THE REFORMS ACHIEVED SOMETHING

I wrote this in the Calcutta Telegraph of 5 May 2009. Manmohan Singh engaged some good economists, who did good work like what is reported in this column. But he abhorred publicity. I believe that the government is responsible to the people, and must explain to them the developments and its approach. I got into trouble for trying to do so, and was soon edged out. After that, I tried not to think about policy, but old habits die hard. AFTER THE REFORMS

C. Rangarajan has been many things, including governor of the Reserve Bank of India and chairman of the economic advisory council to the prime minister. Recently, he has been doing some number-crunching for the prime minister, to find out what has happened to employment since the reforms. The figures come from three rounds of the national sample survey — rounds 50, 55 and 61 — held in 1993-94, 1999-2000 and 2004-05. The results are encouraging, fascinating and intriguing in different ways. The years are too long to spell out each time; let us call them 0, 6 and 11. The labour force went up by 73-88 million between 0 and 11, depending on the question asked to workers — did you work yesterday? Did you work in the last week? Or did you work in the last year? These are really figures of employment, not of the labour force; and employment went up by 20-25 per cent in just 11 years. The population is growing at roughly 13 per cent in 11 years; so employment grew almost twice as fast as the population. That would imply that a higher proportion of the population had got jobs, and that the number of unemployed should have gone down. But not according to Indian statistics. Unemployment rose from 7 to 11 million or from 20 to 35 million between 0 and 11, depending on what question was asked. Either way, unemployment grew much faster than employment, even though a larger proportion of population got employment. How could that happen? It means that a higher proportion of the population came to look for jobs. The way I would interpret the figures is that more jobs became available, and that as a result, many people who would not earlier have looked for jobs thought, work is available, why don’t we do it and earn some money? The employment situation became buoyant, and it attracted more people into the work force. Strangely, the growth rate of unemployment accelerated after 6. Between 0 and 6, it was one per cent a year; between 6 and 11 it rose to 2.9 per cent. The early years of this century have seen a strong boom that has drawn millions of people into employment. This is true of villages, where the annual employment growth rose from 0.6 to 2.5 per cent, as well as of cities, where it rose from 2.3 to 4.5 per cent. At 4.5 per cent a year, employment in towns would have grown by a quarter in five years. The employment boom was particularly strong in Punjab, where employment grew by 2.6 and 2.8 per cent a year in the two periods, and in Gujarat, whose rates were 2.3 and 2.6 per cent. Even in West Bengal the rates were 0.8 and 3 per cent, leading to employment growth of 27 per cent in 11 years. As employment grew, people stopped doing daily jobs, and started selling goods and services. The proportion of casual workers in the workforce fell from 32.8 to 28.3 per cent between year 6 and 11, while the proportion of self-employed workers rose from 52.6 to 56.4 per cent. The proportion of people with regular jobs rose from 14.6 to 15.3 per cent. The difference between casual workers and self-employed people is more a matter of their own perception than an objective distinction. But many workers started thinking differently of themselves as the employment opportunities increased. To put it differently, the number of casual workers rose at 1.5 per cent a year between 0 and 6 and actually fell between 6 and 11; the number of self-employed workers rose at 0.4 and 4.4 per cent, and the number of regular workers increased 2.2 and 3.7 per cent per annum in the two periods. The jobs were mostly outside agriculture; the proportion of agricultural workers fell from 64 to 56.5 per cent between 0 and 11. The proportion of industrial workers rose from 15 to 18.7 per cent; in other words, more than half of the proportion lost by agriculture was gained by jobs in industry. The annual growth of the labour force in industry was 2.4 per cent between 0 and 6 and 5.9 per cent between 6 and 11. These rates imply that industrial employment doubled in the 11 years. This is a sensation that has escaped the entire press. The growth rate of employment in services was 2.9 and 4 per cent in the two periods; that would have increased employment by 2.4 times in 11 years. These figures suggest to me that the years after the reforms of 1991 have seen unprecedented growth of employment outside agriculture — in industry and services. As a result, a much higher proportion of workers has moved to higher-paying jobs. The demand for labour has grown much faster than supply. As a result, workers have ceased to think of themselves as casual workers; they have started looking for opportunities of employment and business, and calculating how best they can increase their incomes and improve their prospects. Why has this radical change in the employment situation been missed by the media? I would suggest that it is because of a built-in preconception that India is a country of poor people doing footling jobs and would continue to be so. The poverty and the stagnation are perceived by everyone to be so ineradicable that any change in them is inconceivable. And what is inconceivable is by definition imperceptible. But whether we perceive it or not, the change is happening. I do not know whether it will continue or not. As with the perception of employment, perception of growth is also a preconception; everyone in this country implicitly believes that it will go on growing rapidly until it has surpassed the rest of the world. I do not share this perception; growth is as much an uncertain, statistical variable as anything else, and we have entered a period where growth is turning into precipitate decline in many parts of the world. India does not happen yet to be one of them, but there is nothing automatic about growth. But if we manage to continue growth, the qualitative implications are mind-boggling. Indians have changed in the last 15 years — in their standards of living, in their optimism, in their perception of opportunities. They have not become advanced, but they have advanced further towards being like the citizens of advanced countries than they did in the previous half century. A good life is within our reach, and more and more Indians believe that it is. This is why it is important to continue the growth that we have achieved in the past 15 years. The Congress government’s obsession with distributional issues is irrelevant and an obstruction; its objectives can be far more easily and securely achieved by enabling the economy to grow. I joined the government in 1991 because I believed that growth mattered and was possible. Now that is not just my belief, but the experience of millions. Let us build on that experience and make India a happy, confident country. The policies and concerns that mattered in 1991 are even more relevant today.