Job woes threaten Modi's quest to cut inequality

NEW DELHI • Indian Prime Minister Narendra Modi has a job problem.

He swept to power three years ago promising India's poor and middle classes he would restore their "dignity" after years of swelling inequality, with job creation central to his pitch. But now, the job market has been slugged by last November's shock cash ban and July's imposition of a goods and services tax.

And things look like they are about to get worse: India is set to see a further 30 to 40 per cent reduction of jobs in the manufacturing sector compared with last year, according to TeamLease Services, one of the country's biggest recruitment firms.

While other surveys are not quite so bleak, they also suggest Mr Modi is a long way from creating the 10 million jobs a year needed to keep up with his young and rapidly expanding workforce.

The opposition is dialling up its criticism as it eyes elections due in 2019. "If India cannot give the millions of people entering the job market employment, anger will increase, and it has the potential to derail what has been built so far," Mr Rahul Gandhi, heir apparent to the main opposition Congress party, said in a speech earlier this month. "That will be catastrophic for India and the world beyond it."

Ms Munira Loliwala, a general manager at TeamLease, said the slowdown accelerated sharply with demonetisation.

Indian manufacturers, which previously preferred to cut white-collar jobs rather than factory-floor workers, are now slashing all over, she said. Manufacturing accounts for some 18 per cent of gross domestic product (GDP) and directly employs 12 per cent of the population, government data shows.

Indian manufacturers, which previously preferred to cut white-collar jobs rather than factory-floor workers, are now slashing all over. Many of those who lose their jobs stay unemployed because they lack the communication skills required for the service sector.

Ms Loliwala said that many of those who lose their jobs stay unemployed because they lack the communication skills required for the service sector, which accounts for 62 per cent of GDP.

The struggle to create jobs threatens a key plank of Mr Modi's populist push to reverse decades of widening income inequality, a problem highlighted in a new study published this month.

The top 1 per cent of India's population hold an unprecedented 22 per cent of the nation's wealth, while the middle 40 per cent benefited the least compared with China, France and the United States from 1980 to 2014, the study found.

Another recent report underscores the magnitude of Mr Modi's challenge to boost employment. India ranks 103rd out of 130 countries in the World Economic Forum's Global Human Capital Report 2017. Its youth literacy rate is 89 per cent, well behind other leading emerging markets, and it has the world's largest employment gender gaps. Yet, the government remains optimistic. "The economic slowdown and job losses are in line with a worldwide downward trend," Finance Ministry spokesman D.S. Malik said.

"There may be problems in the manufacturing sector, but services are growing well. And that's why our revenue collections are doing fine."

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A version of this article appeared in the print edition of The Straits Times on September 21, 2017, with the headline 'Job woes threaten Modi's quest to cut inequality'. Print Edition | Subscribe