Understanding India's Jobs Crisis and Macro-Economic Challenges
Introduction: The Jobs Crisis in India
- India is grappling with a persistent jobs crisis, evident from official data and on-the-ground reports.
- This editorial delves into the macroeconomic reasons behind this crisis, focusing on the symptoms of low labor demand.
Types of Employment in India
- The distinction between wage employment and self-employment is crucial, with wage employment stemming from employer-driven labor demand and self-employment implying identical labor supply and demand.
- The discussion also draws a line between wage labor and jobs, emphasizing the inadequacy of labor demand for regular wage work when addressing the jobs problem.
Historical Perspective: Lack of Opportunities
- India’s historical employment landscape has featured open unemployment and informal employment, including self-employed and casual wage workers.
- The stagnant employment growth rate of salaried workers in the non-agricultural sector over four decades raises questions about the constraints in formal sector labor demand.
Macroeconomic Factors Influencing Labor Demand
- Labor demand in the formal non-agricultural sector is intricately linked to output and technology factors.
- The editorial explores the impact of output growth rate and labor productivity growth rate on employment growth rate, highlighting the phenomenon of jobless growth in India.
Jobless Growth with Indian Characteristics
- The discussion introduces the concept of jobless growth regimes, differentiating between weak and strong responsiveness of labor productivity growth rate to output growth rate.
- India falls into the latter category, where the positive effect of GDP growth on employment is overshadowed by the adverse impact of labor-saving technologies.
Macroeconomic Policy Framework
- Tracing the evolution of macroeconomic theories, the essay underscores the Keynesian emphasis on aggregate demand as a constraint on employment.
- It critiques the presumption that increasing non-agricultural sector output growth is sufficient for boosting employment growth, asserting that India’s unique jobless growth regime requires a distinct policy focus on employment.
Policy Recommendations
- The editorial concludes by proposing a comprehensive approach to address the employment challenge in India.
- This involves a dual strategy with demand-side measures, such as public job creation, and supply-side efforts, including enhancing workforce skills through improved education and healthcare.
Financing such initiatives necessitates a significant reorientation of the macroeconomic framework, including increasing the direct tax to GDP ratio and innovative use of macro-policy for constructive employment agendas.
Introduction:
- In early December, Ajit Doval, India’s National Security Adviser, engaged in the sixth NSA meeting of the Colombo Security Conclave (CSC).
- This editorial explores the key developments and implications of the meeting, emphasizing India’s strategic vision for the Indian Ocean.
Review and Roadmap:
- The meeting assessed the CSC’s progress over the past year and established a roadmap for 2024, aiming to foster a secure and stable Indian Ocean.
- The involvement of member-states (Mauritius and Sri Lanka) and observer-states (Bangladesh and Seychelles) highlighted the collaborative approach, with the absence of the Maldives reflecting domestic political influences.
Evolving Dynamics of the Indian Ocean:
- Examining the history of the CSC, it emerged in 2011 as a trilateral maritime security group but faced a hiatus in 2014 due to tensions.
- India’s proactive efforts in 2020 to revive and expand the CSC reveal its evolving strategic vision, aligning with the shifting dynamics of the multipolar Indian Ocean.
India’s Role and Strategic Vision:
- India, as a traditional power in the region, sees the CSC as an opportunity to institutionalize its leadership and shape the regional security architecture.
- India’s historical involvement in assisting island nations in defense, security, and humanitarian efforts positions the CSC as a crucial instrument to address emerging threats effectively.
China’s Influence:
The revival of the CSC is linked to China’s increasing presence in the Indian Ocean through the Belt and Road Initiative.
China’s strategic motives, including naval capabilities, defense relationships, and infrastructure projects, underscore the need for India to counterbalance and institutionalize regional security through the CSC.
Pillars of Cooperation:
The CSC’s focus on five pillars—
- maritime security,
- counter-terrorism,
- trafficking and transnational crime,
- cyber-security, and
- humanitarian assistance—reveals India’s strategic accommodation and flexibility.
By addressing these sectors, India aims to understand and respond to the evolving threats in the Indian Ocean, ensuring its continued role as a preferred partner.
Influence of Politics:
- The vulnerability of the CSC to domestic political changes is evident, as seen in the Maldives’ absence from the recent meeting.
- Domestic politics, including nationalist sentiments and pro-China sentiments, can impact the collaborative efforts of the member-states.
- However, recognizing the democratic nature of the CSC’s members, New Delhi remains committed to leveraging the institution despite these challenges.
Conclusion:
As India navigates increased ambitions, responsibilities, and threats, the CSC emerges as a vital instrument to consolidate its regional leadership.
Despite challenges posed by domestic politics and external players, India’s strategic vision for the CSC remains essential in shaping the future of the Indian Ocean region.
Seasonal Greetings and National Aspirations
The editorial begins with warm Christmas wishes and introduces the theme of prosperity, emphasizing the crucial role of leaders and policies in shaping individual and national well-being.
BJP’s Victories and Vision for a Developed India
- The narrative shifts to recent BJP electoral successes and their ambitious plan, Viksit Bharat Sankalp, aiming to transform India into a developed country by 2047.
- The criteria for a developed country, as outlined by the World Bank, are discussed, raising questions about the feasibility of India reaching high-income status.
Evaluating India’s Prosperity Indicators
- The editorial delves into key indicators such as GDP growth, per capita income, and changes in income inequality.
- It highlights the influence of economic reforms since 1991 and emphasizes the remarkable economic growth under the Modi government, projecting India as a $6 trillion economy by 2029.
Per Capita Income and Inequality
- A detailed analysis of India’s per capita income progression is presented, showcasing a steady increase.
- The editorial also considers concerns about rising economic inequalities and references the Gini Index, indicating that income distribution remains relatively stable despite economic growth.
Inflation, Exchange Rates, and Financial Stability
- The discussion extends to economic stability, covering inflation rates during the Modi era, which have remained within acceptable limits.
- India’s robust foreign exchange reserves are highlighted as a safeguard against currency depreciation, contributing to financial stability and high growth rates.
Path to Viksit Bharat and Potential Challenges
- The editorial concludes by asserting that sustained focus on growth, innovation, and investment, along with prudent fiscal measures, could realize the vision of Viksit Bharat by 2047.
The caveat is introduced, pointing out potential obstacles such as pandemics, wars, natural disasters, or political upheavals that could derail this trajectory.
