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If Modi is serious about creating jobs, he’s got to do something about India’s export sector

Reuters/Anindito Mukherjee
Too few jobs.
Published This article is more than 2 years old.

One of the major electoral promises that swept Narendra Modi and the Bharatiya Janata Party (BJP) into power two years ago was jobs.

“The country has been dragged through 10 years of jobless growth by the Congress-led UPA government,” said the BJP’s 2014 election manifesto (pdf).

Instead, Modi assured that his government would prioritise job creation, with the intention to “strategically develop high impact domains like labour-intensive manufacturing.”

But after 24 months in power, job growth in India’s eight labour-intensive sectors has been the lowest in seven years.

And the reason is clear: exports are falling.

In 2015-16, exports in labour-intensive sectors dropped 9.83% compared to a year ago, according to data (pdf) presented by Nirmala Sitharaman, India’s commerce and industry minister, in the Lok Sabha on May 09.

Eight of the 14 labour-intensive sectors have seen exports shrink. This means the possibility of new employment in these is negligible. In fact, existing jobs might be at risk if the trend continues.

Annual export growth in labour-intensive sectors in 2015-16Growth (%)
Engineering goods-16.99
Sports goods-13.66
Rubber and articles-13.48
Man-made yarn/fabrics/madeups-11.41
Leather and leather manufactures-10.33
Cotton yarn/fabrics/made-ups/handloom products-6.22
Gems and jewellery-4.42
All other textiles0.77
Handicrafts (excluding handmade carpet)18.82
Jute manufacturing61.18

In a written reply, Sitharaman explained that this drop in exports is mainly due to a global slowdown. “The decline in certain sectors can be attributed significantly to shrinkage of demand due to the global economic slowdown, fluctuation in currency markets, instability in Middle-East and high domestic price of some commodities,” she said.

Sitharaman said the government had introduced export promotion schemes and waived off duties in certain sectors.

But doubts remain. The situation has been in a rut for some time now. Exports of goods, which form about two-thirds of total Indian exports, have been falling for more than a year now. The oil price crash and weak global demand are partly responsible for this. But domestic issues such as a slump in manufacturing are adding to the woes. Modi wants to hit the $900-billion mark in exports by 2020, but the figure for fiscal 2016 was the lowest in five years.

Manufacturing growth in April was the lowest in four months, according to the Nikkei/Markit India Manufacturing Purchasing Managers’ Index.

“If job creation is not given priority, India faces the risk of stagnation just like in the developed world, albeit with a difference: there it is at a high per capita GDP level, which is not the case in India,” Madan Sabnavis, chief economist at CARE Ratings, wrote in Quartz last month.

Modi needs to fix the country’s brewing jobs crisis quickly because demand for employment isn’t coming down anytime soon. By 2050, India is likely to have the highest working-age population in the Asia-Pacific, at around 1.1 billion.

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