Calcutta Notebook


The issue of creation of jobs is being raised in the ongoing elections in the States with gusto. This gives an occasion to review whether the policies of the BJP Government are actually creating jobs or not.

The economy is increasingly been driven by big industries that are eating the jobs. Capital has become cheap and production is increasingly being undertaken by robots. Companies find it profitable to borrow money and install automatic machines instead of employing workers. A sugar factory this writer knows used to produce 2000 bags of sugar a day and employed 2000 workers fifty years ago. Today it produces 8000 bags of sugar a day and employs only 500 workers. Operations such as unloading sugar cane from the trucks, feeding bagasse into the boilers, and stitching bags of sugar are now being done by automatic machines. Khandsari and Jaggery industries have lost their market share. This has led to job losses. The number of jobs created in a sugar factory is a fraction of the number of jobs that would be created in Khandsari or Jaggery industries. Similarly bottled cold drinks have taken away the jobs of sugar cane juice vendors. Packed foods like potato chips have taken away the jobs of poor people who used to sell roasted rice to bus passengers. This job eating tendency is partly offset by creation of jobs such as in servicing of mobile phones. But these new jobs are far and few.

The problem is global. About one-half of black youth in the United States are unemployed. About one-half of all youth in Spain and Greece are unemployed. One should here not be carried away by the data showing creation of jobs in the United States. These jobs are mostly being created in the health and education sectors that are funded by the government. Market-based generation of jobs is slow in the US as well. This loss of jobs is happening across the world because capital is cheap and companies find it profitable to install robots rather than employ workers.

The BJP Government could take many steps to prevent these losses of jobs. Heavy taxes can be imposed on job eating machineries like harvesters, JCBs, and automatic looms. That would make it costly for the companies to produce with machines. They would find it profitable to employ workers instead of installing robots. The Reserve Bank can direct the scheduled banks not to give loans for job-eating machineries. The Reserve Bank has directed the banks not to give loans for equipments that release gasses that lead to global warming. Similarly the Reserve Bank can direct the banks not to give loans to JCBs and harvesters.

Difficulty is that free trade stands against such a policy. Even if, the Finance Minister imposes high rates of excise duty on automatic looms, the cost of production of cloth in India will increase. This will lead to increased imports of cloth produced in foreign countries with the same automatic machines. In the result, Indian factories will be in trouble. Therefore, it will be necessary to impose equally high import duties on machine made imports. However, imposition of such taxes is prohibited under the WTO. It is necessary for the BJP Government to review India's position in the WTO from this perspective.

The "Make in India" programme is not helping. The Government is committed to making India a global manufacturing hub. That means that production in India will be undertaken according to international standards. The international standards are moving towards the use of less numbers of workers and more numbers of automatic machines. Therefore, ‘Make in India’ is leading the industry to use more machines and less labour.

The Government is aware of the need to encourage generation of jobs by big companies. The Government has promised to pay the Employer's share of the Provident Fund contribution of new employees for the first three years. This is a welcome step in the direction of lowering the cost of labour for the companies. But this amount is too small to be effective. It would be much better to impose high taxes on job-eating technologies instead of providing subsidies in the form of EPF contributions. The Government will be earning revenues from these taxes while it will be losing revenues in EPF subsidies.

The BJP Government continues to follow the UPA policy of taxing big companies and using the money to generate jobs under MNREGA. But the BJP ruled centre has reduced the outlay on this scheme. The BJP Government has claimed that it has made an all-time high allocation of Rs 38k crore for MNREGA in the budget for 2016-17. This actually amounts to a cut in the allocation. An amount of about Rs 34k crore was allocated for MNREGA around 2009-10 by the UPA Government. This amount should increase in tandem with inflation. Today an allocation of about Rs 70k crore would keep the real allocation at the levels of 2009-10. Thus allocation of Rs 38k crore for 2016-17 is actually a step down from Rs 70k crore that was required.

The Government has launched the "Skill India" mission with great hopes. The intention is good. But this can actually lead to opposite results. Say telephone companies were laying cables using manual labour to dig the trenches. Now, skill is imparted to JCB operators by the Government. The cost of laying a cable using JCB machines will decline. The skilled JCB operator will lay 100 metres of cable in a day while the unskilled operator laid only 50 metres of cable in a day. It will become profitable for the telephone companies to use JCBs. The total number of jobs created in the laying of cables will decline. Thus it is necessary to classify the skills in job-creating and job-eating categories. Skill development should be restricted to job-creating skills like mobile repairing, making garments, and the like.

All is not lost though. The NDA Government is not creating any obstructions in growth of the services sector. India can become a global exporter of services like educational tutorials, health tourism, translations and the like. Young students out from management colleges are getting excellent packages from Multinational Corporations. A new middle class is in the making. This middle class is employing domestic help, buying services like tourism and real estate. Jobs are being created in domestic help and construction sectors. Thus two opposite forces are at play. The larger economic policies are destroying jobs while the trickle down from the new middle class is creating jobs. It is difficult to say which of the two tendencies will win. It can be said, however, that job creation would move on the fast lane if the NDA Government abandoned the job eating policies that it is promoting.

Vol. 48, No. 44, May 8 - 14, 2016