As India gallops towards the next phase of its general elections, the specter of unemployment looms large, casting a sobering shadow over the nation’s roaring economy. The issue has propelled itself to the centerstage of political discourse, with opposition leader Rahul Gandhi lambasting Prime Minister Narendra Modi for transforming India into a “center of unemployment.”
The Youth Unemployment Crisis
Youth unemployment has reached alarming proportions in India, with a staggering 83% of all unemployed individuals falling within the age group of 15 to 29, according to the “India Employment Report 2024.” This disconcerting statistic has become a formidable weapon in the arsenal of opposition parties, who relentlessly blame Modi’s policies for exacerbating the situation.
Gandhi has been relentlessly vocal in his criticism, declaring that Modi “has aggravated unemployment in the country” and crippled businesses responsible for creating jobs through his disastrous demonetization drive and the flawed Goods and Services Tax (GST) regime.
The Demonetization Debacle
In 2016, Modi announced a sweeping demonetization drive, declaring all high-value notes as invalid. This audacious gamble, intended to curb black money and illicit activities, was met with widespread criticism. Modi’s predecessor, Manmohan Singh, denounced it as “monumental mismanagement.”
However, despite the backlash, demonetization did not prevent Modi from securing a second term in 2019. However, its impact on India’s unorganized sector, which employs a whopping 93% of the country’s workforce, has been profound and long-lasting, according to economist and former Jawahar Lal Nehru University professor, Arun Kumar.
A Shift That Hurts
The deterioration of India’s job generation capacity can be attributed to a shift towards the organized sector from the unorganized sector, coupled with a transition from labor-intensive industries to capital-intensive sectors such as e-commerce, explains Kumar. This shift has resulted in a diminished demand for low-skilled labor, exacerbating the unemployment problem.
Former Reserve Bank of India governor, Raghuram Rajan, shares Kumar’s concerns. He highlights the decline in employment in labor-intensive sectors like leather goods, attributing it to the government’s priorities: “Think about these chip factories. So many billions going to subsidize chip manufacturing.”
A Manufacturing Mirage
India’s ambitious manufacturing push has thus far failed to address the unemployment crisis due to limited value-addition and increasing mechanization, particularly in sectors like mobile phone manufacturing. “We are assembling the phones here, not manufacturing the parts that would lead to higher job creation,” laments Kumar.
With mechanization on the rise, job creation in India has become capital-intensive, employing far fewer workers than in the past. Rajan decries this trend, questioning the wisdom of investing heavily in capital-intensive sectors like chip manufacturing when the nation is struggling to create jobs.
Just Political Rhetoric?
Amidst the heated political rhetoric, it is crucial to acknowledge that youth unemployment has declined from 17.5% in 2019 to 12.1% in 2022 and further to 10% in 2023, according to the ILO-IHD report. Additionally, overall unemployment has dropped to 3.1% in 2023.
Supporters of Prime Minister Modi maintain that the clamor around unemployment is largely political posturing. Surjit Bhalla, a former IMF executive director and member of the prime minister’s economic advisory council, dismisses much of it as a “political narrative.”
Despite the controversy, it is undeniable that unemployment remains a pressing concern for many Indian voters. As the nation heads into the second phase of its elections, the candidates and their policies will be closely scrutinized for their ability to address this daunting issue and restore hope to India’s aspiring youth.
Data sourced from: cnbc.com
