Joblessness : Pain refreshed

India’s perennial scare of unemployment is looming large as economic growth is going to a tailspin.   GDP growth was the slowest in nine years during the first quarter of FY 2012 and the second quarter is likely to witness a similar fate. Index of Industrial production again contracted for the third time in last four months creating the fear of job cuts in Indian industries. This slowdown comes at a time when the country already faces job loss in rural area due to rainfall-deficit. Services sector, India’s new job engine is also slowing down due to lack of demand and rising cost.   

Slump in industrial growth thus can be taken as the worst in the decade. It shrank 1.8 percent due to a deep dip in manufacturing which constitutes about 76% of the industrial production. This slowdown in manufacturing is further aggravated by shrinking exports to recession-hit Europe and slowing U.S. Apart from this the capital goods which has shown growth only once in 10 months also slumped 27.9 percent. Consumer goods industry is also lackluster because of shrinking demand and price rise. Slowdown in manufacturing sector has already dried up potential for higher jobs in industries. The blue collar jobs are now at stake with an increasing pressure of production cuts.  Collapse in industrial production indicates that corporate investment is going to dry up more hence new job creation is just impossible for next six months to one year.

Reserve Bank of India and Central Bank are in deadlock whether or not cut down the interest rates. India’s interest rates are among the highest in major economies. It is very important to ease the rates in order to stimulate demand and encourage investment. RBI is pressurized to make rate-cut but high inflation is playing a spoilsport. Inflation is a notorious demand dampener. Price rise is now gripping the services sector and resulting less demand, lesser investment and reduction is jobs.

India has witnessed a remarkable improvement in jobs market with the help of rapid economic growth of recent years. Unemployment rate has significantly reduced during the last decade. This is the first serious blow to the job market after many years. Economic slowdown is just not taking its toll from potential of jobs creation but it is also forcing industries for painful job cuts.  Joblessness, India’s perpetual socio economic riddle has become a more complex ordeal now. 

Rural Jobs schemes : A trying time ahead

Monsoon rains have played truant this season resulting serious repercussions in across the various areas of economy. It is  just not  food and water scarcity but the job loss in farm and non-farm activities which is actually thickening the plot of problems. Job shortage would definitely increase the demand for the government’s rural job guarantee interventions i.e. the ubiquitous Mahatma Gandhi National Rural Employment Guarantee Scheme. 

Agriculture, the primary job machine of Indian rural milieu has already come to a cranking halt. Kharif crop would only be a partially success due to deficient rains in granary of India. A good part of the areas may remain unsown in Maharashtra, Karnataka, Gujarat and western Rajasthan. The month of August and September won’t be getting their normal quota of rain due to EL NINO. One must not forget that a failed monsoon will also affect the sowing Rabi crops as well, due to dearth of irrigation water and less humidity. Moreover a failed monsoon puts an unprecedented pressure on the ground water, which must be carefully conserved and rationally used by all. Farmers in very few irrigated areas like Punjab and Haryana are asked to use ground water for paddy cultivation instead of water-reservoirs, clearly explains the grave situation.  

The prices of food products have already begun to move up. The prices spiral will be difficult to contain as shortfall in kharif crops don’t seem to be made up so easily. Prices of oilseeds and pulses are all set to skyrocket while festival season is just round the corner. Dearth of fodder will also hit milk supply as well and food inflation may get even worse. Govt is considering to impose stockholding limits on food items such as pulses and cooking oil to check hoarding and rein in prices but this won’t be enough as Inflation is already at a very high level even before the drought sets in. 

Indian economy is no doubt in a difficult situation. The Govt. is already reeling under the pressure of providing subsidized food to below-poverty line families. States have started pressing for drought relief packages and farm debt waivers. This may further worsen the budget management.   Drought and Inflation are double whammy for rural poor as they lose job and purchasing power in sync. This is the time when they look towards govt schemes for a real support.  High inflation and dwindling jobs are likely to stay for a longer period. It is a tough task for the government to prove the competence of its corruption-ridden, abominable scheme machinery. This is probably the first litmus test for efficacy of much hyped MNERGS.

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