Union Budget 2024 has placed significant emphasis on job creation and skill development to capitalise on the country's demographic advantage. Growing unemployment, political observers aver, emerged as a major concern during the 2024 Lok Sabha general elections.
India needs to create 8 million new jobs annually, according to the Economic Survey, to absorb into the workforce the youth graduating from colleges. And the challenge lies in creating enough jobs not only in terms of quantity but also in terms of quality.
There is an ongoing debate and comparisons regarding the jobs being created during the NDA regime as against those that were created during the UPA rule, as well as about the true unemployment rate in India.
The Shares Across Agriculture, Industry And Services
While according to a Reserve Bank of India (RBI) report, the unemployment rate in India was 3.2% in FY 2022-23, the Centre for Monitoring Indian Economy (CMIE), a private body, pegs it at 7.6%. The RBI report, titled Measuring Productivity at the Industrial Level, states that the total workforce in India was 643.3 million in FY24, with 47 million jobs created during the year. Approximately 265 million people are employed in agriculture, 154 million in industry, and 219 million in services.
In FY23, the total workforce was 596.7 million, with 42.4% employed in agriculture - which puts the non-agricultural workforce at 343.7 million. Of the 74 million income tax returns filed in FY23, 51.6 million, that is, 70% of the total, were zero-income tax returns.
Agricultural income is tax-exempt, so it is expected that 42.4% of the workforce in this sector would not pay taxes. However, the fact that 70% of total returns are zero-income returns indicates that there are low-paying jobs even in the industry and service sectors. Of the 347 million people employed in industry and services, only 22.4 million are paying taxes. Meaning that just 6.5% of the non-agricultural workforce is contributing to India's income tax collection. This raises serious concerns about job quality.
Reports indicate that only around 118 million people in India are employed in salaried jobs, with just 20% earning more than Rs. 50,000 in a month; most of them have monthly salaries of less than Rs. 20,000.
Jobs Under NDA vs Jobs Under UPA
Decadal employment data from the RBI shows that India created 125 million jobs during FY14-23 (that is, during the NDA regime), compared to the 29 million created in FY04-14 (the UPA regime). Even if we exclude agriculture, job creation in manufacturing and services amounted to 89 million during the NDA regime versus 66 million during the UPA dispensation.
At the same time, in FY04-14, the agricultural workforce declined by 37 million, while industry and services each saw an increase of 33 million. This indicates a strategic shift from agriculture to industry and services, aligning with India's long-term goal. Agriculture employs close to 40% of the workforce but contributes only 15% to the country's GDP.
From FY14 to FY23, 36 million jobs were created in agriculture, 32 million in industry, and 57 million in the service sector, totalling 125 million jobs over nine years on a net basis. The shift from agriculture to industry and services appears to have slowed down during this decade, possibly due to the Covid-19 pandemic. Many workers from cities and metros returned to their villages and did not come back, taking up agriculture-related jobs in their local areas instead. This could have led to an increase in the agricultural workforce.
How Promising Are The Recent Schemes?
The government has set an ambitious target of creating an additional 41 million jobs over the next five years through the schemes announced in the Budget. This target includes 29 million jobs from Employment-Linked Incentive (ELI) schemes, 10 million from internships, and 2 million from ITI (Industrial training institutes) programmes.
To enhance employability, the Government of India has also launched a scheme offering internship opportunities to 10 million youths in India's top 500 companies over five years. This translates to 4,000 interns per year for each of these companies, totalling 2 million interns annually. An internship allowance of Rs 5,000 per month will be provided to youth, while companies will cover the cost of training through CSR funds. EaseMyTrip has already announced plans to hire through this scheme.
However, doubts remain about the feasibility of the scheme. Was the industry consulted before launching the ambitious initiative? The Finance Minister also said in an interview with a leading news organisation that "the internship scheme was not "compulsory". "We are nudging the industry to adopt it," she said.
Corporate Sector Needs To Step Up
The Economic Survey has subtly suggested that the corporate sector needs to contribute more to employment generation. It noted that the sector was "swimming in excess profits", with Profit Before Tax (PBT) nearly quadrupling between FY20 and FY23 and the corporate profits-to-GDP ratio reaching a 15-year high in FY24. Yet, the survey said, "hiring and compensation growth hardly kept up with this".
Employment data from the top 585 publicly traded companies show that they collectively employ 7.3 million people. How, then, can they absorb 10 million interns? For India to benefit from its demographic dividend, it needs to generate productive employment for 7-8 million youths who will join the labour force each year. If not, this dividend could be lost. Can the budget push to achieve these job creation goals? We will have to wait to see the implementation of recently announced schemes in months to come.
(Amitabh Tiwari is a political strategist and commentator. In his earlier avatar, he was a corporate and investment banker.)
Disclaimer: These are the personal opinions of the author
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