Capital Reallocation for Job Creation
Dr. Panagariya highlighted that while there is sufficient capital in the market, it is concentrated in sectors that are not labor-intensive. “You have got machinery. You got pharmaceuticals. You got petroleum refining. These are absorbers of capital, but they don’t absorb enough workers,” he explained. He emphasized the need to redirect capital to sectors that can generate more jobs per unit of investment.
Job creation, according to Dr. Panagariya, is closely linked to the composition of industries, particularly in manufacturing. “I think this is where you create good jobs and perhaps where the focus could shift a bit more than has been the case so far,” he said. He suggested that the industrial structure should evolve towards sectors that employ more workers relative to the capital invested. “That’s our challenge,” he added.
Unemployment is not the main issue: Arvind Panagariya
Responding to opposition claims that the government has failed to generate enough jobs, affecting their electoral performance, Dr. Panagariya refuted the notion that unemployment is the primary issue. “The issue of jobs are ongoing projects. There is no discontinuity here. The way sometimes this question is being posed on jobs and farm districts, etc., this is as if there is a discontinuity. There is no discontinuity. Economy has been growing robustly, and last three years we have seen very robust growth,” he said.
“Job creation is related to the composition of the industry, and particularly manufacturing. Let me also repeat something that I have often said, that our problem is not unemployment. You know, we do have pretty good data actually from the PLFS, the Periodic Labor Force Survey,” he added.He noted that unemployment rates have been decreasing. “Our problem is the productivity, the labour productivity per worker, has been low. That is a long-term problem,” he stated, referring to this issue as “under-employment,” where multiple workers are performing jobs that could be done by fewer people.As Finance Minister Nirmala Sitharaman prepares for the upcoming budget, Dr. Panagariya emphasized that it will be a significant test for her. He stressed that the budget is not merely a financial plan but a “statement of policy.” “She has to bring together various constituencies on board and show the roadmap for economic policy, since this is going to be a foundational budget,” he concluded.
