In the Indian context the definition of who is employed or unemployed is rather loose compared to many other economies of the world. Even if a person has done a job for a few hours of the week, the individual may claim that he or she is employed. We do not have a minimum baseline definition of what employment is, for example working for 20 days of the month. We need some hard coded definition of the quality and quantity of employment. 

Questions are asked on how we gather data on the employment situation in the country. For example, if we measure unemployment by measuring people who came to a labour exchange and did not find work, it is a narrow instrument for assessing how many people are unemployed. There needs to be dipstick surveys done to assess the state of employment. The challenge, however, is that there is no economic incentive for an individual to call oneself unemployed. While the statistics say that there is single-digit unemployment in India, if one takes a ride through the streets of India, seeing underemployed people at every corner is common. The situation, therefore, is likely to be worse than what the numbers suggest.

When we look at the single-digit unemployment numbers in India and compare it with the 30% unemployment for a more developed economy, such as Spain, questions arise on the measurement methodology. The method of gathering statistics have remained the same across the decades. This may be alright for comparing progress over time, but may not be represented the actual state of affairs regarding employment. This is the same argument the Planning Commission has been making with poverty line calculations. Since the yardstick hasn’t changed, numbers indicate that fewer people are below the poverty line now as compared to the economy 10 or 20 years back. However, many say that this does not capture the real poverty level. One can easily see what is going wrong with such a system.

The need to connect skills with opportunities

People look for employment that is close to the skills they have and also to the location they prefer. To empower people to be able to connect with the opportunities that are available, the greater is the variety of skills they should be able to have, the greater should be their ability to connect with opportunities.

Increasing the supply of skilled people is necessary. Therefore we must build more capacity in supply side institutions. However people who come out of these institutions must find jobs! Newspaper reports mention that even people from the IIMs this year have found it more difficult to find jobs compared to last year and the year before. We saw postgraduates lining up to find employment as bus conductors in the city of Pune a few months ago. A couple of years ago, in a recruitment drive for jobs as border security personnel in the city of Bareilly, there were applications from all over the country from over-qualified candidates with legitimate college degrees. The government’s plan of skilling 500 million people through the push system is alarming because it might lead to economic waste and disenchantment among the people. Instances are rife in other economies where unemployed or underemployed post-graduate and graduate students become leaders of political unrest.

The focus on manufacturing has to be bottom-up

The manufacturing sector will be the prime channel for employment generation in the economy. What is ‘manufacturing’? There are many value-adding activities such as farm produce processing that should come under the purview of manufacturing although they do not employ large amounts of power and are not necessarily produced inside a factory. The Planning Commission is working toward the employment generation side of the equation, especially on small enterprises. These will lead to strategies that translate into much more meaningful employment for people rather than focus on a few large enterprises.

The potential of single-person retail enterprises to generate employment is very large. Perhaps much more than multi-brand large establishments. Self-employed retailers in the form of street-side hawkers are examples of establishments that use very little space and capital and yet generate meaningful economic outcomes. It is the government’s responsibility to incentivise these small enterprises by providing economic support to build and sustain them. This bottom-up approach will enable smaller enterprises to be more productive and make more profits.

The need to listen to the system

The Planning Commission has undertaken the very difficult task of listening to the rumblings of the system through small industries and identifying what their problems and challenges are. This should be supplemented by providing means for small enterprises to overcome last-mile problems, such as finding bank credit. Small enterprises themselves have a big role to play by organising themselves into associations. A lot needs to be done for small enterprises, but not in the form of handouts or subsidies, but by showing them a path of economic opportunity and a better future.

The Planning Commission has started the process by connecting with associations of small enterprises, such as FISME as well as CII, FICCI, and ASSOCHAM, who represent both large and small enterprises to identify what problems they face and what can the government do to minimise them. By looking closely at these sectors, we have been able to identify how many jobs they will create, and what will be the productivity improvement. We believe that almost 100 million additional jobs can be created in the manufacturing sector in India by 2025. To sum it up, we have a plan that addresses the pressing problems that the economy faces in terms of employment and if implemented systematically, we are giving ourselves a real chance of achieving the target of lowering unemployment in the country.