Holes in the agenda

Fixing the sharp decline in employment growth, and the neglect of agriculture during the NDA years, we’re told, is the new government’s objective. What needs to be done to achieve this, however, is reform in sectors that members of the coalition are unlikely to allow.

A look at some of the hard numbers makes this evident. The sharp decline in employment growth as reported in NSS data, from 2.7 per cent in the 11-year period 1983-94, to 1.1 in the next seven years, 1993-00, is almost entirely due to agricultural employment growth dipping from 2.2 per cent to 0.02 per cent.

The major reason for this is the sharp drop in creation of minor irrigation facilities by states, from 1.6 million hectares a year in the 7th Plan (1985-90), to 1.1 million hectares in the 8th (1992-97), and further to 0.1 million hectares in the 9th (1997-2002) when, after the Pay Commission hit them, the states had no money to spend on anything other than salaries.

The only way to give the states more funds is to increase tax collections, in the manner Dr Kelkar has outlined, and not by hiking tax rates as some members of the new alliance want.

Besides, if the revenues raised are going to be frittered away on subsidies, as many coalition partners including the Congress want, the sharp fall in investments in the farm sector is not going to get reversed.

But even if this is achieved, it will not be good enough. As the 10th Plan projections show, if there’s 8 per cent GDP growth, it will increase employment from 343 million in 2001-02 to 373 million in 2006-07.

While this represents 1.7 per cent annual employment growth, the unemployment rate will jump from 9.2 per cent to 9.8 per cent. And this, mind you, is based on an 8 per cent annual GDP growth, including agricultural growth of 4.2 per cent and industrial growth of 10 per cent, all of which are way above the trends observed so far.

Getting such high economic growth, of course, means a major step up in investments (that means policy reforms) as well as removing antiquated laws (most states don’t allow grain to be sold outside their borders, and some like Andhra Pradesh even impose a 10 per cent cess on sales of farm produce like paddy).

Getting the unemployment rate down to a more acceptable 5 per cent is possible, the Plan says, but apart from the expected agriculture reforms, it requires switching acreage from cereals. That in turn entails virtual scrapping of the price support scheme in its current form.

While employment schemes like the Jawahar Rozgar Yojana have to be expanded, states like Bihar are too broke to contribute their share of spending, and so the scheme has not been the success that was hoped.

It is also worth pointing out that Kerala and West Bengal, which have had more than their share of Left rule, have the country’s highest unemployment rates while Gujarat has amongst the lowest.