Budget 2019 | The job challenges for Modi 2.0

Representative image (PTI)

D Dhanuraj and Anupama Ghosh

The Modi 2.0 government’s upcoming budget will be challenged for its focus on distressed job growth reported by the recent labour statistics. Employment opportunities, or rather the lack of it, had dominated the discourse before the 2019 elections. Job creation was a major poll promise made by the Bharatiya Janata Party (BJP) during its campaign before the 2014 elections.

Now, in his second innings, Prime Minister Narendra Modi, acknowledging the crisis, established two Cabinet committees on investment and jobs under his supervision. Even though the unemployment crisis has a lot to do with the policies and not with the budget announcements, the interest lies with the intent of the government to address some of the fundamental challenges in the job sector.

As the majority of the workers are still with the agriculture sector, avenues of employment in the sector have been witnessing a continuous slump. The World Bank data projects this decline. Here, the challenge is to generate job opportunities more in the off-field activities in the farm sector, such as pre-harvest and post-harvest handling facilities, storage and distribution, processing facilities and infrastructure in the form of roads and transports, which may expedite swift trade.

The process of overhauling these mechanisms and infrastructure will, in turn, generate more jobs. Budgetary support and encouraging policy initiatives, further inviting private investment in these sectors will lead to employment generation as well as better return from agriculture for the farmers.

In the manufacturing sector, the debate on adequate avenues and improvement in the eco-systems for attracting higher investment and the labour-oriented works still haunts the market. Manufacturing jobs fell in absolute terms from 58.9 million in 2011–12 to 48.3 million in 2015–16. There has been a consistent decline in the Index of Industrial Production (IIP), which includes manufacturing, mining and electricity.

Land, capital and labour reforms have not yet received the required attention in the field. Labour law reforms are still a distant dream, which otherwise would have led to the labour-intensive work patterns and generated more jobs. As land acquisitions are still a cumbersome task, the announcement of the land banks will be a major policy reform to overcome the issue. In the prevailing context, applying annuity and equity principles for those who lose their property for the land banks could be a major step.

Infrastructure and real estate domains are also hampered by the expensive capital requirement for investment, while the poor transmission rates for the housing sector loans and insurance for the consumers is another case of concern.

The role of the banks and the Non-Banking Financial Companies (NBFCs) is very important in this juncture. The budget may announce the injection of another tranche of a few billion dollars to revitalise the banking operations. However, in the case of the NBFCs, they will get an opportunity to eliminate bad players by their own market actions and not by offering support liquidity by the government.

The banking sector also demands a major overhaul in terms of redefining government ownership in them. An effective and quick adaptation of Insolvency and Bankruptcy Codes (IBCs) will also improve the sentiments of the market that would reflect on the investment and job creation.

The labour participation of women is another major concern. Even though there is a positive trend of young women joining the workforce, the averages are below the global standards. The safety and security enshrined in the rule of law are beyond the scope of a mere budget speech.

The BJP, in its election manifesto, Sankalp Patra, promised to set up one lakh digital villages in the next five years. The role of Atal Innovation Centres will be strengthened for the skill training and innovation challenges. The budget allocation for the skill development projects in the last five years has witnessed considerable growth, but the job uptake has not matched with the same. MUDRA loans distributed to more than 7 crore entrepreneurs are raising doubts on those loans becoming Non-Performing Assets (NPAs).

The government has promised to launch a new scheme to provide collateral-free credit up to 50 lakh for entrepreneurs and guaranteed 50 per cent of the loan amount for female entrepreneurs and 25 per cent of the loan amount for male entrepreneurs. Modi has also promised to facilitate setting up of 50,000 new StartUps in India by 2024 and the central government would create a ‘Seed Startup Fund’ of Rs 20,000 crore. In its manifesto, the BJP has also promised to invest Rs 100 lakh-crore in the infrastructure sector in the next five years.

The July 5 budget is expected to outline measures by the government to revive growth and generate jobs. Whether these measures will aid in bridging the structural gaps in India’s job generation across the sectors remains to be seen.

D Dhanuraj is chairman, and Anupama Ghosh is senior research associate, at Centre for Public Policy Research. Views expressed are personal.