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Pranjal Sharma

Pranjal Sharma has been analysing, commenting and writing on economic and development policy in India for 25 years. He has worked in print, TV and digital media in leadership positions and guided teams to interpret economic change and India’s engagement with the world

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Politics Of Policy | Competitive But Jobless

As India climbs on World Economic Forum’s competitiveness ranking, it must focus on the growing crisis in unemployment

Photo Credit : Shutterstock


India has a problem of plenty. Plenty expectations. While delivery of some promises from the Modi government has begun, the expectations are rising faster than can be met.

The recent world competitiveness report by World Economic Forum (WEF) shows that India has risen the fastest up the ladder in the last year. India’s ranking has grown 16 places to 39 in the list of all countries.

This may not be impressive by global standards but it shows positive movement for India after many years.

Opening the economy to foreign investors, improving process for domestic investors and increasing transparency in financial system has allowed India to quantify its efforts to improve its economic environment. Its improved competitiveness has allowed it to maintain high FDI also. In 2016-17, it should be able exceed last year’s figure of $35 billion net FDI.

On creating a single domestic market, the government seems to have surprised the private sector with its speed. After years of delay, the rapid movement on goods and services tax (GST) is outpacing the private sector’s ability to adapt. Companies are now scrambling to get their systems and business models aligned to the GST.

In its assessment of India WEF says, “If the economic liberalization of 1991 was a watershed moment for India, 25 years later India again stands on the threshold of another historic moment. The World Bank and the International Monetary Fund both project a robust 7.5 per cent growth for the country in 2016 and 2017. Yet, India also faces challenges, including shrinking exports, an infrastructure deficit, barriers to business and stalled reforms. If the pace of reform fails to pick up and improvement in the ease of doing business proves too slow, companies may look elsewhere.”

The biggest challenge remains employment. Economic data and anecdotal evidence points to an employment crisis. Over 77 per cent of households surveyed by Labour Bureau said they did not have a salaried person. At 5 per cent, the unemployment rate is highest since 2011-12.

Higher FDI and improved competitiveness must result in more jobs. The hundreds of thousands who were laid off in the last few years are desperately applying for any available job. Many are accepting jobs that do not match their experience or skills. This, when automation is yet to pick up momentum in India.

The solution perhaps lies in creating job creators. India has to be able to boost the creation of start-up and help create new entrepreneurs. Infotech industry’s body Nasscom estimates that 4200-4400 start-ups are launched in India every year. However this is less than 10 per cent of new start-ups in the US and only marginally above China with 3900-4100 every year. These start-ups in India employed 85000 people in 2015 and are expected to create 250,000 jobs by 2020. These figures are limited to tech sector.

A similar sentiment must be created in non-technology sectors. Services sector remains the fast way to create jobs since investment and effort in skilling is relatively lesser than for complex manufacturing.

The fourth industrial revolution will bring in higher levels of technology led efficiency and limit job creation. As a result, focus on job creators and services may help in the medium term.

India’s competitiveness is expected to improve but its success should be measured in terms of jobs created also. This is not an unreasonable expectation.