India needs to create more salaried jobs: World Bank
New Delhi: India needs to create regular, salaried jobs with growing earnings rather than self-employed ones in order to join the ranks of the global middle class by 2047—the centenary of its Independence, the World Bank said in a draft Systematic Country Diagnostic (SCD) for India.
The bank said in a society with wide inequalities, the most urgent priority is to create productive, regular jobs.
“The issue is not just the number of jobs but also the type of jobs. A transition into the middle class calls for the creation of salaried jobs, which is a rare privilege in India today where less than a fifth of workers are in salaried employment,” the World Bank said in a first-of-its-kind draft report published on its website, seeking comments from stakeholders.
India has been classed a lower-middle income country for a decade and aspires to move a step up in the global prosperity ladder.
Globally, low-income countries are those with real per capita GDP less than 5% of that in the US in purchasing power parity (PPP) terms; lower-middle income countries are those with 5-15% per capita incomes of that in the US; and upper-middle income countries are those with 15-35% per capita incomes of that in the US. High-income countries are those above that line, including some even above the US’ income level.
The Economic Survey 2017-18 said if per capita income in India grows at 6.5% per year, India will reach upper-middle income status by the mid-to-late 2020s.
India attained lower middle-income status in 2008 and today has a per capita income of $6,538 (in 2011 PPP terms), which is 12% of the US. In 1960, India was a low income country with a per capita income (in PPP terms) of $1,033. This was equivalent to about 6% of US per capita income at the time.
The SCD is an analytical exercise that the World Bank conducts in all countries.
It articulates, from the perspective of the World Bank Group, an analysis of the most important opportunities and challenges to achieving, in that country, the two goals the Group holds itself accountable for—eliminating extreme poverty and boosting shared prosperity.
The World Bank warned that with an increasing number of youths needing employment, the jobs deficit that India faces has the potential to turn the much-awaited demographic dividend into a demographic curse.
“A growth strategy that focuses on productivity-led economic growth and good jobs will ensure not only that growth is inclusive but that growth is sustainable,” it said.
Between 2005 and 2012, the Indian economy generated about 3 million new jobs per year, while an extra 13 million people entered the working age population each year. There is no recent credible jobs data as India conducts the comprehensive employment-unemployment surveys only once in five years. A recent claim in a State Bank of India report—based on data from the Employees’ Provident Fund Organisation (EPFO)—that the economy generated 7 million jobs last year, has been contested by many economists.
The World Bank said reforms in land and labour markets in India would pay high dividends and help unshackle Indian businesses. “Well-functioning land markets require clearly defined property rights, a reliable land registry, and predictable processes for investment and changes in land-use... Flexible labour markets that facilitate the reallocation of workers in response to market conditions are important for productivity and job growth,” it said.
The existing stringent labour regulations create a segmented labour market with a high level of protection for a very small fraction of workers in jobs and high barriers for the entry of other workers into the protected segment of the formal labour market, the bank said.
“Going forward, “grandfathering” current workers covered under existing laws and introducing easy mechanisms for firms to buy workers out of their old contracts are possible options,” it added.
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