The headline unemployment rate in India stands at sub-4 per cent, but is as high as 13.2 per cent among the youth aged 18-29 years.
NEW DELHI: If you think that an economy growing at a healthy 7 per cent or above generates better job opportunities, you may well have to do a rethink as India offers an interesting example to the contrary.
The bottomline is productivity rather than labour employment drives emerging markets like ours. Indian economy will need 1.02 crore jobs per annum until 2030, but could end up creating only 91 lakh jobs, says Motilal Oswal Securities in a note. This, even as the economy may keep growing at a rapid pace.
Just look at the chart below:
This chart compiled by the brokerage suggests that contrary to the popular view, employment and GDP growth share an inverse relationship in India, no matter which way you slice it.
"A surge (or fall) in employment elasticity during slowdown (or boom) periods over the past quarter of a century confirms that the thumb rule of 'higher GDP growth is necessary to create more employment' is not valid in the context of the Indian economy," it said.
The real GVA-GDP growth in the Indian context is not a strictly positive function of employment growth and the economy, in the past, has done great without solid employment growth and may well continue to do well.
The headline unemployment rate in India stands at sub-4 per cent, but is as high as 13.2 per cent among the youth aged 18-29 years and 35 per cent among the educated youth who are graduates or hold higher degrees.
Motilal Oswal believes that India's unemployment could jump to 5 per cent by 2022 and 5.9 per cent by 2030. To give you a perspective, it would mean a doubling of the pool of unemployed people to 36 million, from about 18 million.
"With doubling of the country's unemployed population, the employment situation will rightly regain its dominance in India's political and economic landscape. Policymakers would do well to keep a tight lid on the unemployment rate to avoid social chaos," it cautioned.
Evidence from the US suggests that a boost to startups could assist in job creation in India as well. Renewed focus on promoting labour-intensive export industries could lead to more jobs, the report said.
That apart, a boost to the construction sector can well be taken up as it is the only industry among the top five labour-intensive ones -- covering 85 per cent of total employment -- with a job elasticity of more than 1, it argued.
