RSTV- The Big Picture : Economy and Employment

  • IASbaba
  • February 1, 2018
  • 1
The Big Picture- RSTV
Print Friendly, PDF & Email

Economy and Employment


TOPIC: General Studies 2

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Rajya sabha took up a short discussion on state of economy, investment climate, job creation and the challenge of unemployment. Macro economic data has mixed news- there is some indication of recovery in the manufacturing sector but the private investment is yet to see any pick up. The corporate sector is moving up but agriculture, investments, MSMEs have not shown much improvement. NPAs are still lingering. The budget can have increased expenditure by the government as it is easy and direct. But the room for it is coming down as if the government goes easy on fiscal target of 3.2% GDP, it would breach 3.5% target which it certainly looks forward to avoid.

Two more macro economic problems are:

  • Under estimation of the deficit impact. Today the deficit of the state is larger than centre.
  • Oil prices have touched 67USD. RBI calculations are based on 55USD. Each dollar difference in the crude oil prices makes the Rs.10000 crore difference as India is the largest importer of crude in the world and every dollar increase means 1.5 million dollars extra expenditures and 10 dollars means 15 million dollars lost.

GDP accelerated to 6.3% in September quarter of 2017-18 after dropping to 5.7% in June quarter. The economists expect sustained recovery in next two quarters and expect the Indian economy to grow in 17-18 at 6.8%.

The immediate requirements

  • Spurring of private investments in India is critical. Generation of quality jobs through better social protections is one of the surest means to attract more private investments.
  • The external demand, particularly the export demands in global markets are down. As a consequence of which, there has to be increased sustenance of internal demand. The domestic demand has to be spurred up for encouraging the private investments and growth of industrial sectors. For this, quality employment is the essential.
  • Demand generation development in India depends on bringing money to hands of people who spend. This includes focus on rural economy- farming sector as well as non-farm jobs and others non-low grade sectors. The crucial need is to create decent work in unorganized sector. Revival of work in unorganized sector, upgradation, modernized, integrate with the economy is the key to bring sustainable growth in economy.
  • Most of the increase in working population is going to take place in northern states- Rajasthan, UP, Bihar, Jharkhand and MP. The real challenge is to generate this type of dynamism in non-agricultural growth in these states. South is getting into opposite state of maximum development whereas western and eastern India will get there in a decade. Thus, there is a need to work hard to galvanise, upgrade, modernize maximum population in northern India and ensure decent well paid jobs on a larger scale.

Resent cause of concerns

  1. The wage income shares in organized manufacturing- during last 4 decades, the percentage of wage has declined from 40% to 10-12% and the corresponding increase has happened in profit shares. Thus the people were getting shares in value added are not necessarily spending it in economy. Today, the formal sector has also seen growth but the money is going to people who are not spending it. According to a report, the top Indian management gets 300 times of what average Indian worker gets paid. The expenditure is done by the ordinary worker. For higher aggregate demand, the incomes of workers have to be increased in the formal sector as well as informal sector.
  2. The open unemployment may be low. But the unemployment figures among the educated young people are rising which is a cause of concern. That can be tackled through coherent education employment policy and that policy coherence is critical. India is categorized into ‘Not in employment, education and training category’. This is called as NEET category. NEET is a relatively new concept. According to the OECD, youth inactivity presents the share of young people (age 15-29) not in employment, education or training (NEET) as a percentage of the total number of young people in the corresponding age group. The inactivity in India needs to be found out- what is causing it? Is it the job search assistance that is provided to young people is weak, the job aspirations are not being resorted to or little incentives or face too high constraints to be in the education and training systems.
  3. The third cause of concern is in respect to quality- universalization of social security. India has a distinctively different employment structure. There are 51% self-employed in India and thus tough labor regulations is not the sole answer.

Way forward

  • Get MSME sector back on it’s front foot and modernize it.
  • Agricultural focus has to be increased.
  • No unpredictable measures for economy in the remaining term of government.
  • Stability, growth in terms of taxation side as a policy.
  • Labour intensive manufacturing to be encouraged- leather, food prcessing, handicrafts give special status.


There is a cruel disruption in the Indian growth story of almost a decade. Soon after 2008 global financial crisis, there were expectations that there would be resurgent India growing fast at double digit or more on a sustained basis for 30 years. So by 2030, India becomes world’s top 3 economies. However, due to policy paralysis from 2011 to 2014 and unprecedented structural changes from 2014 till present has not allowed the economy to grow as expected.

However, in last three years, India’s economy has been among the fastest growing at the global level. The reforms to address the structural issues faced by the economy had resulted in an upgrade in India’s credit ratings as well as an increase in India’s rankings to 100 in World Bank’s ease of doing business index. The government is getting good signals on the investment climate and there are several initiatives taken on those lines. Slew of measure are in place to help the banks and bulk of NPAs, which are today adversely impacting the banks. More investments in agricultural sector, increased private investments, focus on reviving MSMEs will help to give the necessary filip. Thus, the Indian economy will see an upturn soon thereby galloping towards one of world’s fastest growing economy in the world.

Connecting the dots:

  • Critically explain how economy and employment drive each other.

For a dedicated peer group, Motivation & Quick updates, Join our official telegram channel – https://t.me/IASbabaOfficialAccount

Subscribe to our YouTube Channel HERE to watch Explainer Videos, Strategy Sessions, Toppers Talks & many more…

Search now.....