'10% growth can check unemployment'

India needs to achieve a 10 per cent growth rate to ensure that a vast majority of its people gets employment, William W Lewis, author of "Power of Productivity" said.

Speaking on the trade-off between productivity and employment at a seminar on "Labour Market Strategies for Inclusive Growth" at the ADB's annual meeting today, Lewis said anything less than a 10 per cent growth would prove disastrous for India.

According to him, at a status quo of the last decade's 5.5 per cent growth rate, the employment creation outside agriculture would be only 24 million by 2010, while unemployment reached an unacceptable level of 16 per cent.

But with a 10.1 per cent growth rate, employment generation would be in the order of 75 million, while the unemployment rate could be kept at 7 per cent.

"What is important now is to make everybody feel that they have a chance," he said.

Contradicting the existing notion about the adverse impact of productivity on job creation, Lewis argued that the increase in productivity would also lead to more jobs in the formal sector as in the case of the automobile sector.

"The formal sector remains far behind in job creation but helps increase labour rate in rural areas and also increases the demand for transitional services," he said.

On labour regulations, the speakers, including Duncan Campbell, director, policy integration department, ILO, Chris Manning, Indonesia project, Australian National University, and Rana Hasan of the ADB sought to delink labour regulations from growth or stagnation in employment creation, suggesting that labour reforms were not going to be the panacea for unemployment.

Campbell, in his presentation, said labour market regulations had nothing to do with either growth or job creation.

He said under excessive protectionism at lower levels, labour markets underwent adjustments in the form of employers engaging more and more people on temporary or contract basis as in the case of India.

He asked the policy-makers to move the societal objectives of social protection off the micro level and create a social protection mechanism at the macro level.

Manning said except in the face of sudden and rapid changes in labour regulations as in the case of Indonesia, no link between employment growth and labour regulations has been found in Philippines, which has equally stringent labour laws.

He also pointed out that despite robust growth in several countries, only small increases in the formal sector had been witnessed while unemployment kept growing.

However, the informal sector in Philippines increased to 30 per cent from 20 per cent during the 90s, when unemployment started rising.