The World Bank has issued a stark warning to those who might gloat about how, under the so-called “decoupling hypothesis,” emerging economies such as India have avoided sinking into the quagmire of unemployment that post-recession Western economies are now grappling with.
In a grim forecast the Bank commented on the upcoming release of a new book on More and Better Jobs in South Asia that a “million new jobs are needed each month” to sustain growth and reduce poverty in South Asia. Yet South Asia created approximately 800,000 jobs per month between 2000 and 2010, the study said.
Given the rampant spread of underemployment, Kalpana Kochhar, Chief Economist for the World Bank’s South Asia Region, cautioned that it was “not only the quantity of jobs but the quality of the jobs being created in the region that is relevant.”
The Bank’s report on the dire job market situation in South Asian countries, including India, comes even as there is a growing recognition that the failure to create sufficient quality jobs in these economies is linked directly to failures in areas such as education and nutrition.
Speaking to The Hindu after a panel discussion on the report on Thursday Ms. Kochhar said that for children under the age of five years 48 per cent were stunted, 44 per cent were underweight and 20 per cent were wasting compared to 42 per cent, 25 per cent, and 11 per cent respectively for sub-Saharan Africa.
Given that the average number of years of education of people between the ages 15-34 is only 7.1 years “There is a stark contrast between increasing demand for higher levels of education and the educational attainment of the work force,” Ms. Kochhar noted.
The Bank’s study also makes reference to infrastructural constraints that hinder job creation by businesses in India, in particular India’s enduring struggle with power sector reforms. Ms. Kochhar said that despite rapid economic growth, India “is still a lower middle income country...[and] being average is not good enough.”
The challenge for Indian authorities to expand employment for the vast number of new entrants into the labour force over the next three decades is to enact reforms that will address both infrastructural capacity shortages and leakages from the power grid.
There were three crucial elements of these reforms, Ms. Kocchar said: first, to improve the financial and commercial viability of the power sector through increasing tariffs, better collections and curbing of theft and improving the independence of regulatory agencies; second, to improve the business environment for private investment in the power sector; and third, to strengthen the governance of utilities and institutional capacity.
There was also a strong link between inadequate job creation, political corruption and instability, the Bank’s study argued, presenting the results of its analysis of “corruption and bribe payments in dealings between firms and the state in specific dimensions of the business environment, e.g., construction permits, tax meetings, operating licenses, electricity connections.”
Ms. Kochhar said to The Hindu in this regard that “Enterprise surveys reveal that firms in India cite corruption as being the second most important constraint, after electricity, to their operations and growth,” and that the book pointed to simplification of procedures as an important step to reduce corruption that may come from such business-government interactions.
In terms of major causes of instability Ms. Kochhar noted that the Maoist insurgency in central and eastern India was been identified by Prime Minister Manmohan Singh as ‘the single biggest security challenge to the Indian state’ and “many of their grievances are related to land rights and the distribution of benefits from mining and hydropower, but also to the overall poor socio-economic conditions of the population in these areas.”
“A comprehensive approach which directly addresses their grievances and which includes a focus on developing the agricultural sector and linking it better to markets would allow these communities to improve their livelihoods and work for peace,” Ms. Kochhar said, adding that investments in infrastructure and improved security would then attract more private firms to these areas that would then generate employment.
On major government rural employment programmes such as the MGNREGA Bank position was that although the private sector had to be the main provider of jobs, public works programmes like MGNREGA in principle have an important social protection role to play. However “wages also need to be set low enough so the programme does not make it difficult for rural employers to find workers,” Ms. Kochhar said.