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In India, a Job Paradox
Despite Economic Surge,
Still Lack Steady Pay
By JOANNA SLATER
Staff Reporter of THE WALL STREET JOURNAL
May 5, 2004; Page A12
BHIWANDI, India -- As India faces criticism for luring white-collar jobs away from the U.S., what is sometimes lost is the larger challenge for India: Generating enough work for its own citizens.
The workers at the center of the outsourcing uproar -- software engineers, customer-service agents, claims processors -- now number roughly one million, a small fraction of the country's work force of more than 400 million people. So while India's economy has shown impressive growth over the past year, beneath the numbers lies a paradox.
For many Indians, the economy's resurgence isn't translating into the one thing they want most -- a steady paycheck. In fact, India has seen a marked decline in the number of jobs at companies with more than 10 employees in recent years.
Sarwan Kumar is typical. He is one of the hundreds of millions who work in the so-called unorganized sector, which accounts for 92% of India's jobs. They are farmers, street vendors, truck drivers, traders or, like Mr. Kumar, migrant laborers. All have little or no job security.
Mr. Kumar, now in his 20s, left his home in North India to become a loom worker in Bhiwandi, a dusty industrial town outside Bombay. When the local candidate for India's ruling party came looking for votes here in the national election now under way, he didn't find many takers. For these migrant workers, little has changed during the present government's tenure.
The crowded maze of dwellings where Mr. Kumar lives still has open gutters, a shortage of water and daily power outages. His pay hasn't budged in years -- that is, when the looms are running.
With nearly 10 million people entering the work force each year, India desperately needs to rev up its creation of jobs beyond high-profile industries like software. The good news is that India has one of the world's youngest populations, and, by and large, students are staying in school longer. Some experts fear, however, that there will be too few jobs awaiting them.
That could mean more incidents like one in November, when Indian Railways announced it would recruit 2,700 people for menial positions in the city of Guwahati in India's northeast. More than 600,000 people attempted to apply. Violence broke out after protesters insisted the jobs should only go to those living in the region.
Officially, India's unemployment rate is about 8%. But economists note that figure doesn't accurately reflect the reality of working lives in a country where the poverty rate exceeds 20% and many people are chronically underemployed.
"Employment is being generated in a few small pockets," says R. Nagaraj, an economist at the Indira Gandhi Institute for Development Research in Bombay. "In Bangalore and Gurgaon, you really feel it. These cities are throbbing. But that doesn't define India -- just go a hundred miles away and nothing's happening."
At Mr. Nagaraj's own institute, for example, companies such as General Electric Co. and American Express Co. snap up a handful of graduate students every year for lucrative positions doing real-time statistical analysis for their back-office operations in India. But his research shows that for the vast majority of Indians, full-time employment with a company -- and the attendant job and income security -- are becoming scarcer, especially in manufacturing.
Workers produce thread in a factory near New Delhi.
In order to reverse the current trend of increasing unemployment, India needs to register growth rates of 8% or more on a consistent basis, according to the government's own projections. While India will hit that target for the financial year that ended in March, economic growth is unlikely to exceed 6.5% in the current financial year.
Job creation has been India's weak spot ever since the country began opening its economy in 1991. Since then, the situation at private and public companies with more than 10 employees -- the "organized" sector -- has been "practically jobless," says S.P. Gupta, a senior official at India's Planning Commission who focuses on employment. That is because those companies are shedding workers and increasing productivity in the face of new competition, he says.
The Tata group, India's oldest conglomerate, has reduced its work force to 220,000 from 320,000 over the past decade. At its steel arm, it plans to eliminate even more jobs as technology makes labor obsolete while augmenting output. The same is happening at India's state-owned businesses.
Despite greater economic growth, the country's employment engine has faltered. For example, between 1993 and 2000, the growth of gross domestic product -- the total value of goods and services produced -- averaged 6.7% a year. But employment expanded at an anemic 1% a year, compared with 2.7% annually in the previous decade, when economic growth was 5.2% a year.
The causes are familiar: Much of the growth came from increasing the productivity of existing workers through investments in machinery and technology. Rising efficiency has curbed the appetite to hire new staff in industries from banking to telecommunications to manufacturing.
Some figures suggest that the only place where jobs have increased overall in recent years is in the unorganized sector, an ocean of mom-and-pop businesses, small-scale manufacturing and free-lance labor. Confirmation of this will have to await the next national job survey, set to begin later this year.
Meanwhile, some promising developments could be around the corner. The ruling Bharatiya Janata Party is promising new spending on infrastructure should it be re-elected in the national poll now under way, which concludes on May 10. Economists say that is good news for job seekers and the economy overall.