india

Updated: Jul 05, 2019 22:52 IST

If there was one big economic policy criticism of the Narendra Modi government in its first term, it was on the employment front. Anecdotal accounts of policies such as demonetisation and implementation of Goods and Services Tax (GST) leading to job losses in the informal sector gained credibility when the Periodic Labour Force Survey (PLFS) released by the National Sample Survey Office (NSSO) put the unemployment rate at 6.1% in 2017-18. The PLFS also shows that unemployment is a bigger problem among better educated and relatively well-off sections of the society. This, many believe, is a reflection of the greater scarcity of well paying jobs in the economy. What does the 2019-20 Budget do to address this problem?

The best way to answer this question is to look at the share of various sectors in total employment and then see what the budget has done for them.

Agriculture continues to be the main source of employment in rural India and employs 55% of male and 73% of female workers in rural areas. It is also a sector in which government policy has to strike a delicate balance between protecting incomes and also ensuring that they feel the need to move into non-farm employment over time. The government has tried to do this by universalising the coverage of PM-KISAN scheme (which gives Rs 6,000 a year to farmers) and announcing the creation of 10,000 new farmers’ producers organisations (read cooperatives) which could cushion farm incomes. However, it has not given any extraordinary hike in Minimum Support Prices or announced a big increase in government spending in agriculture. Whether this is enough to alleviate rural distress in the days to come remains to be seen.

Construction is another big source of employment in both rural and urban India, which employs around 10% of all male workers in the country and around 5% of female workers. By announcing a boost to its welfare housing-for-all programme in both rural and urban areas and also income tax sops for people who buy houses up to Rs 45 lakh, the government is hoping to give a big boost to the construction sector. The budget also makes it clear that the government will continue to and even intensify its push on big infrastructure projects in its second term. It has set itself an ambitious target of investing Rs 100 lakh crore in infrastructure over the next five years.

Almost 25% of the urban male workers are employed in the trade, hotel and restaurant sector. The budget has promised to boost India’s tourism sector by improving infrastructure in tourist destinations. It also hopes to give a boost to tourism by steps such as improving air connectivity.

A promise of giving Rs 1 lakh loan to women, who are members of Self Help Groups, has also been made in the budget, which could help in generating employment opportunities for small entrepreneurs. While the budget hopes to generate blue collar jobs through such steps, it has also tried to give a big boost to high value entrepreneurs through steps such as liberalising investment and tax rules for the start-up ecosystem. With the PLFS surveys now promising employment statistics at more frequent intervals than the earlier five year period, we will be able to see whether these steps have achieved their desired results.

Experts said that the government’s focus on the rural sector is likely to create employment. Sridhar Iyer, national director, CSR, EY India said, “The government’s ambition to develop 75,000 skilled entrepreneurs in agro-rural industries, together with incentives provided for women’s Self-Help Groups, are significant measures towards reducing unemployment and promoting rural entrepreneurship. It is commendable that the government has prioritised inclusive development and is addressing the challenge of grassroots economic development.”

Harsha Razdan, partner and head, consumer markets, KPMG in India, said that the government’s move to tap the potential of the rural economy will help it in achieving its target of making India a $5 trillion economy by 2024-25. “The budget seems to take a leaf from the economic survey about driving a ‘virtuous cycle’ wherein investment, agricultural productivity, job creation feed into each other to drive growth and consumption. Robust implementation of this vision will be key,” Razdan said.