03-13-2006, 09:51 PM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Chidambaram misled the nation </b>
Pioneer.com
<b>Budget 2006 clearly fails to harness the power of the market to create jobs, says Bharat Jhunjhunwala </b>
The Congress won the last election on the platform of the common man. There was no place for the common man in the economic policies implemented by BJP Finance Minister Yashwant Sinha. No wonder Finance Minister P Chidambaram wants to deliver on the promise. He said in his Budget speech that textiles, food processing, petroleum, chemicals and petrochemicals, leather and automobiles in the manufacturing sector, and tourism and software in the services sector have the potential to create a large number of jobs, if appropriate incentives are given.
Mr Chidambaram, however, does not specify whether the incentives are to be provided to investment in these sectors or to job creation. And here lies the problem. The experience of the past 15 years indicates that more investment and production in these sectors is not leading to jobs.
The Economic Survey gives the rates of growth and the number of jobs created in various sectors. Between 2000 and 2003, the average rate of growth in the manufacturing sector was 6.5 per cent, but the rate of employment generation in this sector was (-)3.0 per cent. In other words, the number of persons employed in this sector declined by 3.0 per cent, despite high rate of growth.
Mr Chidambaram is saying that the manufacturing sector has the potential to create a large number of jobs. But the Economic Survey tells us that jobs are being eaten away in this sector. Similarly, the rate of growth in the services at 8.5 per cent was highest among the sectors. But the number of jobs declined by 0.7 per cent every year. Jobs are being eaten away in both the sectors, in which the Finance Minister sees the potential to create a large number of jobs.
The implication is that economic growth in these sectors is no guarantee for the creation of employment. However, this does not cancel Mr Chidambaram's logic because he also mentioned the need to provide appropriate incentives. So, let us examine what kinds of incentives have been provided to these sectors.
Mr Chidambaram has increased the allocation for Technology Upgradation Fund for the textile sector from Rs 435 crore to Rs 535 crore. Seven textile parks will be developed at a cost of Rs 189 crore. But there is a huge distance between technological upgradation and job creation. Technological upgradation can be undertaken by using computers for textile designing, or for automatic printing of textiles. That would lead to fewer jobs, not more.
The Cluster Development approach is to be continued for the handloom sector. Additional 100 clusters are proposed to be developed with an outlay of Rs 50 crore. A scheme to establish a "Handloom Mark" along the lines of "Woolmark" to certify the quality of handloom products is to be launched. But Cluster Development and Woolmark have not led to the generation of jobs till now. How can we assume that the same strategy will lead to the generation of jobs in future?
NABARD will create a separate window with a corpus of Rs 1,000 crore for refinancing the agro-processing sector. But the loans given to the agro-processing sector has increased much during the previous years and not led to the generation of employment, which has actually fallen by 1.5 per cent in the agriculture sector during 2000-03.
A task force is to be constituted in order to promote investment in the petroleum and chemicals sector. But this is about investment, not jobs. Rapid investment is already taking place in this sector, but jobs are declining.
India Infrastructure Finance Company Limited will continue the existing schemes for providing equity participation to new ventures for the production of hardware, such as wafers, semi-conductors, flat display and storage devices. Once again this is providing incentive to investment, not employment.
The Ministry of Small Scale Industries has identified 180 industries for dereservation. Simultaneously, the corpus of Credit Guarantee Trust for Small Industries will be raised by Rs 1,368 crore. The cost of seeking guarantee from this institution will be reduced. But more loans to these industries need not translate into more jobs. For example, investment in machinery such as excavator or harvester actually eats away a large number of jobs. Agricultural labour across the country earned much during the harvesting season earlier. Nowadays they are unemployed in the harvesting season because the job is being done by mechanical harvesters.
The allocation for the tourism sector has been increased from Rs 786 crore to Rs 830 crore for the development of 15 tourist destinations and setting up of four institutes of hotel management. But there is no explanation how this will lead to more jobs. For example, an ATM set up for the tourists can lead to unemployment among bank workers and the establishment of an automated kitchen can take away the job of the cook.
The Finance Minister has said that these sectors have a potential to create a large number of jobs, if appropriate incentives are given. That may indeed be true. But the schemes announced for these sectors only seek to promote investment and production. There is really no incentive to employment.
Certainly, incentives should be provided to investment in these sectors. But, simultaneously, explicit incentives should also be provided to the creation of jobs. For example, industries creating a large number of jobs can be subjected to lower rates of excise duty and VAT. A condition can be imposed on government contracts that specified works will be undertaken by manual labour, rather than machines. Industries such as agarbatti, papad and handloom can be given exemption from labour laws. Higher tax can be imposed on machinery that eats away jobs and adds little to production like harvesters, excavators and various automatic machines. Industries employing more capital and less labour can be subject to higher level of Income Tax.
Other policies can be developed to provide incentive to business to employ larger numbers. Industrialists employing large number of workers can be honoured along the lines of Padma awards. An "employment audit" can be made mandatory for all big investment proposals, including those cleared by the FIPB. No such policy is mentioned by Mr Chidambaram.
<b>The high rate of growth in the last few years has actually led to the decline in number of persons employed in the organised sector</b>. The Finance Minister should have taken concrete steps to harness the power of the market to create jobs. It will not be sufficient to assume that growth of these sectors will spontaneously lead to the generation of large number of jobs.
Mr Chidambaram is actually misleading the people of the country. It is true that these sectors have the potential to create jobs, if appropriate incentives are provided. Alas! Those very incentives are missing from the Finance Minister's dispensation.
<!--QuoteEnd--><!--QuoteEEnd-->
Pioneer.com
<b>Budget 2006 clearly fails to harness the power of the market to create jobs, says Bharat Jhunjhunwala </b>
The Congress won the last election on the platform of the common man. There was no place for the common man in the economic policies implemented by BJP Finance Minister Yashwant Sinha. No wonder Finance Minister P Chidambaram wants to deliver on the promise. He said in his Budget speech that textiles, food processing, petroleum, chemicals and petrochemicals, leather and automobiles in the manufacturing sector, and tourism and software in the services sector have the potential to create a large number of jobs, if appropriate incentives are given.
Mr Chidambaram, however, does not specify whether the incentives are to be provided to investment in these sectors or to job creation. And here lies the problem. The experience of the past 15 years indicates that more investment and production in these sectors is not leading to jobs.
The Economic Survey gives the rates of growth and the number of jobs created in various sectors. Between 2000 and 2003, the average rate of growth in the manufacturing sector was 6.5 per cent, but the rate of employment generation in this sector was (-)3.0 per cent. In other words, the number of persons employed in this sector declined by 3.0 per cent, despite high rate of growth.
Mr Chidambaram is saying that the manufacturing sector has the potential to create a large number of jobs. But the Economic Survey tells us that jobs are being eaten away in this sector. Similarly, the rate of growth in the services at 8.5 per cent was highest among the sectors. But the number of jobs declined by 0.7 per cent every year. Jobs are being eaten away in both the sectors, in which the Finance Minister sees the potential to create a large number of jobs.
The implication is that economic growth in these sectors is no guarantee for the creation of employment. However, this does not cancel Mr Chidambaram's logic because he also mentioned the need to provide appropriate incentives. So, let us examine what kinds of incentives have been provided to these sectors.
Mr Chidambaram has increased the allocation for Technology Upgradation Fund for the textile sector from Rs 435 crore to Rs 535 crore. Seven textile parks will be developed at a cost of Rs 189 crore. But there is a huge distance between technological upgradation and job creation. Technological upgradation can be undertaken by using computers for textile designing, or for automatic printing of textiles. That would lead to fewer jobs, not more.
The Cluster Development approach is to be continued for the handloom sector. Additional 100 clusters are proposed to be developed with an outlay of Rs 50 crore. A scheme to establish a "Handloom Mark" along the lines of "Woolmark" to certify the quality of handloom products is to be launched. But Cluster Development and Woolmark have not led to the generation of jobs till now. How can we assume that the same strategy will lead to the generation of jobs in future?
NABARD will create a separate window with a corpus of Rs 1,000 crore for refinancing the agro-processing sector. But the loans given to the agro-processing sector has increased much during the previous years and not led to the generation of employment, which has actually fallen by 1.5 per cent in the agriculture sector during 2000-03.
A task force is to be constituted in order to promote investment in the petroleum and chemicals sector. But this is about investment, not jobs. Rapid investment is already taking place in this sector, but jobs are declining.
India Infrastructure Finance Company Limited will continue the existing schemes for providing equity participation to new ventures for the production of hardware, such as wafers, semi-conductors, flat display and storage devices. Once again this is providing incentive to investment, not employment.
The Ministry of Small Scale Industries has identified 180 industries for dereservation. Simultaneously, the corpus of Credit Guarantee Trust for Small Industries will be raised by Rs 1,368 crore. The cost of seeking guarantee from this institution will be reduced. But more loans to these industries need not translate into more jobs. For example, investment in machinery such as excavator or harvester actually eats away a large number of jobs. Agricultural labour across the country earned much during the harvesting season earlier. Nowadays they are unemployed in the harvesting season because the job is being done by mechanical harvesters.
The allocation for the tourism sector has been increased from Rs 786 crore to Rs 830 crore for the development of 15 tourist destinations and setting up of four institutes of hotel management. But there is no explanation how this will lead to more jobs. For example, an ATM set up for the tourists can lead to unemployment among bank workers and the establishment of an automated kitchen can take away the job of the cook.
The Finance Minister has said that these sectors have a potential to create a large number of jobs, if appropriate incentives are given. That may indeed be true. But the schemes announced for these sectors only seek to promote investment and production. There is really no incentive to employment.
Certainly, incentives should be provided to investment in these sectors. But, simultaneously, explicit incentives should also be provided to the creation of jobs. For example, industries creating a large number of jobs can be subjected to lower rates of excise duty and VAT. A condition can be imposed on government contracts that specified works will be undertaken by manual labour, rather than machines. Industries such as agarbatti, papad and handloom can be given exemption from labour laws. Higher tax can be imposed on machinery that eats away jobs and adds little to production like harvesters, excavators and various automatic machines. Industries employing more capital and less labour can be subject to higher level of Income Tax.
Other policies can be developed to provide incentive to business to employ larger numbers. Industrialists employing large number of workers can be honoured along the lines of Padma awards. An "employment audit" can be made mandatory for all big investment proposals, including those cleared by the FIPB. No such policy is mentioned by Mr Chidambaram.
<b>The high rate of growth in the last few years has actually led to the decline in number of persons employed in the organised sector</b>. The Finance Minister should have taken concrete steps to harness the power of the market to create jobs. It will not be sufficient to assume that growth of these sectors will spontaneously lead to the generation of large number of jobs.
Mr Chidambaram is actually misleading the people of the country. It is true that these sectors have the potential to create jobs, if appropriate incentives are provided. Alas! Those very incentives are missing from the Finance Minister's dispensation.
<!--QuoteEnd--><!--QuoteEEnd-->