• UGI USER
  • Aug 21, 2023
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The issue is not about India’s GDP, but its JDP.

Relevance

  • GS Paper  3 Monetary Policy, Fiscal Policy.
  • Tags: #GDPindia #UPSC #Monetarypolicy #fiscalpolicy #IMF #indianeconomy.

Why in the news?

According to International Monetary Fund (IMF) and Morgan Stanley, India’s Gross Domestic Product (GDP) growing in double digits and the Indian economy is the world’s fastest economy. The whole debate among India’s leading economic policymakers has revolved around whose GDP growth was higher (i.e. the National Democratic Alliance or the UPA), or what must be done to achieve higher growth.

The issue is job potential

  • India’s economy is growing so rapidly, but the demand for minimum wage work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme also growing fast.
  • That is, when India was apparently the fastest growing economy in the world, more and more people were also clamoring for MGNREGA work.
  • If the economy is doing well, it should be creating many jobs, which should then lower the demand for minimum wage MGNREGA work. MGNREGA demand should be inversely proportional to economic growth.
  • Clearly, there is a big dissonance between GDP growth and its translation into actual jobs and incomes for people. Further, even the jobs that are being created tend to exacerbate India’s social fissures.
  • People from higher castes constitute nearly three quarters of the formal service sector jobs that GDP growth produces while 80% of workers under the MGNREGA program are from the oppressed castes of Dalits, Tribals and backward castes.
  • Here is an alarming decline in the number of jobs that are being created with every percentage growth in GDP. This is a function of the poor quality of GDP growth, rapid increase in productivity and extreme automation.
  • Thus, it is important to focus on the job intensity of economic initiatives rather than merely chase headline GDP growth.

India’s economic growth such as job creation, and social implications

Dissonance between GDP Growth and Job Creation

  • Despite India’s reported high GDP growth rates, there is a disconnect between economic growth and the creation of jobs.
  • The demand for minimum wage work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has continued to grow even during periods when India was experiencing rapid GDP growth.
  • This suggests that economic growth has not necessarily translated into an increase in quality jobs for a significant portion of the population.

Job Quality and Social Fissures

  • The jobs being created as a result of GDP growth tend to exacerbate social inequalities.
  • Formal service sector jobs, which contribute to GDP growth, are primarily occupied by people from so called higher castes, while a significant portion of workers engaged in MGNREGA programs come from so called socially oppressed castes such as Dalits, tribals, and backward castes.
  • This highlights a disparity in the distribution of job opportunities based on social backgrounds.

Declining Job Intensity of GDP Growth

  • Over the years, the number of formal jobs created per percentage point of GDP growth has been declining.
  • The article mentions that in the 1980s, every percentage point of GDP growth led to the creation of two lakh formal jobs, but this declined to just one lakh jobs per percentage point of GDP growth in subsequent decades.
  • This decline is attributed to factors such as poor quality of GDP growth, rapid productivity growth, and increased automation in industries.

Focus on Job Intensity

  • The article emphasizes the need to shift the focus from pursuing headline GDP growth to concentrating on the job intensity of economic initiatives.
  • While certain economic activities, such as semiconductor manufacturing, might contribute significantly to GDP figures, they may not generate substantial job opportunities, particularly for low-skilled workers.
  • Automation in industries like electronics, automobiles, and semiconductors has reduced their capacity to create jobs compared to earlier periods.

 

Source: The Hindu

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: https://www.thehindu.com/opinion/lead/the-issue-is-not-about-indias-gdp-but-its-jdp/article67210472.ece#:~:text=The%20issue%20is%20job%20potential&text=Ever%20since%20the%20Narendra%20Modi,also%20clamouring%20for%20MGNREGA%20work.