A widespread assessment of the UPA’s election victory is that it reflected the Congress party’s greater credibility as a party for the future. With about 34 million first-time voters in the fray and multiples of that number in their 20s and 30s, a winning strategy would have had to address the aspirations for a better life that this age group would naturally put a high priority on. The onus is now squarely on the UPA to deliver on this promise. It will be an enormous challenge, calling for a wide range of policy initiatives but, very clearly, the price of failure will very likely be electoral defeat at the hands of the very same demographic group five years from now.
No matter how much credit and electoral dividends the Congress may have received for programmes like the National Rural Employment Guarantee Scheme (NREGS), the reality is that a large mass of young people are not going to be satisfied with 100 days of hard physical labour in a year at subsistence wages. This is okay as safety nets go, but can hardly satisfy the aspirations for material improvements in standards of living. The emphasis must be on significantly accelerating the rate of growth in new jobs, a goal which has proved elusive for so many years, leaving the economy with an ever-widening gap between supply and demand for workers, particularly at the lower ends of the skill ladder.
The reasons for this and, consequently, the solutions that the government needs to implement, are well known. The main bottleneck has been the organised manufacturing sector, which has played such an important role in rising incomes and living standards in so many countries, including China. India’s manufacturing sector has remained virtually stagnant in terms of its share of GDP since the reforms of 1991 were initiated. Of even greater concern is the fact that the number of new jobs created in organised manufacturing has been abysmally small. Two major factors responsible for this have been the quantity and quality of infrastructure and the persistence of job security regulations. The former increases the costs of doing business, while the latter makes it more expensive for employers to hire workers, whom they have to continue to pay even when business conditions do not justify it. Many analysts argue that this has been a huge deterrent to employment growth in organised manufacturing, a view supported by the fact that employment in many service activities, which are not subject to these regulations, has grown quite impressively. Increasing investment in infrastructure and reforming labour market regulations have been on the agenda for several years; their central role in accelerating employment growth in manufacturing, which is in turn key to fulfilling mass aspirations, should place them very high on the list of priorities for the new government. It does have the political weight to overcome resistance to change from any quarter.
Of course, there are other important pieces to the employment puzzle, which need to be addressed simultaneously. Basic education and marketable skills have to be provided to hundreds of millions of young people in short order. And, safety nets like the NREGS have to be extended to urban workers to mitigate the risks of unemployment. As ambitious and politically complex as this whole package may seem, the government has no choice but to pursue it.
