Panel Discussion on "Making of New India: Transformation Under Modi Government" on Wed, 16th January, 2019 at 5:30 PM, Deputy Speaker Hall Annexe, Constitution Club of India, Rafi Marg, New Delhi

The NDA’s National Priority: Job Created Inclusive Growth (Part I of III)

Philip Christopher

Protectionist global trends, particularly in developed economies are increasingly viewed as populist measures to create jobs for locals haveadversely affected employment prospects of skilled workers from developing countries. Temporary suspension of the premium processing for the H-1B visa by the United States Citizenship and Immigration Services since March 2018 or the UK setting higher salary threshold for anyone applying under the Tier 2 intra-company transfer (ICT) category are instance of as protectionist measures to increase local employment.

Governments the world overtake efforts to create jobs for their citizens. Inclusive growth is identified by the Modi government as a strategy to sustain overall economic growth while at the same time creating much needed employment for India’s youthful population.A GDP of 8.2% was reported for the first quarter (April – June) of fiscal year 2018-19. The government has ensured India is the fastest growing economy in the world. Initiatives like Make In India, Startup India, Mudra Yojana, etc can be attributed to the 13.5% growth in the manufacturing sector during the same period. Even the Reserve Bank of India (RBI) has taken cognizance of the increased industrial activity and projected a 7.4% growth rate for the fiscal year 2018-19.SC Garg, Economic Affairs Secretary said “Economic performance is back to very normal. We had over 8% of quarterly growth last time in first quarter of 2016-17. Now after 8 quarters, we are at 8.2%. From 8.1% we have come to 8.2% which signals economic growth now on steady high growth path.” Clearly under the astute governance of current dispensation, the Indian economy has outperformed most forecasts surging at a two year high. The unique characteristics of this economic growth are job creation and inclusiveness of the growth the very premise of the economic development policy of the BJP – SabkaSaath, SabkaVikas.

The inclusiveness of the economic growth is clearly visible in the impetus economic development programs like Startup India, Make In India, Stand Up India or MUDRA generates. The direct beneficiaries of these schemes are entrepreneurs who manage over 36 million MSMEs in India. CII considers the Indian MSME sector as the backbone of the national economic structure and the bulwark for the Indian economy. MSMEs contribute around 6.11% of the manufacturing GDP, 24.63% of the GDP from service activities and represent 33.4% of India’s manufacturing output. The total employment in the MSME sector was 805.24 lakh. The sector is growring at 10% and about 20% of the MSMEs are based out of rural areas. The MSME employ is significant rural workforce and promotes sustainable development and inclusive growth. MSME generate large scale employment particularly rural area and are responsible for more than half of formal employment opportunities.

Despite being an important pillar of the Indian economy, MSMEs faced many challenges including startup procedures, accessing electricity, land, finance and skilled labour. Access to finance is the single biggest problem ever so often impeding productivity and growth. India’s informal sector that is labour intensive is completely driven by MSMEs where 85% of the jobs are created. MSMEs are widely considered to be providers of a higher share of total jobs created. The MSME sector employs 40% of India’s workforce. Considering that 50% of the Indian workforce is engaged in agriculture MSMEs contribution to employment is exceptionally significant.

MSMEs directly benefit from the PradhanMantri MUDRA Yojana (PMMY) as a result of this intervention 5.5 crore jobs have been created. The government continues to take reformative steps to spur growth in the MSME sector as the Prime Minister himself considers this to be crucial for India’s economic transformation. In 2018, annual budgetary allocations to MUDRA was increased by 20% from the previous year resulting in Rs. 3 lakh crore assigned for MSME sector development. Of the 12 crore MUDRA beneficiaries 55% belong to SCs, STs, OBCs and women. This government has ensured inclusive growth by focusing on the MSME sector promoted by women and entrepreneurs from weak socio-economic backgrounds.

The impact on increased investment resulting in job creation in the Indian economy is well researched and long since established. In addition to conventional source of capital including FDI, term loans, and private investments a program such a MUDRA promotes an ecosystem that nurtures entrepreneurs should be a national priority to not only develop the overall economy but foster inclusive growth in labour intensive markets. The policies of the government are well aligned to such national priorities. MUDRA reaches the broadest possible section of the Indian population and therefore promotes inclusive employment that is sustainable in the long-term.

Deployment of Bank Credit



Outstanding as on                                                                                                                                                      Crore
Mar.27, 2009 Mar.26, 2010 Mar.26, 2010 Mar 25, 2011 Mar 23, 2012 Mar.21, 2014 Mar.20, 2015 Mar.18, 2016 Mar.31, 2017 March 30, 2018
  Industry (Micro & Small, Medium and Large ) 1054390 1311451 13115 16208 19659 25165 26576 27307 26798 26993
1 Micro & Small 168997 206401 2064 2291 2592 3482 3800 3715 3697 3730
2 Medium 122155 132636 1326 1846 2056 1241 1245 1148 1048 1037
3 Large 763238 972415 9724 12071 15010 20442 21531 22444 22053 22226


Sector-wise FDI Inflows :

US$ million
Source 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 P
Manufacturing 5,143 4,793 9,337 6,528 6,381 9,613 8,439 11,972
Communication Services 1,852 1,228 1,458 92 1,256 1,075 2,638 5,876
Financial Services 2,206 1,353 2,603 2,760 1,026 3,075 3,547 3,732
Retail & Wholesale Trade 536 391 567 551 1,139 2,551 3,998 2,771
Business Services 1,554 569 1,590 643 521 680 3,031 2,684
Computer Services 866 843 736 247 934 2,154 4,319 1,937
Miscellaneous Services 888 509 801 552 941 586 1,022 1,816
Electricity and other Energy Generation, Distribution & Transmission 1,877 1,338 1,395 1,653 1,284 1,284 1,364 1,722
Construction 3,516 1,599 2,634 1,319 1,276 1,640 4,141 1,564
Transport 220 344 410 213 311 482 1,363 891
Restaurants and Hotels 671 218 870 3,129 361 686 889 430
Education, Research & Development 91 56 103 150 107 131 394 205
Mining 268 592 204 69 24 129 596 141
Real Estate Activities 2,191 444 340 197 201 202 112 105
Trading 198 156 6 140 0 228 0 0
Others 384 506 419 43 292 232 215 470
P: Provisional.
Source: RBI | Note: Includes FDI through SIA/FIPB and RBI routes only.


According to Asian Journal of Economics and Empirical Research (Vol. 3, No. 1, 40-48, 2016), “India certainly can be considered as an emerging economic power and FDI has contributed to its growth in amultidimensional way, but as far as the employment generation is considered there is yet to be methodology developed to establish a concrete relation between the two.”As co-relation coefficient was too a meaningful inference could not be drawn. But as far as the relation between GDP growth and employment generation is concerned, a positive relation with decreasing rate of growth of labor employment, capital intensive technology is now taking up the major role as growth engine in India and a further reduction in elasticity of employment. Therefore, it becomes all the more imperative for a funding avenue like MUDRA be developed into a flagship funding program for the MSME sector. (To be continued)

(The author is Founder and CEO, Policy Matters Institute (a New Delhi based Economic and Public Policy Advisory Organization).    

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