Indians are worse off under Modi

Prime Minister Modi should spend less time abroad telling foreigners how well India is doing and more time at home asking people how they feel about his administration.

• Only 3% of Indians consider themselves thriving in 2017 compared to 14% in 2014.
• India’s largely rural population initially led the decline in life evaluations, with thriving dropping from 14% to 7% between 2014 and 2015, and edging even lower to 4% and 3% in the years after that.
• Declines among urban Indians have been much more gradual, although they are down in the past year, dropping from 11% to 4%.
• Modi’s policies have yet to touch the masses. Living wage for family in India remains almost flat in the Rs.17,300-17,400 per month range over his tenure. 
• Wages paid to low-skilled labor decreased to Rs.10,300 per month in 2017 from Rs.13,300 per month in 2014.
• There is the persistence of corruption, the rise of nonperforming loans in state-owned banks, high taxation, poor public health, and chronic income inequality — something that Modi inherited from previous administrations. All these explains the misalignment between the high hopes of the Indian people for their economy and what they are personally experiencing.
• The people had high expectations, and those expectations have not been satisfied. GDP growth is still above 5%, but it has slowed down sharply from past rates of 8 and 9%.
• The above 5% GDP growth is not creating jobs. There’s this phenomenon of ‘jobless growth.’ India is demographically quite a young nation. And the young people are entering the labor force at too fast a rate compared to job creation. These young people are getting frustrated.

When people see their lives headed in the wrong direction, they want change. That should be of great concern to Modi.

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Artificial Intelligence, Automation & Jobs

• Cars that drive themselves, machines that read X-rays, and algorithms that respond to customer service inquiries are all manifestations of automation. These technologies increase productivity and improve our lives, their use will substitute for some work activities humans currently perform has sparked much public concern.
• Technology destroys jobs, but not work. Automation adoption could be a powerful productivity booster.
• More than 60% of occupations have at least 30% of constituent work activities that could be automated. Less than 5% of occupations can be fully automated. It will also create new occupations that do not exist today, much as technologies of the past have done.

• About 15% of work activities could get automated by 2030. Advanced economies would get more effected by automation reflecting higher wage rates and thus economic incentives to automate.
• Even with automation, the demand for work and workers could increase as economies grow fueled by productivity growth. Rising incomes and consumption in developing countries, increasing health care for aging societies, investment in infrastructure and energy etc will create demand for work that could offset the displacement of workers. Additional investments in infrastructure and construction could be needed to reduce the risk of job shortages in advanced economies.
• By 2030, 75 million to 375 million workers (3 to 14% of the global workforce) will need to switch occupational categories. Displaced workers are unlikely to get jobs if idle for more than an year. If their transition to new jobs is slow, unemployment could rise and dampen wage growth.
• All workers will need to adapt increasingly capable machines which require higher educational attainment, spending more time on activities that require social and emotional skills, creativity, high-level cognitive capabilities and other skills relatively hard to automate.
• Automation will enable growth of high wage jobs in advanced economies while middle-wage jobs might decline. Automation will spur growth of middle wage jobs in emerging economies mostly in construction and service sectors which further boost the emerging middle class.
• The benefits of automation will be vast but addressing worker transitions is imperative by business and political leaders. Economies that are not expanding do not generate job growth. Mid career job training and worker redeployment will become essential. The priority is strengthening transition and income support for workers caught in the crosscurrents of automation.
• This job gained could more than offset the jobs lost to automation only if businesses and governments seize opportunities to boost job creation and for labor markets to function well.
• Technical feasibility of automation is important, other factors such as cost of developing and deploying automation solutions for specific uses in the workplace, the labor market dynamics, the benefits of automation beyond labor substitution, and regulatory and social acceptance will influence the pace and extent of automation adoption.
• In the US, the agricultural share of total employment declined from 60% in 1850 to less than 5% percent by 1970, while manufacturing fell from 26% of total US employment in 1960 to below 10% today. China’s one third workforce moved out of agriculture between 1990 and 2015. Yet overall employment grew. Such shifts can have painful consequences for some workers during the transition period that could be eased only after policy reforms.
• Robust aggregate demand and economic growth are essential for job creation. New technologies have raised productivity growth, enabling firms to lower prices for consumers or pay higher wages. This stimulates demand across the economy, boosting job creation.
• Rising productivity is usually accompanied by employment growth thus creating demand for goods and services across the economy. 
• Productivity growth enabled by technology has reduced the average hours worked per week. Across advanced economies, the length of the average work-week has fallen by nearly 50% since the early 1900's.
• Although the historical record is largely reassuring, some people worry that automation today will be more disruptive than in the past. If technological advances are adopted rapidly, the rate of worker displacement could be faster. If many sectors adopt automation simultaneously, the percentage of the workforce affected by it could be higher.
• Automation will have a lesser effect on jobs that involve managing people, applying expertise, and those involving social interactions, where machines are unable to match human performance for now.
• Jobs in unpredictable environments such as gardeners, plumbers, or providers of child and elder care will also see less automation by 2030, because they are difficult to automate technically and also command lower wages, which makes automation a less attractive business proposition.
• Automation displacing labor is clearly visible but it is difficult to envision all the new jobs that will be created as most new jobs are created indirectly and spread across different sectors and geographies.
• Global consumption grows as incomes rise and consumers spend more and their spending patterns also shift, creating more jobs in the countries where the income is generated, but also in economies that export to those countries. 
• People aged above 65 years could grow by 300 million, by 2030, and their spending will increase on health care and other personal services. This will create significant demand for doctors, nurses, health technicians, home health aides, personal care aides and nursing assistants but reduces demand for pediatricians and primary school teachers. 
• Jobs related to developing and deploying new technologies may also grow. Overall spending on technology could increase by more than 50% between 2015 and 2030. The number of people employed in these occupations is small but they are high-wage occupations.
• Rising incomes also create demand for more and higher quality buildings. Both factors could create new demand, mainly in the construction sector. These jobs include architects, engineers, carpenters and other skilled tradespeople, as well as construction workers, machinery operators and other jobs with lower skill requirements.
• Advanced economies may also see employment declines in occupations that are most susceptible to automation. These include office clerks, office assistants, finance and accounting, customer interaction jobs, cashiers, food service workers, and a wide range of jobs carried out in predictable settings, such as assembly line workers, dishwashers, food preparation workers, drivers, and agricultural and other equipment operators. Helping individuals transition from the declining occupations to growing ones will be a large scale challenge.
• The changes in occupational growth or decline imply that a very large number of people may need to shift occupational categories and learn new skills in the years ahead. The challenge in advanced economies will be to retrain mid career workers. There are few precedents in which societies have successfully retrained such large numbers of people. Frictions in the labor markets including cultural norms regarding gender stereotypes in work and geographic mismatches between workers and jobs could also impede the transition.
• Between 400 million and 800 million individuals could be displaced by automation and need to find new jobs by 2030 around the world. However people will need to find their way into these jobs. Of them, 75 to 375 million may need to switch occupational categories and learn new skills. 
• China faces the largest number of workers needing to switch occupations if automation is adopted rapidly. For advanced economies the share is much higher - up to one-third of the 2030 workforce in the US and Germany, and nearly half in Japan.
• History suggests that over time, labor markets adjust to changes in demand for workers from technological disruptions, although at times with depressed real wages.
• With sufficient economic growth, innovation, and investment, there can be enough new job creation to offset the impact of automation, although in some advanced economies additional investments will be needed to reduce the risk of job shortages.
• Future jobs lost and jobs gained vary by country, with the largest disruptions expected in advanced economies.
• Higher wages make the business case for automation adoption stronger. Some economists worry about “premature deindustrialization” in developing countries due to automation.
• Economic growth is essential for job creation. Economies that are stagnant or growing slowly create few new jobs. Countries with stronger economic and productivity growth and innovation will be expected to experience more new labor demand.
• Countries with a rapidly-growing workforce, such as India, may enjoy a “demographic dividend” that boosts GDP growth, if young people are employed. Countries with a declining workforce need automation to offset their shrinking labor supply, while countries with growing work forces have greater job creation challenges.
• India, a fast-growing developing country with modest potential for automation over the next 15 years due low wage rates. Most occupational categories are projected to grow reflecting its potential for strong economic expansion. However, India’s labor force is expected to grow by 138 million people by 2030, or about 30%. Employing these new entrants in formal sector jobs will require job creation on a much larger scale than in the past. Automation will make this challenge more difficult; some fear “jobless growth.” However analysis suggests that India can create enough new jobs to offset automation and employ new entrants, if it undertakes the investments.
• China and Mexico have higher wages than India, and so are likely to see more automation. Mexico’s projected rate of future economic expansion is more modest. Like the United States and Japan, Mexico could benefit from the job creation in new occupations and activities to make full use of its workforce.

With inputs from:

Transitions in a time of Automation

In coming years 'Automation' in many predictable activities is inevitable in India, its immediate impact on our 4 million IT work force is tremendous. 65% of existing IT employees are not re-trainable and will end up losing their jobs sooner or later. To over come impact of automation it is necessary to retrain our workforce but also create new jobs. But our track record in new job creation is dismally low. Today our economy is facing 'jobless growth' which is neither sustainable nor desirable. Due to Automation, job losses would be local where as new job creation would be any where in the world. New investments, infrastructure spending and construction requires higher budgets otherwise widespread unemployment is imminent. Unless agriculture is made remunerative and vibrant, migration of rural labour to urban localities in search of livelihoods will continue unabated and is destructive for our economic progress. Vibrant economies will easily adjust and derive benefits of 'Automation' but struggling economies like India will see painful disruption and deindustrialisation.

GDP Growth rate precarious

• Economic growth is caused by (1) an increase in aggregate demand and (2) an increase in aggregate supply.
• While the increase in demand is linked to consumption and requires enormous liquidity. Where as supply increase to match increased demand requires investment and easy working capital.
• With stagnant incomes in all classes resulted in demand decrease.
• With stagnant private investment and fragile PSU Banks - working capital for industries is limited and supply side is also restricted. This also restricts exports.
• With no jobs created during past three years economic activity remained stagnant.
• Jobless growth & consumer spending growth are unsustainable beyond a point.
• Infrastructure building remained stagnant.
• Demonetization impacted informal sector sector and agriculture beyond imagination and about 5 million casual jobs evaporated.
• GST roll out resulted in inventory reduction everywhere. Mangled GST badly implemented resulted in confusion and unscrupulous traders are collected higher GST and paying nothing to Government. At least 30% dealers haven't registered with GST but are actively collecting GST and pocketing the same. Cash transactions and GST evasion is on very large scale.
• China recorded average GDP growth of 10.5% during 2003-12 but remained stable at 7.4% thereafter. This despite government's investment of trillions of dollars to enhance growth, which is unsustainable.

Modi & Jaitley should understand that country's economics are complex and there is no single pill to boost GDP growth. Having destroyed racing economy with demonetization and further impacting with mangled GST roll out without adequate preparation impacting economy greatly and GDP growth is limping at 5.7% which otherwise would have been close to 10%. Now Modi & Jaitley are facing dilemma with cash starved treasury and banks, boosting GDP growth is no easy task. With prevailing indicators revival is unlikely prior to 2019 elections.

Unemployment in India

Unemployment, irregular jobs and low salaries continue to hurt India while it continues to embrace labour reforms. Around 77% families have no regular wage earner and more than 67% have income less than Rs 10,000 a month. Unemployment is higher in urban areas, among women, among educated and in agriculture sector. A society where a large proportion of the labour force is unemployed suffers from poverty and vulnerability. An increase in unemployment reduces aggregate spending power, slows down the economy and it increases the vulnerability of households to deal with economic shocks. Govt's employment through various schemes like MGNREGA, at an expense of about Rs.48,000 crores, failed to remove unemployment problem due to corruption and bureaucratic apathy in implementation. 

• Unemployment Rate in India averaged 7.32% between 1983 and 2013, with a high of 9.40% in 2009 and low of 4.90% in 2013. Unemployment in India is projected to increase to 17.8 million in 2017.
• On Nov 22, 2013, as BJP's prime ministerial candidate Narendra Modi at an election rally in Agra had promised creation of 1 crore jobs every year if his party won the election. 
  The BJP manifesto stated that “The country has been dragged through 10 years of jobless growth by the Congress-led UPA government. Under the broader economic revival, BJP will accord high priority to job creation and opportunities for entrepreneurship.”
  After three years of government formation, job creation remains the worst failure of the government as the job creation remained lowest in eight years.
• In 2015 only 1.35 lakh jobs were added, compared to 9.3 lakh jobs that were added in 2011-12 during UPA regime.
• About 15 lakh jobs were lost in the first four months of 2017 as the number of employed people came down from 406.5 million to 405 million. Each year 12 million people enter the workforce and 65% of India's population are under the age of 35. 
• Labour participation rate is a ratio of all adults willing to work, whether employed or unemployed, to the total population. This ratio was 48% in Jan 2016. It fell to below 45% in Nov 2016. Now it reached 43% in July 2017. Most Indians choose not to work. Low labour participation rate hinders economic growth.
• There were only seven countries in the world that had a labour participation rate of 43% or less. These are Iraq, Puerto Rico, Moldova, Syria, Timor-Leste, Samoa and Jordan. Labour participation rate in China is 71%. The world average is 63%. Other major countries are Indonesia with a labour participation rate of 67%, Pakistan (54%), Nigeria (56%), Bangladesh (62%) and Philippines (65%).
• In India, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force. In 2016, the country’s unemployment rate was 7.97%, with rural unemployment at 7.15% and urban unemployment at 9.62%.
• Shift in the pattern of employment from permanent jobs to casual and contract employment has adversely affected the wages, employment stability and social security of the workers.
• Why do so many Indians choose not to work? Indians are neither lazy nor rent-seekers by nature. The problem is in the lack of good jobs; in opportunities to work in a place where meritocracy rules and one can work hard with dignity and honesty for growth and prosperity. If such jobs are available in good numbers Indians will definitely choose to work.
• A jobless growth is neither sustainable nor desirable. It is a dangerous trend that creates social tension and disharmony. It spreads further inequality, which may lead to societal collateral damage.  
• It is the young who are losing jobs and it is the young again, who have stopped looking for jobs although they are unemployed. Young people are not ready to take jobs which are considered to be socially degrading or lowly. Such youngsters could easily stray into unlawful activities. 
• Causes of unemployment in India: (1) Growth of population (2)Underdevelopment of the economy (3) Slow growth in the agricultural sector (4) Defective system of education (5) Absence of manpower planning (6) Degeneration of village industries (7) Inappropriate technology (8) Slow growth of industrial sector (9) Immobility of labour and (10) Jobless growth.
• While unemployment is an important problem India faces, more serious problem is severe underemployment with workforce struck in low-productivity & low-wage jobs. Skilled people gets jobs easily and hence skill development among the youth is imperative.
• Achieving higher economic growth, in the range of 8% to 10%, is necessary to solve the problem of jobless growth.

Very few governments think about youth unemployment 

when they are drawing up their national plans ... Kofi Annan

Long-term unemployment makes a worker less employable.

Quite often the unemployed youth commit crimes to earn their living. Due to lack of opportunities in India, intelligent youth migrate to foreign countries. Their intellectual abilities are used by foreign countries which causes loss to India. Unemployment impacted organisational practices. It has resulted in unfair and corrupt practices in organisations such as low wages, harassment, fake muster rolls etc. The attitude of some private sectors towards employees is unfair on account of availability of surplus labour. Modi after becoming PM had enjoyed touring the world and delivering charismatic speeches and playing rogue politics in India. Midway the term he unleashed senseless demonetization which didn't achieve any of its intended objectives but left nation and its poor suffer unintended consequences. Thereafter, mangled and hurriedly rolled out GST is impacting economy and GDP growth like never before. Demonetization and GST are responsible for GDP growth slipping from 8.1% to 5.7% instead of growing to over 10%. 1% GDP growth loss roughly means loss of 1 million jobs. While recovery is certain after few years, in the meantime poor, peasants and lower classes are paying bitter price for no fault of theirs and for Modi's wild & blind adventures. 

Jobless growth of India's GDP

• Today, India is facing a peculiar situation of 'jobless growth' and 'growthless jobs' as well, mainly due to defective economic policies and gross fiscal mismanagement.
• During the past three years, public sector, government’s headcount remained stagnant. State-run banks registered a job growth of just 0.5%. Private corporations have no better figures.
• Every year, 10-12 million young Indians join the labour force, 5 million people leave agriculture to join the non-agriculture sectors. In contrast job creation is few lakhs only during the past three years which are mostly replacement recruitment.
• India's GDP growth and new jobs creation in India have not been growing at the same rate. The creation of more and better jobs and livelihoods is imperative for policymakers. Focusing only on GDP growth is a wrong approach.
• About 550 jobs are disappearing everyday, an alarmist declaration of loss of one million jobs during past five years.
• The lack of lending by the banks may very well be one contributing factor. 
• Rise in unemployment is due to agriculture and SMEs, which contributes most employment in India, are the worst affected. The organised sector contributes only 1% of jobs.
• Big multinationals in India are highly capital-intensive, while the SMEs are four times more labour intensive than the large firms. But they are one of the least productive sectors and their real wages are very low. 
• India needs to protect sectors like farming, unorganized retail, micro and small enterprises. These sectors need support from the government not regulation. 
• The agricultural sector in India does absorb more than half the workforce, but a lot of it is disguised unemployment. 
• The view of Indian villages as the economic backbone of India is flawed and will never lead to the kind of mass employment that is desired in India. At best it minimizes agriculture labour migration to urban areas.
• Urbanization creates lots of jobs in developing economies.
• 92% of enterprises that created jobs were from the informal sector, and the biggest stumbling block for these was lack of formal credit. 
• India needs to free up its labour laws which are archaic, restrictive, and convoluted which incentivizes firms to stay small and remain in the informal sector. Firms, which can achieve economies of scale, are the need of the hour to create jobs for the masses in India.
• India needs to focus on primary and secondary education and skills development. A skilled worker has a better chance at finding higher paying employment.
• At present, the business environment is the toughest for small to medium enterprises. Improvement of 'ease of doing business' to firms of all sizes, to be set up and facilitate its smooth running. 
• Focus on infrastructure and tourism, on sustainable basis, will help creation of jobs at the unorganized level. 

My View:

Modi administration, in the name of reforms is actually destroying 'informal sector' which are mostly operated by less educated people employing semi skilled people. Modi's failed demonetization and hurriedly rolled out mangled GST have destroyed informal sector, agriculture, construction and tiny industries, while achieving nothing. Winning elections is all about hammering of selective narratives rather than sound public policies. Aside improving 'ease of doing business', promoting manufacturing, preserving agriculture at profitable levels, encouraging small businesses & industries, services, infrastructure, tourism are the keys for providing employment to masses. Banks must be financially healthy and support informal sector so that our economy grows and provide employment to our aspiring youth. Trophy projects, white  elephants and icons are not the indicators of development. It is all round life style improvement of poorest people, which is called 'development'.

Voluntary unemployment rising in India

Unemployment occurs when a person is willing and able to work and is actively seeking for a job but still doesn’t have one. Voluntary unemployment is a situation when a person is unemployed not due to unavailability of jobs in the economy, but because of not being able to find employment of his/her own choice. People reject employment opportunities if they do not receive desired wages or if they are not offered the kind of work they wish to do i.e. unemployed of their own will. 

• Latest annual household survey by Labour Bureau, the unemployment rate has reached 5%,  is the highest in the last 5 years.
• Lack of sufficient job creation could lead to resentment due to people’s high aspirations. Manufacturing alone won’t create many direct jobs.
• There is dramatic rise in voluntary unemployment across the country, where people choose not to work below a certain income level after ‘investing’ in education.
• Nothing has changed substantially in the last one year on the jobs front.
• We need to create 10 million to 12 million new jobs every year. If you believe the Labour Bureau, which are not believable, is about 1 million.
• The current official data on labour and employment indicates ‘jobless growth’ as well as ‘growth-less jobs’. 
• It fails to capture the pre-dominantly informal and unorganized nature of the Indian economy.
• The only credible way to get data on employment and jobs is using household surveys over and above enterprise-level surveys. Otherwise, we will always have an imperfect picture.
• Involuntary unemployment hasn’t gone up, but voluntary unemployment has gone up dramatically. When incomes goes up, women voluntarily opts out. People are unwilling to settle for jobs, particularly after having ‘invested’ in education, that do not give them a salary above this level.
• As the India gets richer and more educated, many Indians are choosing to stay away from the job market, further exacerbating unemployment numbers. 
• Voluntary unemployment could become a bigger headache for India in the coming years.
• Government first needs to put in place a system for timely and reliable job data.

My View:
The stagnant growth of IT industry, which employs over 3 million people, resulted in growth less jobs and now is shrinking due to automation and US Visa restrictions. The backward impact on private engineering colleges with large numbers unfilled seats and some are wound up. Voluntary unemployment is not only a resource wasted but also could result in youth resorting to crime to fulfill the necessities.