Unemployment Crisis: Horror Prospects

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(Brig (retd) GB Reddi)

India faces ‘horror prospects’ to overcome the challenges of “Crisis of Unemployment.”

Amit Shah, President of BJP, for a change, recently hit “the Nail on the Head” when he recently stated “Not possible to give jobs to everyone in the country of 125 crore”.

However, Amit Shah has got the population figure wrong. As per the ‘WorldOMeter” as on 28 May 2017, India’s population has already crossed 134 crores and racing ahead at 1.2% annual growth rate to reach 200 crores by 2050 with 5% unaccounted population taken into account.

Instead of “Catching the Bull – population explosion – by its Horns”, mother of all STRATEGIC CHALLENGES, and taming or containing it, out of fear of vote bank backlash, Indian political leaders excel in making tall promises; by recourse to “catch the Tiger by its Tail.”

India’s constraints are quite explicit. Land is finite; its load bearing capacity over stretched. Natural resources have depleted. Capital is scarce. Fossil fuel reserves are quite low unless new reserves are discovered in Andaman Sea territory. “Youth Bulge” is known to all.    “Robotics” is all set dramatically to change the “rules of the game of manufacturing” and making human skills even in ‘services sector’ redundant by 2030, if not earlier.

Politics is quite bizarre; and political leaders are congenital liar’s world over. India is no exception. Distraction is the penchant of politics. Politicians mostly use jingoistic rhetoric. No “Magic wands” for “Jobs for all”. Nearly 10 lakhs are entering India’s workforce each MONTH.  Image result for unemployment crisis in india

Experts are projecting 28 crores to flood the workforce by 2050. According to the labor bureau data, India had added 135,000 jobs during 2015, 421,000 in 2014, 419,000 jobs in 2013, 321,000 jobs in 2012, 929,000 jobs in 2011, and 870,000 in 2009.

Job prospects and opportunities are grim particularly with the ongoing massive lay-offs in the Information Technology sector and H1B Visa restrictions in USA, Australia and other countries even for B. Tech qualified students. When employability of technical graduates is a worrisome issue, what is the scope for employability of low quality human resources?

In Telangana and neighboring Andhra Pradesh, but also in other States, students are no longer excited about engineering. As per latest media reports, in the 2014-15 academic year Telangana had 280 engineering colleges reduced to 212 functional in 2015-16. Due to crack down on the Colleges, the number may come down less than 150. And, from the high of 2.4 lakhs seats in 2014-15, the number of seats plunged to 1.4 lakhs in 2015-16. No more than 80,000 students may enroll for studies – almost one-third in 2017-18.

Certainly, it would have a cascading effect on other ‘services’ sector jobs. Alongside, it would adversely reduce remittances of dollars from foreign countries. Jobs ‘doomsday’ prediction cannot be ruled out! Let me qualify by highlighting that there is scope for creating jobs in thousands and lakhs in all three sectors – Agriculture, Industry and Services.

With job opportunities scarce, the situation could lead to massive unrest if India’s leaders don’t find a way to address it with utmost expediency. Technically qualified unemployed youth are bound to look for easy opportunities in other avenues like politics, guns, drugs, smuggling, hacking etc. Explode societal violence all around on narrow sectarian lines.

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Of course, political leaders invoke jingoistic rhetoric and sloganeering to audiences to believe in things that don’t exist through policy declarations – as if they will be real. In retrospect, politicians either delude themselves or insult people’s intelligence. Worse still is the cacophony in the media as diversionary to exposing genuine dangers ahead.

Some economic experts educated on western models of growth and development pontificate theories that cannot be implemented in the Indian environment. Few even attempt to invoke that if Japan could sustain its growth with a far higher density of population with limited natural resources, India too can do it.

The real problem lies in such ‘utopian’ concepts.  Japan is Japan; and India is India. They are not comparable when considered from many variables. Japan exploited opportunities available to them in the post-World War 2 era; but we woefully lagged behind.

The so called liberalization of 1990s did little to boost India’s manufacturing industry. Poor infrastructure, labor laws, license Raj and uncompetitive labor costs resulted in MNCs opting for other nations. Add to it, spread of rampant corruption to all vitals of the nation. Meanwhile, global businesses and trade have become increasingly highly competitive.

Since 1990s, experts have been harping on the need for dynamic structural shifts in Indian economy from agriculture to manufacturing and services sectors. Labor unions remain stumbling blocks for efficient productivity.  And, the shifts remain a mirage.

Even today, India’s merchandise exports account for just 1.6% of the total trade. Ipso facto, domestic driven low cost manufacturing through value chain in traditional sectors like textiles to daily usage electronic items were lost to Bangladesh, China, Japan and other South Asian countries what to talk of high-tech high-cost industries for either export or domestic use.

Ipso facto, 58.2% of India’s total imports by value in 2016 were purchased from other Asian countries. European trade partners supplied 17.5% of import sales to India while 7.4% worth originated from North America with 7.3% coming from suppliers in Africa.

Even after 3 years, India imported nearly 33% of items valued around $ 85 billion in 2016:  Electrical machinery, equipment: $37 billion (10.4%); Machinery including computers: $32.5 billion (9.1%) 5 billion; Organic chemicals: $14.8 billion (4.1%); Plastics, plastic articles: $11.4 billion (3.2%); Animal/vegetable fats, oils, waxes: $10.5 billion (2.9%); Iron, steel: $8.7 billion (2.4%); and Optical, technical, medical apparatus: $7.2 billion (2%).

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Surely, India boasts of technical excellence electrical machinery, equipment, electronics, computers, and so on. At least, domestic industry must meet domestic demands by offering at competitive costs as against Chinese or Japanese or other South East Asian countries.

The ‘silver lining’ is the pharmaceuticals sector. It has continued to boom in the wake of the reforms, even if they curbed its freedom. Of late, there is surge in ‘Steel and Iron’ sector.

By coining “Make in India” slogan and campaign, Modi, rightly so, is keen to boost India’s manufacturing industry. Under the initiative, the government has eased restrictions on foreign investment in the defense, railway, civil aviation, broadcasting and pharmaceuticals sectors. India has even taken some tentative steps toward liberalizing India’s capital markets.

Next, agriculture, mostly seasonal, meanwhile, has lost ground due to dismal failure to accelerate transfer of modern technologies to include green houses, drip and sprinkler irrigation, besides ravages of drought and floods. From 52 percent of the country’s gross domestic product in 1950, the share retracted to 18% in 2014. Since more than two-thirds of India’s population lives in rural areas, agriculture still remains full time occupation for majority.

Unfortunately, agriculture has not been given due attention for absorbing rural unemployed labor in rural areas. One cannot help but highlighting the success story of Almeria in Spain. 64,000 acres of plastic greenhouse-like structures is at the heart of the country’s agriculture industry and exports almost three-quarters of its crops to other parts of Europe.

According to data from EXTENDA (Andalusian Agency for Foreign Promotion), the value of exports of fruit and vegetables in 2012 amounted to 1,914.1 million euros (nearly $3 billion), a growth of 9.7% compared to 2011. Fresh vegetables and vegetables contributed 1,665.5 million. There were 359 exporting companies, 222 regular. Among the client countries are Germany, 29.7% of the total, France, 15%, even the Netherlands, 13.1%, the United Kingdom, 11.3%, and Italy, 7.2%. They are followed by Poland, Belgium, Sweden, Denmark and Portugal.

With large number of Indian Agricultural Universities and research institutions around in the country including International Crop Research Institute for Arid Regions (ICRISAT) at Hyderabad, surely industrial development of agriculture should have been formulated and implemented in a dynamic manner. After all, they provide job opportunities for rural lowly skilled labor in large numbers.

Alongside, dairy farming, fisheries and forestry should have also been given impetus. Ironic, but true, that all of them continue to remain stagnant so much so that import of fruits, vegetable oils etc continue as hither to fore including Macdonald’s and KFCs Chicken.

The redeeming feature of Indian economy during the past two decades is the growth of services sector enabled by relatively low labor costs and large number of English speakers for business process outsourcing. Exports of information and communication technology make up 17% of the total worldwide. Today, the country ranks fifth among the world’s top services exporters. Personal remittances to India rose from $2.4 billion in 1990 to $70.4 billion in 2014 due to inflows from IT professionals and Indian work force in West Asia. $33 billion trade surplus was created in services — compared with a $126 billion trade deficit in goods.

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But, the IT bubble ‘bust’ is almost threatening to derail the services sector.  However, as a nation with many layers civilization culture over 5000-7000 years vintage, tourism offers tremendous prospects. Rightly, the focus on development of smart cities, start ups, digitization, infrastructure and other initiatives if efficiently and effectively implemented offers hope.

However, per se, they cannot, by themselves, successfully overcome the “jobs doomsday or Crisis of Unemployment” scenarios during short and mid-term contexts particularly with majority remaining low quality human resources both in rural and urban areas.

If development of agriculture as industry to include dairy farming, floriculture, fisheries and forestry is progressed, it would be possible to absorb low skilled rural labor. But, it requires huge financial investments, technical expertise and marketing infrastructure.

For example, the cost to develop one acre ‘green house’ depends on the product to be produced – High, Medium and Low costs.  Add to it, investment for planting material/seeds, fertilizer, pesticides, cultivation technical expertise, labor and other costs. Even a farmer owning 20-acre land may hesitate to venture into such a heavy capital intensive venture.

Currently, State governments are giving nearly 50-80% subsidy. Yet very few farmers are availing the subsidy facility due to unaffordable capital investments, red tape and lack of technical expertise resulting in development in penny pockets isolated from each other.

Instead what is needed is to replicate Spain’s “Almeria” model under “Special Agri Zone (SAZ)” like Special Export Zones (SEZ) and industrial parks and offering attractive financial subsidies and total technical expertise to interested parties. To start with, “Public-Private-Partnership (PPP)” model in collaboration with either Israel or Spain or Netherland based on “Transfer-of-Technology (TOT)” model may be considered to develop SAZs in various states.

To sum up, the “Crisis of Unemployment or Jobs Doomsday” envelopment is real in posterity. The need is to address the strategic challenge of population explosion – mother of all challenges squarely.  So also, labor law reforms must be addressed. Excessive focus on urbanization in short and mid-term contexts, however, may not squarely address the issue of providing “jobs for all” particularly low skilled rural workers.

So, a balanced ‘holistic’ approach in all sectors needs to be adopted with focus on upgrading of agriculture industry to include dairy farming, fisheries, horticulture, forests with value addition both for domestic and export markets exploiting 24×365 days geographical and climate advantages. Otherwise, be prepared to face explosion of violent revolution.

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