Job-intensive sectors need a helping hand

Sushma Ramachandran
Senior Financial Journalist

NOBEL Prize-winning economist Abhijit Banerjee has said this is a time of “extreme pain” for this country as the economy remains well below what it was in 2019.

His comments come just days after the latest GDP data shows the economy has grown by 8.4 per cent in the second quarter of the current fiscal, with many indicators showing performance better than in the pre-pandemic period of 2019-20. Yet, Banerjee’s views have resonance in the current environment. The problem is, the revival remains uneven and not rapid enough to remove the pain of those at the bottom of the pyramid.

Just as the economist talks of personal experiences during visits to rural West Bengal, many readers would know about income losses facing those around them. For me, one clear example is of a domestic help’s family where four out of five adults were earning salaries at the time of the lockdown in March. In one stroke, three of them lost their jobs, leaving only one to continue doing online work. Thus, the combined income collapsed to one-fourth of the original amount. After 20 months, the five-star hotel where the eldest family member worked has yet to re-employ him. The other two had to find new jobs, leading to reduced wages. From a relatively comfortable living, the family is now struggling to buy rations, pay for medical expenses and education.

This is not an isolated instance. Similar stories abound across both urban and rural areas. The reality of lost jobs is brought out by surveys of the Centre for Monitoring the Indian Economy (CMIE). The latest data shows the unemployment rate was 7.2 per cent on December 5, with the urban rate higher at 8.6 per cent and the rural rate at 6.6 per cent. This is better than the 9.06 per cent recorded in December last year. But it remains way higher than the pre-pandemic months of December 2019 and January 2020, when the unemployment rate was 5.7 and 1.6 per cent, respectively.

One striking element of the jobs scenario ever since the lockdown of March 2020 has been the impact on those employed in contact-intensive sectors. These are the services segments that are still struggling to get back on track. In my example, two of the family members were employed in hotels and restaurants. Numerous such establishments are in the informal sector and the extent of employment is not accurately measurable. As the economy revives, many have re-opened, but not to full capacity, in some part due to social distancing norms. Even those that have resumed operations fully are not in a position to pay salaries at the pre-pandemic levels.

The reality is, as Banerjee has succinctly put it, that some parts of the country are still in extreme pain.

What is interesting also is the lower unemployment rate for rural areas compared to urban areas. This has been broadly consistent for the past year. One factor is seasonal, linked to the sowing and harvesting of rabi and kharif crops. But the other is the increased reliance on the MGNREGA schemes that provide an assured, though limited, income in rural areas. Despite the concern that adequate funds are not being made available for the rural jobs scheme, it has been the mainstay for many who returned to villages after urban jobs shut down.

Though no definitive survey is available on this issue, several short-term media reports have shown that many migrants now prefer to stay put in their homes even at reduced wages. The alternative of relocating to cities and enduring back-breaking labour on construction sites, for instance, is proving to be less attractive, with some form of employment available near their homes.

Workers are, thus, no longer easily available at cheap rates, especially skilled artisans. The latter are becoming increasingly difficult to find for real estate projects, which have now restarted in a big way. Costs are clearly likely to escalate for the upcoming projects, given that labour costs will no longer be as cheap as earlier. This is, ultimately, a positive outcome as better remuneration and working conditions for the construction workers has been long overdue.

In the urban areas, however, the services sector is continuing to lag behind, judging by all parameters. Even the latest GDP data shows that employment-intensive sectors are not in sync with the revival in the rest of the economy. Manufacturing value added has not done much better: it grew by only 5.5 per cent as compared to 1.5 per cent contraction in the previous year. The contact-intensive sectors like construction and trade as well as hotels, transport and communications recorded a value added rise of 7.5 and 8.2 per cent, respectively, on the low base of negative growth rates of 7.2 and 16 per cent in the second quarter last year. This is a positive growth, but not enough to bring the sector back to the pre-pandemic robustness.

With the data showing the uneven nature of the revival even in the second quarter, it is time for greater support to be extended to this segment of the economy. By taking an approach that the economy is virtually back to normal, policymakers are failing to consider more policy changes that are urgently needed to provide supportive infrastructure for both the services and MSME sectors.

The situation has now been complicated with the discovery of the new Covid variant, Omicron. Despite several statements by epidemiologists regarding the mild nature of symptoms resulting from the variant, demands are growing for even this country to impose border controls in a knee-jerk reaction. Any harsh action to impose movement curbs yet again is likely to hit the employment-intensive sectors hardest. It would not be in the public interest for the authorities to give in to such pleas, unless there is a genuine crisis on the horizon.

It would also be wise of the government to listen carefully to comments by eminent economists about the suffering being endured by the weakest sections of society. It would be unfair to dismiss these as unfounded criticism. There is no doubt that many indicators are showing an upswing in economic growth. There is, equally, no doubt that large swathes of the population, which have been pushed into poverty by the pandemic, still need a helping hand.