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#Budget2018’s job promise is hollow

Sona Mitra

  • 7 February 2018
  • Newslaundry
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India’s employment statistics have been grim for some time now.

In the face of the brouhaha over the pakoda business, the Union Budget for 2018-19 - the fifth and final full budget of the current government - was looked at with hope by the people of the nation.

What did it promise, many wondered, in the face of challenges to the economy and huge joblessness in India? Comparing expectation with reality, in one word, the budget’s promises are - ambiguous.

Where are the jobs?

That the rate of growth of employment has been decelerating for the overall economy and specifically for women workers is not news anymore.

The last large National Sample Survey (NSS) data on employment-unemployment in India pertains to 2011-12 and the latest estimates from the same are awaited. In the meantime, there have been several micro studies and media reports highlighting the lack of job creation in the Indian economy in the last few years. A lot has also been reported about the double blows of demonetisation and a hastily implemented GST on loss of informal sector employment.

Expectations from government during a crisis

The government, which came to power on a mandate of “development”, was expected in such circumstances to give a fiscal injection to the economy to not only provide services and amenities to the vulnerable sections of the population, but also lead to greater employment generation.

It was expected that government strategies would strengthen the direct employment generating initiatives through increase in public investment in wage-employment programmes as well as a fiscal boost to labour-intensive sectors (such as manufacturing) which would lead to increased demand for employment.

An unrealistic budget

The final full budget of the government claims to generate 321 crore person-days of employment via a rural infrastructural boost - claims which seem unrealistic.

This is because of three simple reasons.

First, the thrust for creating employment is based on an entrepreneurship model of self-employment among the youth. This has been emphasised in the budget with the promise to impart training in specific skills under the Skill India programme, identifying Micro, Small and Medium Enterprises (MSME) as “engines of employment growth” and highlighting the PM’s “Make in India” project.

Also, emphasis has been placed on self-employment programmes such as the National Rural and Urban Livelihood Mission, promotion of self-help groups among women, facilitation of MUDRA loans for setting up small-scale enterprises via a Rs 500 crore Credit Guarantee Fund created under the MUDRA Yojana, and increasing allocations by Rs 2,483 crore for the PM’s Kaushal Vikas Yojana in 2018-19. This may generate some self-employment, but as pointed out on several occasions by economists, earnings from such almost always remain uncertain and below expectations.

Second, the budget clearly shows the reduced priority accorded to the most successful wage-employment programme of the government till now - the MGNREGA, which was launched under the Congress. The MGNREGA has been allocated Rs 55,000 crore for 2018-19, not much different from the allocations of 2017-18.

It has also been proposed to converge the MGNREGA with construction activities (houses, toilets and pipelines, infrastructure, roads) undertaken by rural development programmes in social sectors and within agriculture, but there remains a gray area.

The budget claims to provide a fiscal boost to rural infrastructure via an investment of Rs 14.34 lakh crore. However, a large part of this “claimed” investment includes extra-budgetary and non-budgetary resources of Rs 11.98 lakh crore - which essentially translates into loans.

The actual allocations or the gross budgetary support for rural infrastructure therefore stands at a meagre Rs 2.4 lakh crore.

If this allocation is disaggregated, then the most important employment programmes of the government such as the PM’s Employment Generation Programme under the MSME, or the PM’s Kaushal Vikas Yojana and similar others show a marginal increase of an average 10 per cent or less over 2017-18.

While such budgetary provisions have a potential of not being able to generate the promised quantum of employment, it is also a matter of concern that most rural employment promised to be generated would be in less productive, casual construction activities.

Third, and the final reason for expressing doubts over the announcements related to employment creation comes from the provisions of formalisation of employment generation.

One such announcement pertains to incentives provided via Employees’ Provident Fund Organisation (EPFOs). The budget announced 12 per cent contribution to EPFOs by the government above the employer’s contribution for three years for new employees, and extended “fixed term employment” to attract workers in most labour-intensive manufacturing sectors, such as food-processing, apparels, garments, footwear, leather and so on.

While this is a welcome announcement for workers, it should be read as a step towards formalisation of employment by creating “payroll jobs” and may not end up creating net employment for the economy.

For women workers, the budget has announced incentives in the form of a cut in employee’s contribution to EPFOs to 8 per cent while keeping the employer’s contribution fixed at 12 per cent for the first three years, in order to increase take-home wages.

But there may be two issues related to these incentives. The measure runs the risk of a compromise on women worker’s long-term savings for short-term benefits, which may not exactly be a tool for women’s empowerment.

Further, such incentives may be useful in an economy with shortage of labour supply, which would need additional benefits to bring women into the workforce. In the context of the declining rate of growth of employment in India, where there is a dearth of employment opportunities and labour supply remains in excess, such measures would do little to improve growth of employment.

On the whole, the “supposed” boost for employment in Union Budget 2018-19 mainly comes via generating less productive construction jobs under a range of government schemes and promoting self-employment by encouraging credit-based entrepreneurship models.

Given that the overall budgetary allocation for fiscal 2018-19 increased by a mere 10 per cent over 2017-18, the promised announcements raise concerns over the necessary indirect boost via increased public investment in labour-intensive domestic as well as export industries, which would be the key to revival of non-farm sectors and create long-term employment opportunities within the economy.

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