India must grow at 18% to ensure jobs to growing workforce: World Bank

Insufficient female labour participation, employment key challenges, says the report

If employment growth per percentage point gross domestic product (GDP) growth remains business-as-usual, then India would need to grow at 18 per cent per year to ensure employment to the burgeoning workforce, a World Bank (WB) report has said.

However, it has said that attaining such rates is not possible and that growth rates alone cannot solve the looming jobs challenge in India, at a time when the job-demanding population is on an organic rise.

“These (growth) rates are implausibly high, implying that rapid growth alone will not be enough. If South Asian countries are serious about increasing employment rates, more jobs will need to be created for every percentage point of growth,” said the report.

The WB released its bi-annual South Asia Economic Focus report for Spring 2018 titled ‘Jobless Growth?’ on Sunday. In its previous South Asia economic focus reports, it had focused on backlash of globalisation, tepid investment growth, and fading global tailwinds in the South Asian context.

Against the backdrop of an uptick in global growth in the current year, the report predicts that global demand and thus, the exports from emerging economies would moderate in the upcoming years to 2020. It also notes that the 6 per cent growth in Indian exports in 2017 (calendar year) was lower than what the WB expected in its January update.

Exports growth is key to employment growth in India, economists and policy planners have observed time and again.

India’s GDP growth plummeted from 7.9 per cent in 2015-16, to 7.1 per cent in 2016-17 (Revised Estimate) to 6.6 per cent in 2017-18 (Advance Estimate). Keeping its eye on South Asia, the WB report said there is an addition of 750,000 jobs in India per percentage point of GDP growth. In Pakistan, 200,000 jobs are added for 1 per cent upswing in GDP growth, while the figure is 110,000 for Bangladesh.

“With the Indian economy going through structural changes and technology changing the idea of our future every day, the report does not portray a realistic picture for India’s growth,” Ila Patnaik, an economist and a professor at the National Institute of Public Finance and Policy, said.

Deconstructing the debate on unemployment, it says female employment rate dropped by 5 per cent per year in India in 2005-2015, whereas male employment rate decreased very little.

Labour force participation rate is defined as the number of persons looking for a job as a proportion of the working age population (age group 15-59). In 2015-16, the labour force participation  for males was 75.5 per cent, while that for females was a meagre 27.4 per cent.

The national sample surveys in India indicate that female labour force participation has reduced, while the census data says it has remained constant, notes the WB report. This incongruity in data, the report said, makes it difficult to ascertain employment estimates and prospects for not just India, but all South Asian countries.

The report notes that “faster economic growth leads to either more jobs in the aggregate, or to a reallocation of jobs away from self-employment”, but it also observed that this correlation is the weakest for India.

Though India has grown faster than before past 2005, the report says that job growth has rather reduced in the reference period 2005-2015.

On the growth front, the report said that though improvement in global growth was the biggest relief for South Asian emerging economies in 2017, it is going to dampen in 2019 and 2020. It also noted that the growth in exports would be lower than expected in certain sectors. The WB has put 2017-18 growth estimate for India at 6.7 per cent.

“A further acceleration to 7.5 per cent by FY19/20 is dependent on a sustained recovery in private investments, which is expected to be supported by policy measures that improve the investment climate,” is said in its forward-looking outlook for India.

Upward looking growth rates and “contained” inflation are the positives, while the “export performance remains disappointing throughout the region,” it said. Criticising the current fiscal situation in South Asian countries, including India, its fiscal outlook is in the ‘sustainable’ domain.  

Rising oil prices put a pressure on the balance of payments of South Asian countries, it added. Brent crude crossed $73 per barrel, while crude oil for the Indian basket crossed $70 per barrel last week, and is on an upward trot this week.

Better infrastructure, with a special mention of affordable housing in the upcoming urban areas, and greater integration with global markets were the top priorities spelled out by respondents in the survey preceding the report, in order to strengthen the relationship between GDP growth and job creation.