Event Report
Aashnaa Mehta
IMPRI #PolicyWebTalk recently organised an insightful 6-day panel discussion on the prospects of the Union Budget. Held from July 24th to July 29th, 2024, this event was part of the IMPRI 5th Annual Series of Thematic Deliberations and Analysis of Interim Union Budget 2024-25. On July 25th, 2024, the Center for Work and Welfare (CWW), IMPRI Impact and Policy Research Institute, New Delhi, hosted a discussion on “Employment, Livelihoods, and Union Budget 2024-25.” The webinar examined its potential impact on employment opportunities and livelihood sustainability.
The panel featured a distinguished lineup of experts. The Chair and Moderator for the event was Prof. Suchita Krishnaprasad, Visiting Professor at IMPRI and Former Associate Professor and Head of the Department of Economics at Elphinstone College, Mumbai. The panellists included Mr Sandeep Chachra, Prof. R S Ghuman, Prof. Randhir Singh Rathore, Prof. Swarna Sadasivam Vepa, Prof. Sarthi Acharya, and Prof. Ashok Pankaj. Each expert brought unique insights and perspectives, enriching the discussion with in-depth analyses and forward-looking views.
In her opening remarks, Prof. Suchita Krishnaprasad, Former Associate Professor and Head of the Department of Economics at Elphinstone College, Mumbai, highlighted that, following a V-shaped recovery from COVID, the Indian economy has demonstrated resilience against geopolitical challenges. The economy has solidified its recovery with a balanced approach of fiscal and monetary measures, maintaining economic and financial stability. While headline inflation is largely controlled, food inflation remains a concern due to its impact on livelihoods. The trade and current account deficits have narrowed, with the latter showing a surplus in the last quarter of the previous financial year. Foreign exchange reserves are robust, equity markets are strong, and repatriated investment has surged. Corporate sector performance has been remarkable, with profits quadrupling from 2020 to 2023 and gross fixed capital formation increasing by 52% post-COVID, largely due to tax incentives.
Despite these positive economic indicators, the benefits have not fully translated into improved livelihoods. Manufacturing jobs have decreased by 54 lakh, and the growth in service sector employment appears driven more by necessity than opportunity, leaving many workers in precarious conditions. The private sector’s reluctance to invest, despite high capital formation, mirrors the underutilization of allocated funds by states.
To address these issues, the government has introduced the Employment Linked Incentive Scheme to stimulate private sector employment. However, challenges remain regarding job quality and productivity, with a significant number of engineering graduates being deemed unemployable. Income and wealth inequality persists, with the top 1% earning 21.7% of the income in 2021, limiting market size and investment potential. Rural distress, evident from rising MGNREGA demand, remains a critical issue. Agriculture, the only sector with positive growth during the pandemic, faces climate change challenges, though recent budget initiatives aim to enhance agricultural resilience and support the national policy on cooperatives.
Despite ongoing infrastructure improvements under Atmanirbhar Bharat and Gati Shakti, the budget’s inclusion of religious infrastructure projects represents a novel focus. While macroeconomic indicators are promising, the reality of livelihoods is troubling, with nearly 30% of young Indians struggling to find suitable employment, compounded by poor educational outcomes and undernourishment, challenging the vision of ‘Viksit Bharat.’
Prof. Sarthi Acharya, Professor (Delhi Chair) at the Institute for Human Development, New Delhi, and former Director of the Institute of Development Studies (IDS), Jaipur, emphasized the critical role of manufacturing, particularly MSMEs, in enhancing livelihoods and advancing India’s development. With a labor force of about 50 crores and an annual employment increase of 1.2%, India faces a significant challenge in addressing unemployment, which stands at around 3 crores. The GDP’s capacity to absorb labor has been declining since 1972, with recent improvements attributed mainly to rises in unpaid family workers and self-employed individuals, indicating insufficient job creation in formal wage sectors.
Prof. Acharya noted that NEET (Not in Employment, Education, or Training) affects 13% of men and 55% of women, representing a loss of potential human resources. To combat unemployment, India needs to generate 1 to 2 crores of jobs annually. The budget’s Rs. 2 lakh crores allocation for employment generation, focusing on skills, incentives, and internships, may have limited immediate impact because of the voluntary nature of internships and the delayed effects of incentives.
MSMEs, which make up 96% of enterprises and contribute over 30% to industrial production and 40% to exports, face challenges such as operating in traditional sectors, high mortality rates, and low average salaries of Rs. 8,000 to 10,000 per month. Prof. Acharya questioned the reduction of import duties on electronics and footwear, arguing that local MSMEs could have produced these goods.
The supply side of labor also faces challenges, including an average education length of only eight years and limited mobility for women. Prof. Acharya argued that while GDP growth might rise, human development is questionable without improvements in worker quality and wages. He stressed the need for better skill development, research, and education quality. The budget’s provisions for higher education loans and skill development are undermined by the poor quality of many Indian universities, with declining standards at institutions like IITs reflecting broader educational issues. For MSMEs to effectively contribute to job creation and development, substantial improvements in skill quality, research, and institutional support are essential. Without these measures, job creation efforts may merely perpetuate poverty rather than foster genuine development, underscoring the need for a comprehensive approach to achieving ‘Viksit Bharat.’
Mr. Sandeep Chachra, Executive Director of ActionAid Association, India, and former Co-Chair of the World Urban Campaign at UN-HABITAT, offered a critical assessment of the budget, focusing on employment, livelihoods, and agriculture. He emphasized the necessity of a social class analysis, which he feels is often overlooked in mainstream media and academic discussions. Understanding the budget through a class perspective reveals the true beneficiaries of financial policies and allocations, especially concerning the working class and marginalized groups.
He observed that while the budget reflects social concerns due to electoral pressures, it heavily relies on the private sector for job creation, a strategy that has been ineffective in recent decades due to the declining role of labor in capital formation. He questioned the practicality of measures like the proposed one crore internships in top companies and the use of EPFO-linked incentives, arguing they may not address the informal sector’s needs.
Mr. Chachra expressed concerns about the quality of jobs created, highlighting the increase in contractual employment and wage depression, which affects both the private and public sectors. He criticized the budget’s focus on formal sector jobs, which benefits the middle class but neglects the informal workers who make up 90% of the workforce. There is a need for a more active role of the state in providing direct employment and social security, since the budget’s reliance on trickle-down economics fails to address deep-rooted issues faced by the majority.
Prof. Ashok Pankaj from the Council for Social Development in New Delhi offered a critical analysis of recent budgetary measures aimed at inclusive development and employment in India. He highlighted the evolution of inclusive development as a key policy theme since the 11th Five-Year Plan, which seeks to address the inequities in growth that impact Scheduled Castes (SCs), Scheduled Tribes (STs), minorities, and women. The recent budget appears to respond to political and electoral pressures, particularly in rural areas. Measures such as a direct benefit transfer (DBT) of ₹15,000 for each new employee earning up to ₹1 lakh are intended to promote employment. However, the effectiveness of these initiatives may come into question, since the realization of benefits hinges on actual job creation.
The budget’s emphasis on formalizing the informal sector through Provident Fund incentives has been met with skepticism, with doubts about whether these measures will sufficiently address small businesses’ reluctance to formalize. A comparison with the Economic Survey’s recommendations reveals a disconnect between the budget’s reliance on private sector incentives and the need for more substantial job creation. Nonetheless, several measures, such as a credit guarantee of up to ₹100 crore and online platforms to enhance access to working capital, are seen as potentially transformative for MSMEs, which play a crucial role in employment generation.
Prof. Randhir Singh Rathore, Dean of Academic Affairs at Shri Vishwakarma Skill University, provided a detailed analysis of recent skill development and livelihood initiatives from the latest budget. Building on prior critiques, he focused on practical implications and challenges facing the government’s new schemes. Prof. Rathore noted that while the Economic Survey aimed to create 1 crore jobs annually, the government introduced five schemes to achieve this goal.
A key issue is the quality of skill development, as industries, including MSMEs and larger firms, often find graduates lacking essential skills, even engineers. He also suggested better utilization of existing schemes like the National Apprenticeship Training Scheme (NATS) and the National Apprenticeship Promotion Scheme (NAPS), which offer practical experience.
The emphasis on green technology, such as solar rooftop installations and specialized clean energy projects, highlights promising avenues for job creation, provided there is adequate training and support. Additionally, investment in tourism infrastructure presents another potential avenue for employment growth. Prof. Rathore’s call for a practical and comprehensive approach to skill development, which includes quality training and exploring new sectors, reflects the broader need for a multifaceted strategy.
Prof. Swarna Sadasivam Vepa, Visiting Professor at the Madras School of Economics (MSE) and IMPRI, offers a critical analysis of the labor market amid technological advancements, focusing on the implications for employment. While acknowledging the discussions on policy initiatives, Prof. Vepa emphasizes the transformative impact of technology on job markets, highlighting both challenges and opportunities.
Technological advancements have reshaped job markets by creating new opportunities but also rendering some jobs obsolete. This has led to “jobless growth,” where economic growth does not equate to job creation. Historically, employment growth was closely tied to economic growth, but this elasticity has significantly declined.
Globally, there has been a decline in middle-skill jobs, with a polarization towards high-skill and low-skill positions. In India, this trend is evident in the shrinking of middle-skill jobs in manufacturing, while low-skill jobs persist in agriculture and construction. The unorganized sector, which once employed a large portion of the workforce, is diminishing, with only modest growth in the organized sector. Manufacturing, a major contributor to GDP, has limited job creation capacity, further constrained by automation. The rise of digital platforms and service aggregators, such as Zomato and Amazon, has introduced new employment opportunities for low-skilled workers in urban areas. However, these jobs often lack stability and benefits, fueling the growth of the gig economy rather than providing secure employment.
Prof. Vepa raises concerns about digitalization and automation’s impact on low-skilled workers, noting that the gig economy often lacks job security and benefits. There is a need for more comprehensive studies to understand technological changes’ effects on low-skilled workers, as well as for advocating for policies that address these challenges and the broader implications of digitalization and automation on job markets.
The Way Forward
While the budget introduces various schemes aimed at boosting employment and supporting skill development, concerns persist about their effectiveness and practical implementation. The emphasis on private sector-led job creation, the focus on formal sector employment, and the introduction of initiatives like internships and incentives for MSMEs show a commitment to addressing employment issues. However, significant gaps remain, particularly in relation to informal sector workers and marginalized groups.
The panel discussion highlighted the need for a more inclusive approach that not only tackles immediate employment challenges but also addresses structural issues such as skill mismatches, quality of jobs, and the impact of technological changes. A holistic strategy that integrates robust support for various social classes, strengthens the role of both the public and private sectors, and embraces the evolving nature of work is essential to achieving sustainable and equitable employment growth.
Acknowledgement- This article was written by Aashnaa Mehta, Research Intern at IMPRI, who is currently pursuing her Bachelor’s in Political Science.
Read more Event Reports here: Viksit Bharat – Developed India @2047 and Union Budget 2024-25
