Rethinking India's Economic Growth: From GDP to Job Creation : Daily News Analysis

Date : 19/08/2023

Relevance – GS Paper 3 – Indian Economy

Keywords – IMF, GDP, MGNREGA, JDP

Context –

In a recent parliamentary debate on a motion of no-confidence, the discourse centered on India's economic growth, with the Union Finance Minister extolling the country's double-digit GDP growth and status as the world's fastest-growing economy. She pointed to accolades from institutions like the IMF and Morgan Stanley. However, a former Finance Minister countered her claims by asserting that annual GDP growth during the preceding administration was higher. Amid this exchange, one crucial question remains overlooked: Whose GDP growth is it benefiting in the first place?

11.5% growth rate for India in 2021- IMF : Daily Current Affairs ...

Job Potential: A Discrepancy in Economic Success

While India's economy is purportedly experiencing rapid growth, there's a paradoxical increase in demand for minimum-wage work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme. The demand for such work suggests that individuals with no alternative income sources are seeking meager wages for labor-intensive tasks. Surprisingly, during the tenure of the current government, India's real GDP expanded by 5.3% (annualized), mirroring a concurrent 5.4% annualized growth in MGNREGA work demand. This disconnect between GDP growth and MGNREGA work demand highlights a troubling disparity.

The Flawed Link between GDP Growth and Job Creation

The argument that a thriving economy should yield job opportunities contradicts the reality in India. If economic growth were genuinely robust, it would naturally result in job creation and diminish the need for minimum-wage work. However, this is not the case. The quality of GDP growth, coupled with rapid productivity gains and heightened automation, has drastically reduced job creation. The Reserve Bank of India's data analysis reveals a concerning trend: in the 1980s, each percentage point of GDP growth produced around two lakh formal jobs; this declined to merely one lakh jobs per percentage point in the 1990s and has further decreased with subsequent decades.

This decline in job creation for every increment in GDP growth isn't unique to India; it's a global concern linked to automation and the evolving nature of work. Consequently, the focus must shift from pursuing headline GDP growth to fostering economic initiatives with high job intensity.

Social Implications of Job Disparities

Compounding this issue is the fact that the jobs being created perpetuate social disparities. While higher-caste individuals dominate the formal service sector employment opportunities generated by GDP growth, the majority of MGNREGA workers hail from marginalized castes like Dalits, tribals, and backward communities. This skew in employment further deepens existing social fissures.

Mines and Minerals Bill: A Path to Inclusive Economic Growth

A potential solution lies in the current government's Mines and Minerals (Development and Regulation) Amendment Bill, 2023—the MMA Bill. With the global shift toward electric mobility, minerals like lithium, cobalt, and graphite have become vital for electric vehicle supply chains. These minerals are the bedrock of the electric mobility transition, an area where countries like China are assertively leading.

India possesses a geologically conducive landscape for discovering similar mineral deposits as found in regions like Afghanistan and Western Australia. However, India has underutilized this potential, exploring less than 10% of its subterranean mineral deposits and mining even fewer. The MMA Bill seeks to change this by encouraging private sector participation in exploring strategic minerals, including lithium. Unlike semiconductor manufacturing, mining offers the potential for substantial local job creation, particularly among low-skilled workers from marginalized communities. Moreover, mining can foster social inclusivity by providing employment to oppressed castes.

The Power of Inclusive Mining for India's Future

Unlike industries such as semiconductor manufacturing, mining is inherently labor-intensive and has the potential to generate a multitude of jobs. This sector's growth can address both unemployment and social disparities in India. Given India's coastline of over 7,000 kilometers, there's also untapped potential in deep-sea mining. However, concerns related to environmental impacts and labor exploitation have hindered progress in this arena.

While the MMA Bill holds promise for unlocking India's mining potential, its success hinges on meticulous implementation and safeguards against exploitation and environmental degradation. Instead of allocating resources unquestioningly to endeavors like "SemiconIndia" or "Make in India," the government must exercise discernment and prioritize initiatives with maximum social returns.

Shifting the Economic Discourse: From GDP to Job Creation

To effect meaningful change, it's imperative for political leaders to reframe the economic discourse. The fixation on headline GDP growth, advocated by economists, technocrats, and international institutions like the IMF, is convenient for forecasting and comparisons but falls short in addressing the real welfare of the populace. This shift in perspective is crucial for true economic prosperity that benefits all citizens.

Finance Minister's initiative of a 'chintan shivir' or thought workshop for top economic policy officials is a step in the right direction. However, rather than focusing solely on achieving high GDP growth rates, the workshop should prioritize "Jobs Data Product" (JDP). This means not fixating on the nation's GDP growth goals, but instead evaluating how economic initiatives translate into tangible job opportunities for the masses.

Conclusion

In conclusion, India's economic growth story is much more nuanced than headline GDP figures suggest. The link between GDP growth and job creation has weakened due to factors like automation and evolving industries. The MMA Bill's potential to stimulate inclusive job creation through mining is promising, provided it's executed with careful attention to social and environmental concerns. It's high time the nation's economic discourse evolves from a narrow focus on GDP growth to a broader emphasis on creating meaningful employment opportunities for all citizens.

Probable Questions for UPSC Mains Exam –

  • Question 1: Explain the disconnect between India's GDP growth and job creation. How does automation contribute to this gap? Recommend policy measures to address this disparity. (10 marks, 150 words)
  • Question 2: Discuss the paradox of rising demand for certain employment schemes alongside reported GDP growth in India. Propose strategies to align economic policies with effective job creation. Evaluate the impact of recent legislative changes on inclusive employment opportunities. (15 marks, 250 words)

Source – The Hindu