The government is in a flap. General elections are around the corner and the spectre of unemployment looms large. That is one reason why the government has begun focussing on farmers and women as key voters to be wooed. This, in addition to playing the religion card.
Farmers, however, have seen little improvement in their incomes. In a bid to reduce the impact of bad news, the government has asked the Ministry of Labour not to post any updates on the state of unemployment on its website.
Media reports about the doubling of non-performing assets (NPAs) in the micro and small enterprises (MSME) segment spells trouble for the government as it could further stoke unemployment.
It is worth recalling that over 90 percent of units in India and the labour they employ come from MSMEs. Any downturn in the fortunes of MSMEs could immediately result in higher unemployment.
While the government remains silent on the unemployment numbers, reports from the International Labour Organisation (ILO) suggest that the unemployment situation in India may not improve in coming years. On the contrary, if one goes by the numbers put out by the Centre for Monitoring Indian Economy (CMIE), unemployment could well have increased. CMIE pegged this rate at 4.7 percent in FY18.
Reinforcing these numbers is the flashing light of low gross fixed capital formation (GFCF). Any decline in this number indicates the unwillingness on the part of investors to invest in units which can produce more, hence create jobs. The fact is that this number has been declining. And that is not a happy sign.
Put the four tables together, and you come up with a picture that could cause furrows on the brow to deepen.One possible solution
There could be one way out for the government. It is by adopting rooftop solar as a binding policy across the country
. This policy alone has the potential of creating 80 million jobs within a few years. What is interesting is that at least 20 percent of jobs could get created within the first six months of implementation of this concept.
The concept itself is quite simple, and draws on the experience of Germany, which heralded mass scale solar power generation through rooftops. Hermann Scheer, the German Minister for Energy, decided at the turn of this century that if solar power could enjoy just a percent of the subsidies and benefits that had been given to the oil and gas sectors, solar could become immensely viable and even the powerhouse of the entire world. One of the schemes he introduced was the concept of rooftop solar.
Knowing that most people would not have the time or the willingness to set up solar panels on their rooftops, Scheer created a middle layer of people who would do the installation (with government subsidies), the maintenance of the panels periodically at no cost to the customer, and monitor the use of solar power (free for the customer, with the surplus being sold and the revenue being shared by the middle layer and the customer). The scheme worked, and millions of households opted for rooftop solar.
What was more interesting — and an unintended consequence — is that eight years later, Germany employed more people in the solar sector than in its fabled automobile segment. The solar power business was labour intensive — it required installation, maintenance and constant monitoring through the use of bidirectional meters.
India, unlike Germany, has more sunlight. If solar could work in Germany, it would do wonderfully well in India. India has more houses and even where there is no roof over the shelter, one can always use a pole with a solar panel atop it.
What is needed is a decentralised mechanism to create a micro-grid and work on short transmission lines.
If the government could allow small clusters to set-up independent solar power generation systems — by the private sector — the results could be startling. Since commercial power would cost more than residential power, each cluster solar power entrepreneur would strive to push his ‘parish’ into setting up a small enterprise. It could be a welding unit, or a flour mill, or a tyre puncture repair facility. The possibilities are endless.
The local rooftop solar entrepreneur would become the catalyst to promote enterprise, doing things that a government babu would not ordinarily do. More entrepreneurs would mean more profits for the rooftop solar entrepreneur, employment and, in turn, GDP growth.
As the above table shows, the result could be startling. In just a few years, India could create over 80 million jobs. The country requires some 12 million jobs each year to meet the aspirational needs of a young and emerging population. This would take care of the first wave of unemployed youth, with the second and third wave coming in from additional solar installations and new start-up enterprises.
But adopting this model would require reducing the role of state-owned grids (distribution companies) in supplying power to villages. In turn, it would help reduce the losses that these discoms face year after year.
Some of these losses are the result of incompetence, but much of it through collusion, where power theft is misclassified as agricultural consumption. It would also result in power to all villages and additional national wealth.
This will require political will, because it will mean reducing the ill-gotten benefits to a sector which has fattened itself on the spoils of theft. But with political survival at stake, the risk is worth taking.
So will the government bite?The author is consulting editor with moneycontrol.com