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India’s New Government Faces Major Employment Challenge

For the past decade, the Bharatiya Janata Party (BJP) held an absolute majority in the Lok Sabha, India’s lower house of parliament. However, the recent elections saw a significant drop in their numbers, reflecting public dissatisfaction with the BJP’s handling of economic issues, especially concerning youth and farmers. Addressing employment, particularly for the youth, is now a critical task for the incoming government.

The Need for a National Employment Policy

A crucial step for the new administration is to adopt a comprehensive National Employment Policy. This idea was previously discussed during the Congress-led government before 2014 but was dismissed by the BJP-led National Democratic Alliance (NDA) government by 2022. A National Employment Policy could provide a structured approach to job creation, focusing on both immediate and long-term solutions

Addressing Informality in the Labor Market

India’s labor market is characterized by a high level of informality, with over 90% of the workforce employed in the informal economy. A holistic approach is required to integrate all stakeholders and develop concrete measures to create formal jobs and provide social security to workers. Additionally, the government should recalibrate incentives for the private sector, linking them to job creation metrics.

Challenges in the Agricultural Sector

Agriculture remains the backbone of India’s workforce, with 47% of the population relying on it for their livelihood. Despite this, the sector faces significant challenges, including inadequate income for rural workers. The NDA government’s attempt to reform agriculture through three controversial farm laws in 2020 met with severe backlash, leading to their withdrawal without addressing the underlying issues in agriculture.

The Need for a National Agricultural Policy

A major oversight in Indian policy-making has been the absence of a National Agricultural Policy. Unlike the United States and European Union, which have robust agricultural policies, India has yet to enact a comprehensive policy to address the needs of its agricultural sector. Such a policy could ensure the involvement of farmers’ organizations and state governments, aiming to improve the viability of agriculture and the livelihoods of a significant portion of the population.

Harnessing the Demographic Dividend

India’s youthful population presents a unique opportunity for economic growth. However, high levels of youth unemployment threaten to waste this demographic dividend. The youth unemployment rate in the first quarter of 2024 stood at 17%, significantly higher than the overall unemployment rate. The rate for young women was even higher at 22.7%. Addressing this requires targeted interventions to integrate young people into the workforce effectively.

Reassessing Economic Policies

The NDA government’s strategy of boosting private sector investment through fiscal incentives has not yielded the desired results in job creation. Measures like the substantial cut in corporation tax in 2019 and the Production Linked Incentive Scheme have not significantly reduced youth unemployment. Instead, there is a need for direct government intervention in job creation and a shift away from reliance on private sector-led growth alone.

Moving Beyond Handouts

The BJP’s recent election manifesto, “Modi ki Guarantee,” focused heavily on extending freebies to the distressed, including free rations for over 800 million people. However, the election results suggest that voters are seeking more than handouts; they want “decent work” as defined by the International Labour Organization—productive employment in conditions of freedom, equity, security, and dignity.

Conclusion

The new government in New Delhi faces the formidable task of creating jobs and addressing the economic distress of its citizens. A strategic shift towards comprehensive employment and agricultural policies, combined with targeted interventions to harness the demographic dividend, can help steer India towards sustainable and inclusive growth. The emphasis must be on creating meaningful employment opportunities that offer security and dignity to the workforce, ensuring long-term economic stability and prosperity.

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