India’s growing population of young professionals may find it harder to secure jobs in future as the country’s economic growth touched a historic low in the April-June quarter.
Official growth data released on Monday by the National Statistics Office (NSO) estimated India’s Q1 GDP at -23.9 per cent, which is the lowest among major economies in the world and the country’s worst quarterly growth performance in more than four decades.
Soon after the figures were made public, economists said India could face a number of permanent long-term growth hurdles as a result of the sharp contraction. Creating jobs may be one of the biggest challenges for India in years to come.
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The employment outlook in India was deteriorating since 2019, but the coronavirus pandemic has made matters far worse.
Urban employment, which represents a bulk of salaried jobs in the country, is dwindling with every passing month, according to recent reports by the Centre For Monitoring Indian Economy, a Mumbai-based think tank.
Over 18.9 million salaried individuals or 21 per cent of the overall workforce had lost their jobs due to the pandemic as of July. The figure has worsened in August.
CMIE said India’s unemployment rate and overall joblessness in the formal sector shot up to 9.83 per cent in August in comparison to 9.15 per cent in July.
The rising unemployment rate in August also indicates that one in every 10 people living in urban areas does not have a job.
Meanwhile, overall unemployment in August also inched higher in comparison to July. The falling rate of unemployment casts a shadow over the future of India’s growing young population.
GDP AND LOOMING JOB CRISIS
The pandemic has crippled economies all over the world, but India faces a greater challenge largely due to its billion-plus population and stark wealth inequality.
The pandemic is expected to further increase the wealth gap in India, as indicated a World Bank report that said 1.2 crore Indians could be pushed into extreme poverty. The World Bank defines extreme poverty as living on less than $1.90 (Rs 139) per day.
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A steady growth rate in the past helped India steer through difficult periods, but the country’s share of economic hurdles are likely to increase significantly with lower job creation.
Higher unemployment will directly affect private consumption, which has sharply contracted by 27 per cent to Rs 14.61 lakh crore in the April-June quarter in comparison to Rs 19.93 lakh crore in the corresponding quarter last year.
Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI, opined in a recent article that there will be no respite for the economy in this fiscal year. He explained that Q1 GDP growth number is an indication of increased “demand destruction” and added that it is likely to worsen as the pandemic rages on.
He further said that Q2 GDP will witness double-digit contraction and feared that there are chances of contraction in all the remaining quarters of FY21. He mentioned that additional support is needed from the government.
Meanwhile, a recent SBI Ecowrap research report has estimated the country’s real GDP to contract 10.9 per cent in FY21. It earlier pegged the figure at -6.8 per cent.
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“Our preliminary estimate indicates that all the four quarters of FY21 will exhibit negative real GDP growth, and decline of full-year growth will likely be in double digits (around 10.9 per cent),” the research report stated.
If the growth rate shows no sign of improvement, generating enough jobs to support a growing population will become India’s biggest challenge over the next decade.
Creating adequate jobs was already a major headache for India when the economy was growing at a slow pace of five per cent since 2019. With the sharp GDP contraction after the pandemic, unemployment is expected to grow in the absence of jobs.
A recent Mckinsey Global Institute report suggests that India’s GDP will need to grow at 8 to 8.5 per cent annually over the next 10 years to create 90 million or nine crore non-farm jobs. An 8-8.5 per cent growth is double of what India achieved in 2019-20.
The report indicates that India will have to create nearly 10-12 million jobs every year to absorb the growing number of young professionals — a task that seems impossible at the current growth rate.
If India fails to address the growth issues urgently, it could risk a decade of stagnating incomes and quality for life, added the report.
Numerous economists and economic think tanks have urged the government to revise its earlier revival strategy and focus on key job-creating sectors like manufacturing and construction.
If the government fails to take adequate measures to create enough jobs through investments, India will not only see a decade of slow growth but will also miss out the opportunity of becoming a global economic superpower.
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