Budget 2023 promised a capital expenditure of Rs 10 lakh crore. Employment will be the icing on the cake. So, let’s see how this happens. Every Rs 1 crore invested in the infrastructure sector, generates 200-250 man-years of employment for unskilled, semi-skilled and skilled workers of at least 70 trades. Using this calculation by housing and infrastructure expert, V Suresh, I estimated that Budget 2023, in allocating Rs 10 lakh crore in capital expenditure, has ensured significant employment generation. Infrastructure and building construction is required for the growth of most other sectors.
According to a Hudco-sponsored study executed by the Indian Institute of Management, Ahmedabad, by the then director Bakul Dholakia and his economics professor brother Ravindra, construction had a multiplier effect ranging from 1-8 in socio-economic development benefits. It is ranked third among the 14 major industries in terms of forward and backward linkages.
A follow-up study by the National Council of Applied Economic Research (NCAER) in 2014 reinforced these metrics.
Of the Rs 79,000 crore allocated to the Pradhan Mantri Awas Yojana (PMAY), Rs 25,103 crore is earmarked for the urban sector and the rest for rural India. Any construction sector investment impacts 275 linked building materials, components and machinery industries, and the sector accounts for 8.2 per cent of the economy.
Residential real estate construction accounts for one per cent of the economy. Every Rs 1 lakh invested in housing generates 2.65 informal and 0.4 per cent formal employment. It ranges from unskilled load carriers to carpenters, bar-benders and the like, to engineers, architects, management professionals, lawyers, finance experts and so on. This multiplier effect is what can get economies moving or for growing economies like India, fast-track growth. Every additional rupee invested in the housing sector, adds Rs 1.54 to the GDP. About 12 paise out of every rupee invested in housing is collected as indirect taxes.
Rising Urbanisation
The highlight of this year's budget was also the computation of financial allocations to various segments of the economy. Since construction is the base of every industry, all these impacts the housing and construction sectors. Currently, even though the urban population is growing rapidly, only 4 per cent of the land mass is urban. This may well need to double to 8 per cent. For this to happen, reforms at the land acquisition, finance, legal, regulatory and execution levels have to take place. A spread of cities also creates a dispersed demand for housing across geographies and the creation of jobs across these cities.
Renewal of existing cities also contributed to job creation. From the first effort to upgrade urban India, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in 2005 to Atal Mission for Rejuvenation and Urban Transformation (AMRUT I) in 2014, the number of cities covered renewal grew from 63 to 600. From AMRUT1 to AMRUT II, with a 4,800-city portfolio, the multiplier is another 8 times. Clearly, India is preparing for the transition to a 50 per cent or greater urbanised economy by 2050, if not sooner.
At the base of all these projects is hardcore real estate and infrastructure development, spread through the country and not just concentrated in a few select towns and cities. Break this down to the man-years of employment and India should be looking at lakhs of crores of jobs, spread across urban and rural India, across metros, Tier 1, 2 and 3 cities and towns, as well as the rural hinterland.
Another major thrust of this Budget has been institutional strengthening. The Town & Country Planning Organisation, The National Institute of Urban Affairs, the National Capital Region Planning Board and the Building Materials and Technology Promotion Council, have all got enhanced budgets. There is a special allocation for training government officials in city management. This is all expected to have a massive impact on urban development and redevelopment.
As GIS-based city master plans get underway, as promised in Budget 2023, the industry expects development to spread more evenly across India to the smaller towns as well. Connect the dots and the Rs 10 lakh crore infusion is likely to generate many lakh crore jobs in different sectors and trades.
E Jayashree Kurup is a writer researcher and Director, Real Estate & Cities, Wordmeister Editorial Services LLP. Views are personal and do not represent the stand of this publication.
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