When Uttar Pradesh chief minister Akhilesh Yadav visited the riot affected areas in Muzzafarnagar yesterday, he reportedly promised jobs. Similarly, when someone dies in the service of the nation, their families too are offered jobs by the government. It’s a currency which most grief-stricken people quickly identify with despite their loss.
Strangely no head of state ever offers them food. Yet when it comes to deciding on the future of its citizen’s the government feels it’s actually food security, which will solve their problems.
Wrong timing of populism:
In reality, the food security bill is designed to solve their own problems – that of votes - as the impending general elections draw closer. On the face of it though there is nothing wrong with the policy considering it’s designed to further inclusiveness and make available food to the poorest (200 million plus stay under the poverty line) at a fraction of its cost. It’s actually the timing that is all wrong. The country is going through one of its worst economic crises since 1991 when it had to go through the embarrassment of pawning gold to pay for imports. It’s a shade better now since we have enough forex reserves to pay for around seven months of imports, more specifically fuel. The twin deficits – current account and fiscal deficit – is a huge threat, coupled with lower prospects of growth, high inflation, currency depreciation and finally the threat of a sovereign downgrade.
All populist policies like farm loan waiver, NREGA (National Rural Employment Guarantee Act) and food security schemes, which have their basis in inclusive growth, actually add to higher subsidies and defeats attempts towards fiscal consolidation. In short it burdens the economy. Estimates suggest that subsidies now account for 42% of gross fiscal deficit. Analysts believe the food security scheme will add to the deficit burden substantially at a time when it can ill afford. Why? That’s because it could lead to a sovereign downgrade. And this would take the country from its lowest investment grade to a junk status, and would lead to a mandatory exodus of several foreign funds from the country. That’s not all. There are laws in some countries which do not allow these funds to invest back even after the ratings are upgraded (which usually takes at least two years) as rules there specify mandatory waiting period of several months to be able to re-enter that country.
So knowing very well that jobs are the biggest currency for urban and rural folks alike, the UPA government would have done better to sound its political bugle by announcing a new policy around jobs. After all, it’s seen the political benefits of NREGA.
Fewer jobs:
Data from AICTE, which regulates technical education in India, suggests there were 1,511 engineering colleges across India, which had 550,000 students graduating in 2006-07. Both have doubled since then. The number is much larger when graduates of all streams are taken into account. It’s still another thing that a substantial number are unemployable. But when it comes to the number of jobs, there would be fewer opportunities this year given the slowdown, which translates into more disgruntled voters and the possibility of a demographic dividend transforming into a potential time bomb.
A smart strategy would therefore have been to include the aspirations of the youth - roughly 150 million first time voters (aged 18 to 23) in their political math. The youth is keenly looking at the job market. Unfortunately for them, jobs have now reduced. The IT industry for instance, which hires over 50 % of the new engineering graduates alone, is expected to hire 50,000 less people. For the Indian economy which added 14 million jobs to the workforce in the two years ended 2011-12, (12 million join the labour force every year) the outlook now looks bleak.
Why are jobs reducing?
The reason jobs are fewer is because companies are not expanding and not taking up new projects either because they are not being able to get land, clearances, or because high interest rates have rendered their projects unviable.
What’s going to hit them harder now is the new land acquisition bill. Again a bold move, which will empower farmers and give them the right price for their land, while making land acquisition so difficult for certain companies that projects would have to be shelved or inordinately delayed. Instead, the government should have brought in safeguards to ensure that the farmers get their price but a project is not delayed. That’s because in simple terms no project equals to no jobs and more pain.
More youth from the rural areas are migrating to cities in search of jobs despite the fact that NREGA created more avenues of engagement within rural areas. NSSO data suggests that the share of agriculture for rural males in employment, which accounts for the biggest source of jobs, dropped almost 10 % to 59 % in the last couple of years. So, instead of letting them stay illegally in the city footpaths – again for votes – it’s better to build more cities which can offer them an opportunity. The Delhi-Mumbai Industrial Corridor, which would create many new cities along with industrial hubs and jobs are models of infrastructure development that the government should encourage and perhaps even subsidise as this is what would create long term jobs and well being for its people.
Strangely no head of state ever offers them food. Yet when it comes to deciding on the future of its citizen’s the government feels it’s actually food security, which will solve their problems.
Wrong timing of populism:
In reality, the food security bill is designed to solve their own problems – that of votes - as the impending general elections draw closer. On the face of it though there is nothing wrong with the policy considering it’s designed to further inclusiveness and make available food to the poorest (200 million plus stay under the poverty line) at a fraction of its cost. It’s actually the timing that is all wrong. The country is going through one of its worst economic crises since 1991 when it had to go through the embarrassment of pawning gold to pay for imports. It’s a shade better now since we have enough forex reserves to pay for around seven months of imports, more specifically fuel. The twin deficits – current account and fiscal deficit – is a huge threat, coupled with lower prospects of growth, high inflation, currency depreciation and finally the threat of a sovereign downgrade.
All populist policies like farm loan waiver, NREGA (National Rural Employment Guarantee Act) and food security schemes, which have their basis in inclusive growth, actually add to higher subsidies and defeats attempts towards fiscal consolidation. In short it burdens the economy. Estimates suggest that subsidies now account for 42% of gross fiscal deficit. Analysts believe the food security scheme will add to the deficit burden substantially at a time when it can ill afford. Why? That’s because it could lead to a sovereign downgrade. And this would take the country from its lowest investment grade to a junk status, and would lead to a mandatory exodus of several foreign funds from the country. That’s not all. There are laws in some countries which do not allow these funds to invest back even after the ratings are upgraded (which usually takes at least two years) as rules there specify mandatory waiting period of several months to be able to re-enter that country.
So knowing very well that jobs are the biggest currency for urban and rural folks alike, the UPA government would have done better to sound its political bugle by announcing a new policy around jobs. After all, it’s seen the political benefits of NREGA.
Fewer jobs:
Data from AICTE, which regulates technical education in India, suggests there were 1,511 engineering colleges across India, which had 550,000 students graduating in 2006-07. Both have doubled since then. The number is much larger when graduates of all streams are taken into account. It’s still another thing that a substantial number are unemployable. But when it comes to the number of jobs, there would be fewer opportunities this year given the slowdown, which translates into more disgruntled voters and the possibility of a demographic dividend transforming into a potential time bomb.
A smart strategy would therefore have been to include the aspirations of the youth - roughly 150 million first time voters (aged 18 to 23) in their political math. The youth is keenly looking at the job market. Unfortunately for them, jobs have now reduced. The IT industry for instance, which hires over 50 % of the new engineering graduates alone, is expected to hire 50,000 less people. For the Indian economy which added 14 million jobs to the workforce in the two years ended 2011-12, (12 million join the labour force every year) the outlook now looks bleak.
Why are jobs reducing?
The reason jobs are fewer is because companies are not expanding and not taking up new projects either because they are not being able to get land, clearances, or because high interest rates have rendered their projects unviable.
What’s going to hit them harder now is the new land acquisition bill. Again a bold move, which will empower farmers and give them the right price for their land, while making land acquisition so difficult for certain companies that projects would have to be shelved or inordinately delayed. Instead, the government should have brought in safeguards to ensure that the farmers get their price but a project is not delayed. That’s because in simple terms no project equals to no jobs and more pain.
More youth from the rural areas are migrating to cities in search of jobs despite the fact that NREGA created more avenues of engagement within rural areas. NSSO data suggests that the share of agriculture for rural males in employment, which accounts for the biggest source of jobs, dropped almost 10 % to 59 % in the last couple of years. So, instead of letting them stay illegally in the city footpaths – again for votes – it’s better to build more cities which can offer them an opportunity. The Delhi-Mumbai Industrial Corridor, which would create many new cities along with industrial hubs and jobs are models of infrastructure development that the government should encourage and perhaps even subsidise as this is what would create long term jobs and well being for its people.