Who should create jobs in India? Government or private sector?

I am quite amazed by recent debates on 3 year anniversary of the Indian government. On one hand ,our experts want Government to get out of most economic activities. But on the other hand, they hold government responsible for every economic activity under the sun.

The Government has got a thumbs up for most such economic activities barring one: jobs. Lack of job creation is seen as a major deficiency of the current government. So much so, the experts say this one deficiency does away with whatever good work the current government has done.

This leaves one to question: How is it that Government can create jobs?

  • One obvious direct way is that government creates more jobs in the government sector. I am sure very few will agree to this given previous record not just in India but worldwide as well.
  • The second indirect way is that government creates a good business environment which allows private sector to grow and create more jobs. This is what most people suggest when they say government should create more jobs. It is not jobs per se but the environment.

This leads one to a puzzle. Indeed if the government has ticked all boxes then the business environment must be decent. This should have automatically led private sector to create more jobs. But this isn’t the case. All we want is a government report card on jobs.

If we are not creating jobs despite all good things happening to Indian economy, there are two possibilities. One, much of the growth story is false and hollow. Two, we are seeing a jobless growth which if not now but in future will raise huge issues with demographic dividend becoming a discount.

So, the one who should answer (honestly at that) the question of jobs is not government really but the captains of the private sector. After all, they are the ones who talk big about big things happening in Indian economy and their companies playing a key role. So, why is it that we are not seeing job creation?

By asking government to be answerable to all things including employment, we are doing the opposite of what we intend: Lesser government. We do not really want government to look for ways to create jobs out of thin air for all kinds of unproductive work, as has been the case. The government’s job is to provide basic governance which has been lauded by most captains of industry.

Then why is it that jobs are not being created? One basic problem has been our inability to shift people from agriculture towards industry and service jobs. Services by nature are more skilled and can absorb only so much. The real game is industry where thanks to scale and variety, multiple jobs can be created. But we have been lagging in industrial growth for a long time.

One way to look at this is from a historical viewpoint. Research shows how there are historical roots to booming service economy. We have always excelled in services due to education being available to only selected elites who were game for services. Then much of Indian top businesses were basically merchants/traders who had little aptitude for industry. Critics say this propelled the government to take industry in its hands leading to all kinds of problems in future.

So not sure what the answers are. It is important that the media asks these questions from real creators of jobs and not blame the government. There is something terribly amiss on Indian economy if despite all the buzz and hype, jobs are not being created. We should no more be flattered by mere reporting of quarterly results on sales and profits.



2 Responses to “Who should create jobs in India? Government or private sector?”

  1. Get Real Says:

    “This leaves one to question: How is it that Government can create jobs?”

    Umm…go and check the manifesto of the guy who repeatedly promised his government can do that http://www.firstpost.com/india/modi-promises-one-crore-jobs-if-bjp-comes-to-power-1243037.html

    “So, the one who should answer (honestly at that) the question of jobs is not government really but the captains of the private sector.”

    Every key sector critical from banking, insurance to aviation is controlled by the government through complex arrangements either thru PSUs or companies with 50.5% government ownership. To ignore that and act like the private sector is more powerful than it actually is, is just a display of naive faith in mainstream media narratives.

    Ask the questions who stands to benefit from a bulge in working-age males without jobs and growing insecurity? Could this anyway be related to the rise in conservatism?

    • vikramml Says:

      On your end-note there: I have seen the pseudo-left, socialist policy favoring Congress benefit from the poverty in India all these decades. Meanwhile, many middle class and upper class people (and the better educated) in India support BJP. So, the evidence supports the opposite conclusion to yours. Secondly, conservative/liberal label does not have the same meaning in all traditions and countries. Many eastern traditions were liberal to start with (at least relatively). You pillory govt control but don’t realize that it is the legacy of the Congress. BJP’s performance isn’t that great either, but it has a tougher situation to deal with and all that people see is that it is better than the alternative, for now, but yes, subject to further evaluation. If anything, the risk was and has been true to some extent that BJP would fall into the same trap as Congress of promoting Yojanas and Schemes, while continuing to shackle the private sector, to buy votes. It is not something new.

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