint to creating productive jobs. Around the world, economic dynamism and job creation are associated with “gazelles,” young firms with rapidly rising employment and productivity. India offers a very different picture. An overwhelming majority of Indian firms are small: nearly two-thirds of manufacturing sector jobs are in firms with fewer than six workers—and the most common size of firm is one worker. In comparison, the modal manufacturing firm in the United States has about 45 workers," the report said.

But Youths Not Job Seekers, Say Govt

The government, however, has offered a different approach to the country's employment crisis.  Prime Minister Narendra Modi said the youth of the country doesn't want to seek job but be a job generator, and that the government supports this as a new idea of 'New India 2022'.  

In an effort to promote self-employment and entrepreneurship, the current government had also announced the ambitious 'Start-Up India' fund worth Rs 10,000 crore in 2016. 

The Prime Minister recently stoked controversy when he said that a pakoda-seller earning Rs 200 per day can also be considered employed, while defending the government's policies for employment generation. 

In the Union Budget for this year, Finance Minister Arun Jaitley chose not to make any changes in the present income tax structure for salaried employees. A major portion of the personal income tax collection comes from the salaried class, he agreed, but maintained that the budget should be supportive of the agrarian class.