Why Unemployment is on a rise?
Description:
NSSO, a government organization responsible for conducting surveys based on scientific methods, released a report a few days back, which showed that the unemployment rate in India is at its highest level for 45 years. It doesn’t seem to align with the growth rate data released by the government. If the increase in growth is not being translated into jobs, this statement raises eyebrows.
One of the most accepted reasons for this is because of increasing automation in the manufacturing sector more amount of work is being done by a smaller number of people. Though automation in itself leads to more opportunities but not precisely from where it takes or in other words, jobs are generated in the service sector.
The growth rate data incorporates in itself growth in the service sector, manufacturing, and agriculture sector altogether. India has witnessed tremendous growth in service sectors whose contribution to GDP is around 57% greater than the rest of the two industries combined. However, although the increase is the right service sector is not labor-intensive, so growth is not reflected in jobs.
Agriculture, which used to be the highest labor-consuming sector, is now at last position. The data is collected at pre-monsoon agriculture season when most of the rural population is unemployed so, one reason which could be thought of as this sector contributing the maximum to unemployment. But the data reveals a different story.
The data revealed by the same organization shows that unemployment is more in the urban youth that means the manufacturing sector is not able to absorb labor. The unemployment rate is more in the educated youths than the uneducated youth; this is also indicative of the same fact.
FDI in India is increasing at a whopping rate of 28.7%. However, it’s not being translated into jobs the main factors which can be attributed for such situation are complexity involved in investment in the manufacturing sector especially involving natural resources and stringent labor laws further add up to the cause. Because these companies find it much easier to invest in the service sector, and since the service sector is not as labor, intensive job growth remains almost stagnant.
So, if the government in itself is unable to generate employment, the individuals should create jobs for them and others as well. With the same thoughts in mind, the government started Startup India, Mudra Yojana, to promote entrepreneurship and to facilitate self-employment opportunities. However, angel tax remained a heated issue and viewed by experts as a hindrance to the growth of startup culture.
Angel tax is levied on the income generated by companies through the issuance of shares to the investor. They are often more than the market value of the company. The main issues raised by the startup community regarding the angel tax are the high tax rate, which is 30.7% and the evaluation of the market value of the firm by the IT department which follows a traditional approach for evaluation, as based on assets of the company while completely ignoring growth prospects. Since in a startup, the net assets will be less, hence the significant amount of money is designated as income. Therefore much of the resources are drained as tax.
What can be done?
To increase employment, we need to resort to labor-intensive sectors like manufacturing and construction. These sectors need to be looked upon, and necessary reforms have to be made. As
renowned economist Raghuram Rajan had suggested in a recent interview, the construction sector has
the potential to generate employment opportunities. Establishing a transparent and speedy process for the acquisition of land for infrastructure projects should be a priority of the government. Infrastructure projects require many permissions, including zoning and environmental permissions. These permissions should be given fairly and transparently.
Hurdles in the manufacturing sector like strict labor laws, permissions for industrial setup must be eased out wherever possible to provide an attractive investment opportunity for both domestic and foreign companies, which will lead to enhanced job growth.
