July 12, 2024
📰 FEATURE STORY
Is Citigroup’s report on India’s job creation right in its conclusions?
The Modi 3.0 government, now a coalition, unlike its previous two outings, has a mammoth task ahead of it. India needs to create well-paying jobs to keep up with the demand. We’re less than two weeks away from the 2024 Budget, and plenty of eyes will be on what the government has in store for job creation.
In the meantime, on a related front, there’s a row between the Union government and Citigroup, who released a report that stated, “India would struggle to create enough jobs” even if the growth rate is 7%. The Labour Ministry has refuted the findings and stated Citigroup failed to consider comprehensive employment data. Is India’s job creation future dire, as Citigroup put it?
Context
As the election season kicked into high gear, employment was one of the issues in people’s minds. The world witnessed India’s rapid economic growth over the past decade. Economists lauded the country for its investments in manufacturing. Investors were bullish on India and its future because there were reasons to be. India’s GDP grew by 55% between 2014 and 2023. It overtook the UK, France, and Italy to become the world’s fifth-largest economy.
India has a lot going for it. Chief among them is demographics. India has one of the youngest populations in the world. That’s a large and youthful labour force that will expand. The result is people looking for and getting jobs, spending, consuming, saving, investing, paying taxes, etc.
Despite the rosy picture, things aren’t what they seem underneath. A pre-poll survey by CSDS-Lokniti found that nearly half the electorate saw unemployment and inflation as the two biggest issues for the election. This wasn’t new, but the pandemic and an uncertain global economic landscape accelerated people’s concerns.
The 2024 India Employment Report showed the country’s working population increased from 61% in 2011 to 64% in 2021. It’s projected to reach 65% in 2036. But the important data point here was that the number of youngsters involved in economic activities declined to 37% in 2022.
Unemployment and underemployment have been persistent issues post-independence. India has always been a primarily agrarian and labour-surplus economy. The large population means there have never been enough jobs to match the number of people looking for work. One of the issues India faces is the large unorganised or informal sector where most people are employed. Some estimates say less than 20% are engaged in regular wage or salaried occupations.
Looking to the future, formalisation of the job market remains a challenge. That means India needs to create more jobs where people are paid regular wages and salaries.
Citigroup said there are reasons to worry. According to its estimates, India needs to create 12 million jobs a year over the next decade to meet the demand of new entrants into the job market. If India continues its current growth rate trend of 7%, it’ll only be able to generate 8-9 million jobs. That’s nothing to say about the quality of the jobs, another challenge altogether.
The government, understandably, isn’t happy with the report and its findings. Is Citigroup right in its conclusions?
VIEW: India has the necessary tools
The government has refuted Citigroup’s report. It cited the Periodic Labour Force Survey (PLFS), RBI’s capital, labour, energy, material and services (KLEMS) data, which showed India created over 80 million jobs from 2017-18 to 2021-22. That’s an average of 20 million every year. The PLFS report showed improving trends in labour market indicators like participation rate and worker population ratio. The Citigroup report, per the Centre, didn’t cite these sources.
One thing to keep in mind with Citigroup’s report is that they use their own definitions and calculations of employment and unemployment. The government believes the methodology and sample distribution aren’t as robust as official sources like the PLFS. We also now have the employment data from the Reserve Bank of India (RBI). It stated that the employment growth rate was 6% in 2023-24 compared to 3.2% in 2022-23.
India’s job market will become more crowded due to its rising young population. India also has the necessary tools at hand to meet the challenge head-on. The continued development of its manufacturing hubs and increased investment in services and IT/ITES are positive signs. The country is embracing digitisation, becoming a startup hub, and creating an environment for companies to make in India. All this and more will serve it well for job creation.
COUNTERVIEW: An uphill climb
The job market in India is in a precarious spot. GenX is looking to reskill itself as the landscape is undergoing big changes. Millennials and GenZ are finding out their own way of working. The future of work will be influenced by tech innovations, demographic shifts, and climate change, to name a few. Amidst all this, companies are struggling to find skilled workers.
The two big problems India faces for the future are the quantity and quality of jobs to be created. Going back to the pandemic, India had one of the longest records of school closures, and experts suggested the resulting learning gaps will lead to educational and economic deficits in the future. That’s going to affect the number of people looking for jobs.
India’s manufacturing prowess has often been touted as the base upon which India’s jobs market will grow. While it’s certainly vital to the economy, employment within it has stalled, particularly in urban areas, in the past decade. If India is going to get the coveted “developed nation” tag, it should grow by 8% annually for the next 25 years. A big challenge will be reallocating surplus labour from agriculture to more productive sectors. That means people should be upskilled, which isn’t happening at the necessary pace.
Reference Links:
- Why Indian Voters See Job Creation as the Election’s Biggest Issue – Time
- India will be unable to plug jobs gap even with 7% growth, says Citigroup – Business Standard
- Why a debate over jobs has pitted the Centre against Citigroup – Firstpost
- Employment improved in past decade, formalisation still a challenge – The Financial Express
- Over 514 million jobs created during 2014-2024 – Economic Times
- India created 4.66 cr jobs in FY24; employment growth rate rises to 6%: RBI data – Fortune India
- Explained: Why India’s ‘fastest-growing’ economy needs faster job creation – India Today
- What’s the future of employment for India’s youth? – IDR
What is your opinion on this?
(Only subscribers can participate in polls)
a) Citigroup’s report on India’s job creation is right in its conclusions.
b) Citigroup’s report on India’s job creation is wrong in its conclusions.
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