Gadkari's wish of unemployment rate falling to 3-4% in 2 yrs must come true

The minister does not make lose statements, and he is smart enough to have been extra cautious, especially as he was being interviewed by someone like Karan Thapar

Nitin Gadkari made BJP’s first tangible forward-looking statement on the unemployment rate of the country. In response to a question by Karan Thapar on his show UpFront with Karan Thapar on Monday, May 13, the very business-like minister stated that the unemployment rate would climb down from the current 7.5 per cent to 3-4 per cent within two years.

Mr.Gadkari said this with confidence. Yet, Karan played upon the projection and went ahead to extract a guarantee, a hundred per cent guarantee, as stated by the minister that the unemployment rate would come down to 3-4 per cent in two years.

Television interviews can be treacherous. I don't think Karan forced the minister to make that forecast. It was not necessary for the minister to stick his neck out. But, he did. Unprovoked.

Mr.Gadkari has not been the labour minister or the statistics minister or the finance minister. Yet, he was confident that the unemployment rate would come down to 3-4 per cent in two years. 

Mr.Gadkari does not make loose statements and he is smart enough to be on extra guard when interviewed by a Tim Sebastian of Indian journalists, like Karan Thapar.

So, I am inclined to take Mr.Gadkari's prediction seriously. I have no intention to hold him to the forecast after two years if his party comes back to power this summer. Forecasts can go wrong. And even if they do go wrong, they are important. What I take away from this television interaction is that Mr.Gadkari has good reason to believe that the unemployment rate will come down to 3-4 per cent. He believes it will come down because the BJP government has been encouraging investments, creating more industries, innovating in infrastructure, etc. While this is debatable, a takeaway can be that he believes that the unemployment rate will come down because of the investments the government envisages.

This makes sense. He did not say that employment/unemployment is not measured correctly in India like many of his cabinet colleagues have been saying. He did not actively dispute that the unemployment rate has indeed risen to 7.5 per cent. That was a relief!

He did not say that the BJP promises to provide a certain number of million jobs. That would have been foolish. Mr.Modi is still asked to account for such a promise he reportedly made before he became the Prime Minister.

Targeting a desirable unemployment rate is a good idea. Forecasting it is chivalry but targeting it is certainly sensible. And targeting an unemployment rate of 3-4 per cent is, I'd venture to say, a good target to have.

India is not used to discussing the unemployment rate as a macroeconomic problem. Economists don't debate it, journalists don't discuss it, law makers ignore it as a macro-economic variable of any importance. Its high time we recognized this elephant in the room before it runs amok.

We have made a fetish of fiscal deficit and inflation targets. It makes sense to bring the unemployment rate to share the same space among macro-economic indicators.

Educated middle-class Indians began discussing a government's performance on the basis of macroeconomic indicators like the fiscal deficit and core inflation a decade ago. People have started talking in terms of the unemployment rate only recently. The demand for jobs is irrational and not sustainable. It leads to demands for reservations. But, a demand for an acceptable level of unemployment rate should be considered as a reasonable ask.

Mr.Gadkari may be pleased to know that the unemployment rate has declined from the 7.5 per cent Karan Thapar mentioned during the interview to 7.3 per cent as of May 12. In fact, the decline is from 7.6 per cent in April 2019.

There are just of couple of more important metrics we must target besides the unemployment rate. Like the unemployment rate, the employment rate and the labour participation rate are also very important. These have fallen sharply after demonetisation and need to rise even as the unemployment rate should fall. Because, a fall in the unemployment rate with a falling labour participation rate is not at all desirable.

It is not at all easy to raise the labour participation rate and bring down the unemployment rate. But, that's what we would expect from great political leadership. We wish that Mr.Gadkari's projections come true.

The author is the MD & CEO of CMIE