November 8, 2007EconomyPublic Policy

Of investments and employment

Gujarat has been drawing in investments and creating jobs in the private sector. But is it sensational?

This is an archived blog post from The Acorn.

In this, the sixth instalment of a series on Tehelka’s attempt to paint Gujarat as just another socio-economically vulnerable state’, we look at the presentation of investment and employment figures.

The jugglery of figures extends even to the most hyped aspect of Vibrant Gujarat” — investment from corporates. Modi claims that MoUs worth Rs 4,60,000 crore have been signed with private industry and investment worth (Rs 2,00,000 crore) has been received. But these declarations take a long time to materialise. For instance, in a written reply to the consultative committee of the General Administration Department, the chief minister admitted that out of a total of Rs 66,068 crore worth of MoUs signed during 2003 and Rs 1,06,16 crore during 2005, only Rs 25,450 crore worth of investments till January 2007 and only Rs 13,170 crore, respectively, have fructified so far.

Despite these investments, employment has remained stagnant. That is because Gujarat has as many as three lakh small-scale industry units. Many of them are languishing as only a paltry Rs 115.20 crore has been invested in them in the past five years.There is nothing unusual at all about investments being spread over a number of years. For instance, POSCOs Rs 52,000 crore investment in Orissa—touted as India’s largest FDI project—is spread over 10 years. As a commitment, an MoU is non-binding, and constitutes only an understanding that a certain amount will be invested. That said, an MoU is better than no MoU, isn’t it?

What about employment being stagnant due to the presence of small scale industry units? Going by the Gujarat state government’s socio-economic review, total employment as of end-2004 at 1.66 million is lower than that for year 1999 (1.73 million). But before you conclude that this is evidence of stagnation, let’s look a little deeper. What has happened during this time is that the number of public sector jobs have fallen from 932,000 to 824,000, while the number of private sector jobs have risen from 795,000 to 836,000. Between 2000 to 2005, the number persons registered at employment exchanges has fallen from 855517 to 757234 (educated jobseekers), and from 212234 to 118479 (uneducated jobseekers). Not stellar growth, but not stagnation either. The growth in private sector jobs not only supports Gujarat’s investment story, but the drop in public sector jobs is good news from the public finance perspective.

Shivam is right about small scale industries coming in the way of a massive growth in employment. It so happens that this is largely due to the central government’s labour laws. Gujarat then could be a victim of the UPA government’s inability to reform India’s labour laws.

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