By Vivek Pattanayak* in Bhubaneswar, September 18, 2016 : Who creates jobs or what generates employment? The government can create jobs. However, the Central government’s ability to create job is limited by its budget which is dependent upon sources of income like tax, excise duty, cess, levies etc., dividends, disinvestment, bonds, and other receipts. It also has a priority as to what jobs will be created.

It may consider more appropriate to appoint judges and judicial magistrates than clerks and peons in the secretariat although later may give more employment than the former with the same amount of money. Fiscal deficit is a barrier to job creation. The philosophy of minimum government and maximum governance presupposes less of job creation.

The government may farm out certain functions to private bodies. When the government is hamstrung by pay hike and its ability to raise income is constrained, it cannot create new jobs. In fact it will try to freeze posts, resort to automation and insist on improved productivity.

The State governments are similarly placed except that they also depend upon the central government for grants, subventions, and other financial supports. In a democratic federal system with different political parties in power in the centre and States, there is an additional constraint for flow of funds. Liberal pay hikes for populist consideration particularly before elections reduce flexibility to create new jobs as money goes in pay hikes.

The municipal body which is a local self-government creates employment opportunity. They can be urban bodies called Corporation, municipality, or notified area council. Their budgets are dependent upon grants from the State governments. Of course they can raise their revenues through holding tax, professional tax, octroi and other levies.

With GST coming into operation, their autonomy of imposing octroi will be curtailed. The rural local self-governments called Zilla Parishad, Panchayat Samity, and Gram Panchayat also create jobs. They are dependent upon grants from State government although they can get revenue by leasing of tanks, orchards, and imposing license fees etc.

If the State government does not give grant their activities get limited. Experience has shown the State governments have not been delegating their authorities and functions to local bodies in spite of the clear objective spelt out at the time of constitutional amendment.

The corporate bodies provide a big job market. They can be in public sector or private sector to include the statutory corporations, government companies, public limited companies , listed or unlisted companies or private limited companies, cooperative societies, registered societies whether under the government or outside, partnership concerns, and proprietorship business.

All these institutions can be in manufacturing or in service sector. This can also be in construction activities like building construction, road construction and projects like irrigation projects, building up of industries etc. These bodies will be guided by their profit and loss. Hence they would resort to automation and insist on increased productivity. Outsourcing will be their strategy to avoid labour unrest. The government companies will be guided by the instructions of government. Many public sector corporates do not create jobs without clearance of government. The principle of minimum government extends also to the government companies particularly to loss making ones.

Proprietorship and partnership concerns and many private limited companies are usually in MSME sector. Their expansions will depend upon their own reserves and savings and availability of institutional credit. The State Financial Corporations and State Investment Corporations, the main planks of financial institution of seventies and eighties of the last century, are now moribund. Who will fund them to expand where new jobs can be created?

Many cooperative societies ran sugar industries, textile mills, cold storages and chilling plants. Cooperative banks funded them and also their members. Sugarcane farmers are unhappy as they are not receiving their money on time. Agriculturists are not getting adequate price in absence of cold storages and warehouses. Cooperative institutions are neck deep in political squabbles. In this depressing situation, new projects are not in sight. What expansion of employment will take place in this sector?

New big-sized projects under private sector initiatives can be in industrial and mining sector under entrepreneurship of corporate behemoths. In the last ten years they were hit by opposition from local population on the grounds of land acquisition, rehabilitation, inadequate compensation and environmental consideration orchestrated by the vigilant media, and vibrant civil society. This was followed by judicial activism and adverse comments from the national auditor.

Whether the entrepreneurship of bigwigs has revived since then is one big question mark. Meanwhile, recession, over capacity and depression in the commodity market has over taken the global economy. Public sector Banks have now been beset by non-performing assets. Under these circumstances, will these stalled projects revive?

There can be self-employment. For this category of job creation, what is needed is seed capital. Some depend upon inherited wealth. Some get it from parents, relatives and friends while some get from money lenders. For sustainable growth there should be credit at cheaper rate.

In unorganized sector there is plenty of opportunity of self-employment. Necessarily it need not be in the manufacturing area. It can be in service and trading sector. Realizing the need for capital for this sector, the concept of MUDRA was given in the budget in the previous year.

Angel funding, crowd financing and private equity have been in place for some time, originating from USA. Start up India is only old wine in new bottle. Experience has been that angel funding is not based on philanthropy. There is expectation of return on capital. Public sector participation is not envisaged on the assumption that private sector has better knowledge of viability of angel funding.

Attempt has been made since several decades to create self-employment even in rural areas and semi-urban centres with varying degrees of success. Failures in the past have been more highlighted than success. Some self-employed people have been outstanding success and grown to become famous entrepreneurs.

Promotional bodies had played a significant role in hand-holding in encouraging even unknown and insignificant people to establish viable projects who not only repaid their loans but also bought off seed capital. With change in governments with different political philosophy, focus has shifted away from these bodies.

Sometime attempt is made to reinvent wheel. Without seed capital, hand-holding and constant dedicated monitoring, and even mentoring and review, it is not possible to create viable self-employment.
The non-governmental organizations (NGOs) in the voluntary sector provide employment. They depend upon funds from government, and philanthropic institutions and occasionally from corporate sectors. When the government is facing fiscal deficit, and corporates are losing financially, money will not be available for NGOs. Very often funds flow from foreign sources. They are invariably viewed with suspicion. This is an inhibiting factor in voluntary sector.

Media both print and electronic play also a direct part in creating employment. Circulation, viewing and advertisements are the sources of revenue. When government cut advertisements media suffer. Commercial advertisements are dependent upon profits of corporates. Luxury of giving display advertisement is limited both for government and commercial business. Proliferation of media puts a strain on the advertisement budget.

The educational institutions like universities, private colleges, schools, management institutes, engineering colleges, polytechnics, and Industrial Training Institutes also provide jobs. They are also constrained by their income. Many of them also depend upon government grants. Those who wholly depend upon tuition fees have to ensure that those who pass out get immediate placements after their graduation. Otherwise they will not attract students. If the national job market is poor their seats will remain vacant. Their institutions will become financially unviable. Notable exceptions are those who receive liberal donations from philanthropic institutions. Skill acquired in the educational institutions seems inadequate for getting jobs in some high technology sector.

Agriculture including its subsidiary activity like horticulture, floriculture, dairy farming, poultry, sheep and goat rearing or piggery generates employment. Sericulture and forestry also create employment opportunity. Induction of tenant by a farmer and engagement of landless labour during agricultural operation reduce rural unemployment. Periodic failure of Monsoon affects agricultural sector and creation of employment. Answer to that is creating irrigation facilities, rain water harvesting and dry land farming. Since last many decades large sized irrigation projects have become implementable. Dry land farming has not received the importance it deserves. As regards water harvesting, we are long way off.

The economy has produced many high net-worth individuals (HNIs), retirees with handsome pensions, and aging population dependent upon children with high middle class income who need a lot of personalized service. They include assistants, drivers, cooks, and attendants. Opportunity of employment will continue in this area. As rapid urbanization is taking place migration will be to metros, mega cities, industrial hubs and towns as this category of people usually live there.

There is in this background also a robust optimism among many thinkers that as the economy grows and different branches of the economy expand there may be new areas of jobs creation which was not thought of many decades or years ago like tourism, hospitality, retail trade in informal sector, automobile and entertainment sector. Service sector which includes travel trade, tourism, hospitality, entertainment etc. is making fairly well as indicated by Nikkei India PMI released in August. The objective in India has been for quite some time from the UPA days to reach 25%of GDP in manufacturing sector including automobile.

These sectors need investment either by big behemoths or by MSME. Big wigs are not coming forward to invest, and looking forward for more concessions and rate cuts. They are also affected by over regulation going by what the Chief Editor of Forbes, Asia states in one of the latest issues, fear of unknown and uncertainty as was the experience of POSCO and Vedanta.

Make in India is a good branding for marketing in the world of business. China could succeed in becoming a manufacturing hub in the eighties, nineties, and in the first decade of this century because global economy more particularly the West was growing and had not been affected by debilitating sub-prime crisis.USA and Europe found easy to buy cheap Chinese goods because of low labour cost in Chinathen (not now any more).

Whether India can have same advantage is a big question mark, and the labour cost is increasing and now with 42% minimum wage rise the situation will be even more difficult. There are competitions in the Asian market like Vietnam, Indonesia and Philippines. Let us not forget Africa where countries like Senegal, Cameroon and Nigeria can give low wage and skills are improving there.

To be a manufacturing hub of the world like China of the past, India must be endowed with ultra modern and the state-of -the art technology. Robotics and nano technology had not developed when China was rising in the decades of Deng. For India the latest technology has to be imported as our research has not reached that level and developing that in the immediate future is quite a task.

Former RBI Governor Rajan’s idea of Make for India for which he was much misunderstood is worth examining with seriousness. India is a huge and diversified market. To meet the demand of the rising middle class manufacturing sector has to be geared up. This will create jobs. How to match skilling with manufacturing industry is a huge challenge.

Lack of skill causes job not being filled up in the manufacturing sector recognized since UPA days.”Skill India” is in fact the means to achieve that end.”Digital India” is part of IT sector which with “Start Up India” can create jobs provided seed capital is available along with loan capital for the young entrepreneurs. It is no secret that it is the IT industry which took the Indian youths to the global heights. The book of Ashutosh Seshbalay, “Rising Elephant” sold in million copies spoke about the penetration that the Indian IT has made both in USA and Europe.

To sum up, job creation in the existing economic environment is a challenging task. Attrition due to retirement, highly skilled jobs, and self-employment through service sector will open up the window. Will it accommodate the annual inflow into employment market? Answer is pessimistic. What will be the future for unemployed surplus? They will be underemployed.

• [Mr Vivek Pattanayak is former Indian Administrative Services officer and director, International Civil Aviation Organisation]