ECONOMIC SLOWDOWN: A PERSPECTIVE

The recently released report by Central Statistical Office, Government of India shows that GDP growth stood at 5% at the end of first quarter of 2019-20 which has been the lowest since quarter 4, 2012-13. There has been a gradual fall in the growth rate since Quarter 1 of 2018-19.

Source: Ministry of Statistics and Program implementation(MOSPI)

NITI Aayog Vice-Chairman Rajiv Kumar has termed the ongoing stress in financial stress as “unprecedented in the last 70 years” while calling for extraordinary steps to tackle the economic slowdown. Chief Economic Adviser K V Subramanian attributed this slowdown to both endogenous and exogenous factors. According to him global factors like deceleration in developed economies, Sino-American trade conflict etc., has an impact on the Indian economy. The government has focused to revive the economy and there has been host of measures taken by the Finance Ministry.

Before giving any medicine it is very important to understand what is the disease and what caused the disease, then only the antibiotics will work. Yes, the global economy definitely has an impact. But the slump in growth of Chinese economy has been much less severe if we compare the performance of first quarter, 2019-20 with that of the previous financial year.

Source: MOSPI Data, World Bank reports

This clearly indicates that while the global economy impact has been effecting, there has been a host of endogenous factor that has impacted the Indian economy severely since the first quarter of 2018-19. There has been a significant decline in the consumer demand. The growth rate of private consumption declined to 3.1 % as against 7.3%.

Source: MOSPI


There has been a significant drop in two wheeler and car sales. One of the possible reasons has been that there has been suspicion in the economy leading to lack of spending or lack of desire to spend from the more formal sector employees. But this lack in consumer demand is not restricted to luxury products alone. We also see a huge drop in sales of low ticket products like for example, a 5 rupee biscuit as well and further study clearly points out that this drop in FMCG demand is more rural India driven. All these drop in sales has lead to significant job loss in the economy.

 Now what is causing this lack in demand. The agriculture sector which had shown high growth in first quarter 2018-19. But since then there has been a significant drop in the growth of this sector.

Source: MOSPI

Agriculture sector employs the highest number of Indians. Almost 60% of Indians are dependent on this sector. So if the most people intensive sector shows a slow growth, this is bound to have an impact on the consumption demand.
After agriculture, the construction sector and the manufacturing sector are the most labour intensive sectors. There has been a severe impact of the slowdown in both the sectors. The construction sector grew at around 5.7% in comparison to 9.6% in the same quarter in the previous year.

Source: MOSPI

Similar is the situation in the manufacturing sector. This sector has a mere growth rate of 0.6% as against 12.1% in the previous year.

Source: MOSPI

The slowdown in these sectors is also manifested by a slowdown in the growth of MSME loans. There was almost a 25% growth in MSME loans in the range of 1 lac to 50 crore in 2017-18. But in 2018-19 this has dropped below 10% as per recent analysis by different agencies. Moreover the growth is less than 2% in the higher ticket size( 10 cr to 50 cr) segment.This clearly suggests a slump in the MSME sector.

So what we see is a decline in the growth of the people intensive sectors. This effects the economy significantly as this has a wide impact on the mass demand as the sectors where a vast majority of Indians are dependent are showing a slump. Added to this is the perception that the economy is doing bad. This has lead to holding back in spending mainly for the formal sector employees. Let us look into possible solutions to boost up demand in the economy.
A reduction in tax rate has been widely regarded as a means to increase consumption demand. But in Indian scenario this at best can have a impact on the formal sector employees who has a lack of desire to spend or are holding the spending and yes has some potential impact of increase in demand. So while tax cut is welcome, but is should be cut in indirect tax as that will impact more people. But is it a feasible solution? We have recently seen a huge transfer of RBI reserves worth Rs 1.76 lakh crore to the government of India. Given the need for such unprecedented money by the government, it is unlikely that a significant tax cut will be announced. As that will lead to a decline in tax revenue and will mean more funds will be required by the government.

Any means to pump in consumption demand not sustainable unless there are steps taken to boost the people intensive sectors like agriculture, construction and manufacturing. Unless the slump in the people intensive sectors stops, the problem of lack of demand will not be solved. More thought through steps to boost the people intensive sector is the need of the hour and the right medicine for the present problem.

Economic Performance: First Quarter 2019-20

The Central Statistical Office, Government of India published the report on GDP growth performance after the first quarter of 2019-20. The GDP growth rate stood at 5%, lowest since 2013-14. The downside started since second quarter of 2018-19. The growth rate stood at 5.8% in Q4, 2018-19.

Source: CSO Reports, Government of India

The sector wise growth numbers also showed a downside for most of the sectors. The downside has been most prominent for the manufacturing sector in comparison of the quarter one performance of 2018-19. There has been a few sectors which showed a better performance as compared to the same quarter in 2018-19. The better performance was most prominent in Mining & Querying sector.

Source: CSO Reports, Government of India


State wise Performance across Different Socio-Economic Parameters

In the recent months various government bodies have released data on different socio-economic parameters. The Annual PLFS report 2017-18 which focuses on employment scenario have been published in the end of May, 2019. This report not only talks about the employment-unemployment scenario across the country, it also gives a view on education attainment across individuals. The NITI Aayog has published the Healthy State Progressive India report on health index. The per capita GDP across various states of the country is provided by CSO. With all of this data available let us look into how major Indian states have performed across various socio -economic parameters.

Composite Index

IPD has created a composite index across major 18 states of the country, which in total account for 502 seats in Loksabha out of a total of 543 seats, based on the above mentioned data sources. Four important dimensions were considered for creating the composite index. The four dimensions are education, health, per capita NSDP and unemployment. The index ranges from 0 to 100, 100 being the best.

Source: Data from Annual PLFS ,2017-18, NITI Aayog Healthy State Progressive India report , Central Statistical Organisation, New Delhi

Maharashtra tops the list followed by Kerala and Gujarat. While Maharashtra has been consistent across all the four dimensions of the index, Kerala has out performed the other states in terms of its performance in education and health outcomes. Gujarat on the other hand had the lowest urban unemployment rate. Two of the most populous states of India; Bihar and Uttar Pradesh hold the bottom two position in terms of the composite index.

What has been the drivers for each of the dimensions of the composite index? Let us look into this.

Education

The Annual PLFS report gives the literacy rates for male and female separately across different states of the country. Also the percentage of male and female attaining different levels of education is reported. For the composite index, ranking of states based on literacy rate separately for male and female and the ranking of states based on percentage of people attaining secondary or above education separately for male and female is considered.

Source: Annual PLFS Report, 2017-18, May 2019

Kerala holds the top spot in three of the four measures of education with Maharashtra topping in terms of percentage of male attaining education above secondary level.

Source: Annual PLFS Report, 2017-18, May 2019

While Assam has one of the highest literacy rates for both male and female, it also has one of the lowest percentage of males attaining secondary education and above. The reverse is the case for Telangana.

Health

NITI Aayog published the Healthy State Progressive India report which gives the health index across states and union territories. This measure is used for the above mentioned composite index.

Source : Healthy State Progressive India report , NITI Aayog, June 2019

Similar to education, Kerala holds the top position in terms of the Health Index. The erstwhile economically backward states of Uttar Pradesh, Bihar and Odhisa hold the bottom three position.

Per Capita NSDP

The Central Statistical Organization reports the per capita NSDP for different states of India. For the composite index the per capita NSDP numbers as of 2016-17 has been used as the information for all the major 18 states were available.

Source : http://www.esopb.gov.in/Static/PDF/GSDP/Statewise-Data/StateWiseData.pdf

Haryana has the highest per capita GDP among the states followed by Maharashtra and Kerala. It needs to be noted that Kerala hold top position in education and health also. Maharashtra is also among the top states in terms of education and fourth in terms of health. Bihar and Uttar Pradesh have the lowest per capita NSDP among all the states.

Unemployment

The recently published Annual Periodic Labour Force Survey (PLFS), 2017-18 reports the unemployment rate for all states and union territories. As the overall unemployment rate has significantly increased, same phenomenon is witnessed across all states and union territories. Certain states have unemployment rates below the national average , while certain other states have unemployment rates higher than the national average. For the composite index rural and urban unemployment rates for both male and female separately has been considered.

Source : Annual PLFS Report, 2017-18, May 2019

Gujarat has the lowest unemployment rate in urban India for both male and female. Kerala on the other hand has the highest unemployment rate for both rural and urban female. Hatyana, which has the highest per capita NSDP reports to have one of the highest unemployment rate in rural India.

Source: Annual PLFS Report, 2017-18, May 2019

Highlights of Budget 2019

Nirmala Sitharaman presented her first budget today in the parliament. Here are the key highlights of the Budget, 2019.

 Direct Taxation – Budget 2019 Highlights

  1. Interest deduction on housing loan under Section 80EEA increased by 1.5 lakh for home loans taken on self-occupied house property by 31/3/2020, houses with the cost of Rs 45 lacs will be eligible for this. 
  2. Interchangeability of PAN and Aadhar for ease and convenience of taxpayers Income Tax return can be filed using Aadhar Number
  3. To discourage cash payments TDS@ 2% on withdrawals exceeding 1Cr per annum from a bank account under a new section 194N.
  4. Surcharge for individuals having taxable income from Rs 2 crores to Rs 5 crores increased to 25% – FY 2019-20
  5. Surcharge for individuals having taxable income from Rs 5 crores to Rs 10 crores increased to 37% – FY 2019-20
  6. Proposal to give relief in levy of securities transaction tax
  7. Corporate tax worth 25% that is applicable to companies with an annual turn over Rs 250 crore will be applicable to the ones with an annual turnover of Rs 400 crore
  8. Section 35AD deduction extended to Li-On battery, Semi-conductor, Laptops, Fabrication & Photovolatic cells
  9. Additional income tax deduction of up to Rs. 1.5 lakhs is proposed on payment of interest on loan is taken to purchase electric vehicles under section 80EEB.
  10. Faceless and anonymous assessment system for income tax being rolled out this year in phases.

2. Infrastructure – Budget 2019 Highlights

  1. Focus on investment in infrastructure, national highways and aviation sectors
  2. The second phase of Bharat Mala to develop state highways
  3. A comprehensive restructuring of national highways will be taken up

3. Education – Budget 2019 Highlights

  1. National education policy to propose major changes in both secondary and higher education
  2. Swayam Initiative – Digital education to be promoted
  3. Greater focus on research and development – National Research Foundation to fund and promote research – pooling of research grants from various ministries and disbursing them, preventing duplication of research projects
  4. For the Youth – New national educational policy to transform the Indian education system
Source: Indiatvnews.com

4. Startup Development – Budget 2019 Highlights

  1. Government to introduce a host of exclusive programs for startups on DD News

5. Household – Budget 2019 Highlights

  1. Provision of housing, electricity, clean cooking facility, safe and adequate drinking water to all in rural India
  2. Encouragement of rainwater harvesting, groundwater recharge, and management of household wastewater for reuse in agriculture
  3. Har Ghar Jal – to all rural household by 2024
  4. 7 crore LPG connections delivered to rural households

6. Pension – Budget 2019 Highlights

1.Proposed pension benefit to 3 crore retail traders and shopkeepers whose annual turnover is up to Rs 1.5 crore  

7. MSME- Budget 2019 Highlights

  1. 350 crore rupees allocated for 2% interest subvention for all GST-registered MSMEs on fresh or incremental loans
  2. MSME: Large-scale extensive reforms planned, government to create a platform for MSME payments
  3. MSME to get loans up to 1 crore within 59 minutes. Loans worth Rs. 350 crore already disburse

8. Women Empowerment- Budget 2019 Highlights

  1. Committee to be formed with Public and Private stakeholders for gender equality: FM
  2. Every SHG Women having Jan Dhan Account – Rs. 5,000/- overdraft allowed: FM
  3. Loan up to 1 lakh under Mudra Scheme for Women entrepreneurs: FM

9. NRI- Budget 2019 Highlights

  1. Proposal for Issuance of Aadhar Card on arrival for NRIs with Indian Passports: FM
  2. Aadhaar card for NRI’s post arrival in India
  3. To increase NRI investment in Indian capital market – NRI portfolio scheme route and FPI route should merge

10. Budget – Railway Budget 2019 Highlights

  1. Railway infra would need an investment of 50 lakh crores between 2018 and 2030;
  2.  PPP  to be used to unleash faster development and delivery of passenger freight services
  3. Railway Station Modernisation will be launched this year.
  4. Indian Railways to be encouraged to invest more in urban and suburban regions
  5. 657KM of Metro Rail operational in the country.

11. Banking and Financial Sector – Budget 2019 Highlights

  1. Reforms will be taken to strengthen governance in Public Sector banks
  2. NPAs of commercial banks reduced by over 1 lach crores over last year
  3. Record Recovery of over 4lac crore with IBS
  4. NPAs of commercial banks reduced by over 1 lakh crore over last year
  5. After Consolidation of Public Sector Banks, now 70,000 Crore of Capital boost for credit improvement
  6. Government has smoothly carried out consolidation, reducing the number of PSBs by 8
  7. NBFCs – that are fundamentally sound, will get fundings from govt to a total of 1lakh crore during the current financial year
  8. RBI has limited regulatory Authorities, Now the Regulatory Authorities of RBI over NBFC will be placed
  9. Proposals for strengthening the regulatory authority of RBI over NBFCs – Debenture Redemption Reserve to be maintained
  10. Proposal to return regulatory authority from NHB to RBI!

12. Electric Vehicles – Budget 2019 Highlights

  1. Lower GST Rate from 12% to 5% on Electric vehicle and Additional Income Tax Deduction of 2.5 Lakh on Interest paid on loan taken to purchase an electric vehicle
  2. To make electric vehicles affordable, additional IT deduction on 1.5 lakh on interest paid on loan taken to purchase electric vehicles

13. Technology – Budget 2019 Highlights

  1. Solar storage batteries and chargers included in 35AD deduction: FM
  2. Program of mass scaling of LED Bulbs – Approx. 35 Crores of LED bulbs distribute
  3. Machines and robots to be deployed for scavenging
  4. Focus on VR, AI, Robotics training to youth to align India with the World

Items that will get costlier:

1. Gold and silver

2. Petrol and diesel

3. Imported books

4. Tiles

5. cashew kernels

6. vinyl flooring

7. auto parts

7. some synthetic rubber

8. digital and video recorder and CCTV camera

9. cigarettes, chewing tobacco, zarda and tobacco extracts and essence

10. Fully-imported cars

Items that will get cheaper:

1. Houses

2. Electric vehicles

3. Import of defense equipment, not manufactured in India

4. Raw and semi-finished leather

The Budgetary allocation across different heads are as under:

Source: Government of India

Summary of the Economic Survey -2019

Economic Survey reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. The Finance Minister presented the economic survey, 2019 in the parliament today. The key highlights of the economic survey as per the Press Information Bureau, Government of India are:

  • Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the bottom of the pyramid.
  • Survey states Private Investment as the Key Driver of Growth, Jobs, Exports and Demand
  • Using insights from behavioral economics to create an aspirational agenda for social change- 1. From ‘Beti Baco Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi). 2.From ‘Swachh Bharat’ to ‘Sundar Bharat’. 3.From ‘Give it up” for the LPG subsidy to ‘Think about the Subsidy’. 4. From ‘Tax evasion’ to ‘Tax compliance’.
  • Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.
  • Unshackling MSMEs and enabling them to grow by way of – Asunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives, Deregulating labor law restrictions to create significantly more jobs, as evident from Rajasthan. Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
  • Survey also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, entertainment etc., for job creation.
  • Society’s optimal consumption of data is higher than ever given technological advances in gathering and storage of data.
  • As data of societal interest is generated by the people, data can be created as a public good within the legal framework of data privacy.
  • Government must intervene in creating data as a public good, especially of the poor and in social sectors.
  • Merging the distinct data sets held by the Government already would generate multiple benefits.
  • Productivity improvements of 25 percent in lower courts, 4 percent in High Courts and 18 percent in Supreme Court can clear backlog.
  • Survey proposes reduction in economic policy uncertainty by way of consistency of actual policy with forward guidance.
  • Quality assurance certification of processes in Government departments.
  • Sharp slowdown in population growth expected in next 2 decades. Most of India to enjoy demographic dividend while some states will transition to ageing societies by 2030s.
  • National Total Fertility Rate expected to be below replacement rate by 2021.
  • Working age population to grow by roughly 9.7 mn per year during 2021-31 and 4.2mn per year during 2031-41.  Significant decline to be witnessed in elementary school-going children (5- 14 age group) over next two decades.
  • States need to consolidate/merge schools to make them viable rather than build new ones.
  • Policy makers need to prepare for ageing by investing in health care and by increasing the retirement age in a phased manner.
  • 2.5 times increase in per capita energy consumption needed for India to increase its real per capita GDP by $5000 at 2010 prices, and enter the upper middle income group.
  • 4 times increase in per capita energy consumption needed for India to achieve 0.8 Human Development Index score.
  • India now stands at 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.
  • Rs 50,000 crore saved and 108.28 million tonnes of CO2 emissions reduced by energy efficiency programmes in India.
  • Share of renewable (excluding hydro above 25 MW) in total electricity generation increased from 6% in 2014-15 to 10% in 2018-19.
  • Thermal power still plays a dominant role at 60% share.
  • Market share of electric cars only 0.06% in India while it is 2% in China and 39% in Norway.
  • Survey says that efficacy of MGNREGS increased with use of technology in streamlining it.
  • Significant reduction in delays in the payment of wages with adoption of NeFMS and DBT in MGNREGS.
  • Demand and supply of work under MGNREGS increased, especially in distressed districts.
  • Vulnerable sections of the society viz. women, SC and ST workforce increased under MGNREGS during economic distress.
  • Survey proposes a well-designed minimum wage system as a potent tool for protecting workers and alleviating poverty.
  • Present minimum wage system in India has 1,915 minimum wages for various scheduled job categories across states.
  • 1 in every 3 wage workers in India not protected by the minimum wage law.
  • Survey supports rationalization of minimum wages as proposed under the Code on Wages Bill.
  • Minimum wages to all employments/workers proposed by the Survey.
  • ‘National Floor Minimum Wage’ should be notified by the Central Government, varying across five geographical regions.
  • Minimum wages by states should be fixed at levels not lower than the ‘floor wage’.
  • Survey proposes a simple and enforceable Minimum Wage System using technology.
  • Traceable health benefits brought about by Swachh Bharat Mission (SBM).
  • 93.1% of the households have access to toilets.
  • 96.5% of those with access to toilets are using them in rural India.
  • 100% Individual Households Latrine (IHHL) Coverage in 30 states and UTs.
  • Financial savings from a household toilet exceed the financial costs to the household by 1.7 times on average and 2.4 times for poorest households.
  • Environmental and water management issues need to be incorporated in SBM for sustainable improvements in the long-term.

The survey highlights the state of the economy. Here is the summary:

  • Growth of GDP moderated to 6.8 per cent in 2018-19 from 7.2 per cent in 2017-18.
  • Inflation contained at 3.4 per cent in 2018-19.
  • Non-Performing Assets as percentage of Gross Advances reduced to 10.1 per cent at end December 2018 from 11.5 per cent at end March 2018.
  • Investment growth recovering since 2017-18
  • Current account deficit manageable at 2.1 percent of GDP.
  • Fiscal deficit of Central Government declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19.
  • Prospects of pickup in growth in 2019-20 on the back of further increase in private investment and acceleration in consumption.
  • The public investments in social infrastructure like education, health, housing and connectivity is critical for inclusive development.
  • Health: increased to 1.5 per cent in 2018-19 from 1.2 per cent in 2014-15.
  • Education: increased from 2.8 per cent to 3 per cent during this period.
  • Gross Value Added (GVA) in agriculture was at 2.9 per cent in 2018-19.
  • Women’s participation in agriculture increased to 13.9 per cent in 2015-16 from 11.7 per cent in 2005-06 and their concentration is highest (28 per cent) among small and marginal farmers.
  • Overall Index of Eight Core Industries registered a growth rate of 4.3 percent in 2018-19.
  • Road construction grew @ 30 km per day in 2018-19 compared to 12 km per day in 2014-15.
  • Rail freight and passenger traffic grew by 5.33 per cent and 0.64 per cent respectively in 2018-19 as compared to 2017-18.
  • Total telephone connections in India touched 118.34 crore in 2018-19
  • The installed capacity of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in 2018.
  • The services sector growth declined marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.
  • Services share in employment is 34 per cent in 2017.

Unemployment Trends across Major States of India

The recently published Annual Periodic Labour Force Survey (PLFS), 2017-18 reports the unemployment rate for all states and union territories. As the overall unemployment rate has significantly increased, same phenomenon is witnessed across all states and union territories. Certain states have unemployment rates below the national average , while certain other states have unemployment rates higher than the national average

IPD focuses into the pattern that emerge for 18 major states of India which in total account for 502 seats in Loksabha out of a total of 543 seats. The unemployment rates for male and female in rural and urban sector is looked into separately for each of these 18 states.

SOURCE: ANNUAL PLFS REPORT, 2017-18

For rural males majority of the states ( 10 out of 18) has unemployment rates above the national average. But the pattern reverses for rural females and urban males where majority of the states has lower unemployment rates compared to the national average. For urban females equal number of states have unemployment rates higher / lower than the national average. Gujarat has the lowest unemployment rates for both urban male and female while Kerala has the highest unemployment rate for females in both urban and rural India among the major states.

SOURCE: ANNUAL PLFS REPORT, 2017-18

Andhra Pradesh, Karnataka, Rajasthan and West Bengal has unemployment rates lower than the national average for all the four segments ( both male and female in rural and urban India). Telengana and Odhisa on the other hand has unemployment rate higher than the national average for all the four categories. Maharashtra, Chattisgarh, Gujarat and Madhya Pradesh has unemployment rates lower than the national average for 3 of the four categories.

While the unemployment rate has witnessed a significant increase overall, there are differences in the pattern of unemployment rates for different segments. But one needs to acknowledge that unemployment rates are higher even when looked in absolute terms for each of the states.

Job creation and skill development is a joint responsibility of the central and the state governments. In India’s federal structure state plays a important role and the success of any policy measure is widely dependent on the cooperation between state governments and the central government. IPD sincerely hopes that all state governments and the central government works closely with each other and lead to a reduction in unemployment rates for each states and union territories. This only can lead to sustainable economic growth of the country.

How unemployment rate varies across level of education?

The recently released Annual Periodic labour force Survey (PLFS) report 2017-18, shows that the usual status unemployment rate is 5.8 per cent among males and 3.8 per cent among females in rural areas, while the rates are 7.1 per cent among males and 10.8 per cent among females in urban areas. Let us look into how the unemployment rate varies across the level of education and how this is comparable to the earlier years.

The unemployment rate has increased for people with all education level in 2017-18 as compared to the previous years for rural males. But the rise has been more steeper for people with middle and secondary & above levels of education. The trend across different education levels has remained same over the years with the lowest unemployment rate for illiterate people and the highest for the people with secondary and higher education level.

The unemployment rate for illiterate rural women has shown a decline in 2017-18 as compared to previous survey (2011-12). While the unemployment rate increased for rural females with upto primary level of education and for females attaining middle level of education in 2017-18 as compared to 2011-12, but that was less than 2004-05 levels. But for rural females with secondary and higher level of education the unemployment rate has been the highest in 2017-18 compared to all previous surveys.

Same as their rural counterparts, the unemployment rate for urban males increased sharply in the latest survey compared to the earlier years. The rate increased by over 100% compared to the previous survey. Here also the unemployment rate for males with secondary & above level of education is as high as 9.2% as per the latest survey.

The unemployment rate for urban females also increased in 2017-18 as compared to 2011-12. While the unemployment rate for urban females with primary and middle levels of education was more in 2004-05 as compared to 2017-18, the unemployment rate for urban females with secondary & above level of education almost doubled in 2017-18 compared to 2011-12.

So it can be inferred that the unemployment rate for people with secondary & above has shown a substantial increase for male and female in both rural and urban India in the latest survey. When one delves deeper it is seen that the unemployment rate for secondary and higher secondary level of education is lower than that with higher level of education

The unemployment level for rural male with diploma or certificate holders has been as high as 26.3%. The unemployment rate for Graduate and Post Graduate rural females are as high as 32.7% and 36.8%. The same for urban females are 24.4% and 19.5% respectively.

The question that comes up why the unemployment rate is so high for educated people? There can possibly be two probable situations:

  1. There is lack of job opportunities for educated people across the country
  2. The educated people are unemployable and needs more relevant skill sets for the job opportunities that are available.

It can be any of the above two possibilities or it can be a combination of both. If it is the former then there is a need to focus on creating optimal job opportunities for educated persons. If it the later then a serious focus needs to be given on the higher and technical education policy. More focus needs to be given on courses providing right skill level required for the job market.

The task is cut out for the newly formed Cabinet Committee on Employment and Skill Development. The strategies of the cabinet committee needs to be in sync with the new education policy. The draft education policy proposes several new policy initiatives for promoting internationalization of higher education, strengthening quality open and distance learning, technology integration at all levels of education. Special focus on higher education is the need of the hour. Also more job opportunities with skill set level available in the country needs to be created.

IPD sincerely hopes that this committee considers and tackles the grim employment scenario for people with higher education level. This is extremely crucial for sustainable growth of India. If the unemployment rate remains as high as it is now for people with high level of education, this might have a detrimental impact on the GDP growth of the country.