FM's Budget 2020 speech: Employment outlook remains bleak for FY21

It is often feared that the Government of India lives in denial of the unemployment problem in India. The finance minister's budget speech in Parliament last Saturday provided some clue on the matter through some unambiguous statements. In para 40 of the speech she states "We recognise the knowledge, skills and risk-taking capabilities of our youth. He is no longer the job seeker. He is creator of jobs."

If the youth is no longer a seeker of jobs, then implicitly, there is no unemployment problem among the youth. This betrays the denial mode that the government is feared to be living in.

How do we square this claim that the youth is not seeking jobs with household surveys that tell us the unemployment rate among the young is as high as 31 per cent? And that among young graduates it is higher at 43 per cent.

Possibly, the finance minister's statement on the youth not being job seekers any more but being job creators was hyperbole. There are a few proposals where employment generation is at least a side-benefit. These include setting up hospitals in PPP in aspirational districts, construction, operation and maintenance of infrastructure, grants for select tourism plans of states, etc. Apparently, employment generation is good but, recognizing unemployment is anathema.

The Chapter on jobs in the Economic Survey is actually about copying a Chinese model on exports based on being part of global value chains. India's jobs problem is a huge challenge that is getting worse. The Economic Survey's apparent solution entangles this massive  problem with another equally mammoth and rather ambitious challenge, which is to turn India into a globally-competitive nation with production processes that would be tied closely with seamless processes of global brands. It is no good to be a defeatist but, it isn't good to be unrealistic in policy-making as well. 

The finance minister has echoed this idea propounded in the Economic Survey, in her speech in para 42. She speaks of the Networked Products that the Economic Survey spoke of and goes further to propose a scheme "focused on encouraging manufacture of mobile phones, electronic equipment and semi-conductor packaging". But, the details would be announced later.

Unfortunately, a mere announcement of a new scheme does not build confidence and it provides no guidance. We will have to wait for the scheme to see how it proposes to deliver on jobs and how close it comes to the Economic Survey's estimate of providing 40 million jobs in five years under such a scheme.

It is not the government that becomes a part of any global value chain. This role has to be played by private enterprise. 

But, which Indian industrialist would be willing to wager her capital for business in today's uncertain world and which bank will be willing to fund such a venture today? And why would those who do so not consider automation in assembly operations? Has India resolved its factor problems of land, labour and capital adequately to enthuse private enterprise to invest and ensure the success of such a strategy? Can India ensure that availability of the internet and free movement of labour will not be randomly disrupted? Can the government ensure that its ambitious tax collection targets will not translate into harassment of enterprise? Such questions are obvious and their answers are not merely in copying China. India cannot copy China.

How would Indian labour meet the challenges of automation, high quality standards and the need for their appropriate skilling. It does not help that the union budget has slashed the budget for skilling. The budget for jobs and skills development had been reduced from Rs.61 billion in 2018-19 to Rs.57.5 billion in 2019-20 and now it is further reduced to Rs.53.7 billion for 2020-21, as per Statement 4A of the Union Budget. In 2019-20, it has not been able to spend the budgeted Rs.72.6 billion provided for the year.

Para 39 of the finance minister's speech states that the government has provided Rs.993 billion for education. This is merely 4.7 per cent higher than the revised estimates for 2019-20.

The union budget has also slashed the budget for the only scheme it has that directly deals with jobs for those who have none in rural India. The allocation for the Mahatma Gandhi National Rural Employment Guarantee Programme has been reduced from a revised estimate of Rs.710 billion in 2019-20 to a budgeted Rs.615 billion in 2020-21.

Nothing speaks better than money on the table. The government just reduced its intention to spend on jobs on 2020-21.