India

Employment Elasticity of Growth in India

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Recently, there have been a spate of articles on employment elasticity of income in Indian newspapers and how important that is to job creation in India. The Hindustan Times has a series on India’s job challenge, Mint’s editorial discussed quality of jobs created, and the Economic Times cautions against India mimicking China’s strategy in creating jobs.

But what exactly is employment elasticity? And why is it important?

According to an RBI working paper by Sangita Misra and Anoop K. Suresh, employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as a per cent of its growth or developmentprocess.

An employment elasticity of 1 denotes that employment grows at the same rate as economic growth. Elasticity of 0 denotes that employment does not grow at all, regardless of economic growth. Negative employment elasticity denotes that employment shrinks as the economy grows.

This is crucial as it is commonly believed that economic growth alone will increase employment. However, as we examine the data, we see that despite India’s impressive economic growth, employment has not grown alongside. Ideally we would like to see an employment elasticity >=1, but, from the Misra and Suresh paper, we see that employment elasticity in India declined from 0.44 in the first half of the decade 1999–2000 to 2004–05, to as low as 0.01 during second half of the decade 2004–05 to 2009–10.

YearsEmployment Elasticity
1999-2000 to 2004-050.50
2004-05 to 2009-100.01
2009-10 to 2011-120.18

Similar trends have been witnessed at the sectoral level. In agriculture and manufacturing, employment elasticity between 2004-05 and 2009-10 has been negative.

Sector1999-2000 to 2004-052004-05 to 2009-102009-10 to 2011-122004-05 to 2011-121999-2000 to 2011-12
Agriculture1.09-0.39-0.44-0.41-0.08
Manufacturing0.80-0.271.740.100.33
Mining & quarrying0.870.20-1.76-0.140.34
Utilities0.67-0.277.601.421.17
Construction0.881.63-0.251.121.01
Trade, transport, hotels0.45-0.020.540.130.25
Finance, real estate1.400.34-2.32-0.450.06
Other services0.46-0.112.960.480.47
All sectors0.500.010.170.060.20

The negative employment elasticity in agriculture indicates movement of people out of agriculture to other sectors where wage rates are higher. This migration of surplus workers to other sectors for productive and gainful employment is necessary for inclusive growth. However, the negative employment elasticity in manufacturing sector was a cause of concern particularly when the sector has achieved 6.8 per cent growth in output during Eleventh Plan. It did bounce back during 2009-10 to 2011-12, but the average employment elasticity in manufacturing between 2004-05 and 2011-12 was still only 0.10.

 

References:

Misra, S., & Suresh, A. K. (2014). Estimating Employment Elasticity of Growth for the Indian Economy. Reserve Bank of India.

Planning Commission, India. (2013). Twelfth Five Year Plan, 2012-2017. Sage Publications, India.

Australia and the Logic of Strategy

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Edward Luttwak wrote presciently in 2012 that:

Other things being equal, when a state of China’s magnitude pursues rapid military growth, unless the resulting shift in the power balance passes the culminating point of resistance inducing the acceptance of some form of subjection, it causes a general realignment of forces against it, as former allies retreat into a watchful neutrality, former neutrals become adversaries, and adversaries old and new coalesce in formal or informal alliances against the excessively risen power.

Perhaps, this logic of strategy is most apparent in Australia’s recent foreign policy conduct. The setting up of a highly classified inquiry on Beijing’s clandestine influence over Australian politics by PM Malcom Turnbull in 2016 was the first sign that Australia is realigning its forces against China. This eventually resulted in a legislation in June 2018 that raises the costs for Australians found to be guilty of batting for foreign powers.

The second visible sign was Australia’s changed perception over the Quadrilateral Security Dialogue. Under Kevin Rudd’s leadership, Australia had withdrawn from discussions in 2008. In 2017, they were strongly back.

Signs three and four are specific to Australia’s engagement with India. Over the past couple of years, Australian federal and state governments have infused new vigour in their India connections. This multi-pronged approach has meant that Australia has even managed to create favourable stakeholders outside the Old New Delhi region. The frequency of visits by Australian state government legislators and policy experts to other cities in India has certainly increased. For example, Bengaluru alone is home to trade offices of Victoria and Queensland. New South Wales and Western Australia have trade offices in Mumbai. And the federal government’s Australian Trade and Investment Commission (Austrade) has its presence in 10 Indian cities.

The fourth and the latest sign is an India Economic Strategy 2035 document that was released by the Australian government earlier this month. Commissioned by the Turnbull government, the document identifies 90 specific recommendations for increasing Australian presence in India. Not only does it identify the priority sectors, it also identifies the ten states in India that Australian federal and state governments must focus on. The document illustrates both:  foresight of the Australian foreign policy establishment and Luttwak’s logic of strategy.

 

Why Bangladesh Matters: Yet Another Illustration

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I have argued earlier that the vacillating nature of India’s neighbours need not overly worry Indian foreign policy makers.

beyond the security domain, there is very little that small states in India’s neighbourhood can do in India’s pursuit of prosperity for its citizens in the immediate future. As we enter a world economy that is getting increasingly protectionist in nature, international trade will become increasingly difficult. Fortunately, India’s big, relatively young, and diverse population means that greater domestic consumption alone can help us maintain high economic growth for the next 10 years or so. Barring Bangladesh, no other Indian neighbour has economic prowess that India cannot substitute domestically. So, in the short run, the economic benefits accruing from small states in the neighbourhood will continue to be marginal. [INI, April 7 2017]

A news report in Business Standard today gives an example for why Bangladesh is an exception.

The value of two-wheeler exports from India to Bangladesh jumped 50 per cent in FY18 to $277 million (Rs 19 billion), making it India’s biggest export market, ahead of Sri Lanka. The value of shipments to Bangladesh has more than doubled since FY16, when it was just $128 million…

Bangladesh is estimated to have exported readymade garments worth $29 billion in the calendar year of 2017. Riding on robust economic growth, the nation’s demand for motorcycles soared 50 per cent in 2017 to an estimated 360,000 units. The high double-digit growth continues in 2018 as well. [Business Standard, 20 Jul 2018]

In essence, India’s relationship with Bangladesh is strategic for multiple reasons. It can directly impact the peace and prosperity of a large number of Indians. The opportunity costs of not having Bangladesh on your side are far higher compared to our other neighbours.

Xi Jinping’s foreign policy pivot

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Chinese President Xi Jinping addressed the Central Conference on Work Relating to Foreign Affairs recently, with his speech offering important insights into Chinese foreign policy philosophy, objectives and approaches. Xi defined his philosophical program as “diplomacy of socialism with Chinese characteristics for a new era,” outlining 10 key aspects of this thought.

Examining these, it isn’t surprising that Xi’s first and foremost priority in foreign affairs is to uphold the “authority of the CPC Central Committee” and strengthen “its centralised, unified leadership on external work.” This has a domestic and international component. Domestically, it refers to the emergence and role of a diverse set of actors in Chinese foreign affairs – from the top leadership, diplomatic corps, representatives at international institutions, party members in the judiciary, the trade and commerce bureaucracy, local governments, the military to financial institutions and state-owned enterprises. Externally, it implies an expansion in the role of party organs and ensuring that events outside do not jeopardise the Communist Party’s rule.

Analysing the state media readout of the speech, one can identify that the fundamental objective of Xi’s foreign policy is to “facilitate a favourable external environment for realising the Chinese Dream of national rejuvenation.” This is an expression of Xi’s shift from Deng Xiaoping’s tao guang yang hui (roughly translated to hide your strengths and bide your time) in favour of the strategy of fen fa you wei (roughly translated to striving for achievement.)

What this implies is that one can expect China to continue with an assertive foreign policy to actively shape events, attitudes and institutions in order to achieve its objectives. However, this round of assertion will be different from the nationalistic kind that has been witnessed since 2008, say in the South China Sea or with regard to Senkaku/Diaoyu islands dispute since 2012.

For starters, Xi acknowledges that China’s rise is “intertwined” and interacts with “the most profound and unprecedented changes (that the world is currently undergoing) in a century.” In such an environment, he is placing priority on developing “global partnerships while advancing diplomatic agenda.” This ranks two spaces above “national core interests as the bottom line” in the list of ten aspects of the new diplomatic thought. Also, ranking higher than core interests are the goals of “building of a community with a shared future for humanity” and “reform of the global governance system with the concept of fairness and justice.”

This indicates that Beijing is keen to actively “advance major country diplomacy” to reduce friction and work with partners, particularly developing countries, to expand its global influence and play a greater role in norm setting. For potential partners, this signifies an important window of opportunity, as China is likely be more amenable to addressing sources of tensions and flexible towards accommodating their concerns. One can view events like December’s South-South Human Rights Forum, Beijing’s outreach to New Delhi and Tokyo over the past few months, its deepening ties with Moscow, its attempts at negotiating a new South China Sea Code of Conduct with ASEAN and its efforts to gather support against Donald Trump’s protectionist policies in this context. This subtle change does not imply an infusion of universalistic or idealistic notions in Chinese foreign policy but is rather driven by pragmatism.

A final noteworthy aspect of Xi’s speech was the constant reference to history. The repeated emphasis on having “an accurate understanding of history,” the need to “review the past, summarise historical laws,” understand “the trend of history” and the identification of present times as a particularly significant “historical juncture” operate at multiple levels. First, it signifies a sense of manifest destiny that has characterised Xi’s leadership. Second, it is an example of personal narrative building, whereby Xi has appropriated for himself the goal of making China strong, after it has stood up and grown rich. This once again places Xi in the league of Mao Zedong and Deng Xiaoping, above his predecessors Jiang Zemin and Hu Jintao. And third, it is a nudge to the party rank and file to maintain “strategic confidence” and not be disoriented by “ever-changing international chaos.”

Effectively what Xi appears to be telling Party cadres and the world at large is that while the tide of realpolitik may ebb and flow, China is here to play the long game, “keeping in mind both internal and international imperatives.”

There’s a New Great Game in Afghanistan. It’s Called Cricket.

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— By Retd Lt Gen Namaloom Afraad

There’s a new Great Game in Afghanistan and it is hurting Pakistan badly. This week saw Afghanistan’s entry into test cricket. While we welcome the move, we strongly protest the way in which this was done. India, after surreptitiously granting a ‘home ground’ for the Afghanistan cricket team in Dehradun, is trying to pose itself as a state genuinely interested in Afghanistan’s well-being. What is being forgotten is that the team would have not taken shape at all but for Pakistan graciously allowing Afghan youngsters to play cricket in refugee camps.

The world is well aware of Pakistan’s commitment to peace and stability in Afghanistan. Pakistan has sacrificed many lives to ensure that a true Afghan-led solution can be brought about. That’s the only reason why we are supporting the Afghan Taliban even though it incurs a huge cost to the Pakistani state and society. But while we were busy doing that, India is sabotaging Pakistan’s national interests by providing cricket training to the people of Afghanistan.

We are always asked for proofs of Indian interference in Afghanistan. We don’t need to provide them any longer because India’s role is out in the open. But let me provide a few pieces of evidence in any case.

One, the Afghanistan cricket team couldn’t have been trained without the extensive support provided by R&AW. Grounds and stadia in Afghanistan have been constructed by India. This bolsters the case we have argued for long — India’s four consulates in Afghanistan are actively undermining Pakistani interests in the region.

Two, India is spreading false propaganda in American newspapers on the rise of Afghanistan’s cricket team while whitewashing the role played by Pakistan in the team’s rise.

Three, reliable sources have informed us that Afghanistan T-20 jerseys were being freely sold in India during the match. India even got many Afghanistan supporters into the spectator stands and made them carry flags and banners symbolising India-Afghanistan friendship. The BCCI (not our BCCI, that’s long dead) twitter handle also posted provocative videos like the one below where they got Afghan players to pose with the trophy. All these instances are deliberate acts of provocation on India’s part to destabilise Pakistan’s own efforts in bringing peace to Afghanistan.

Pakistan has always shown active interest in finding a settlement of the Afghan issue. In the recent past, we proposed a string of formations including the Quadrilateral Coordination Group (QCG). In the QCG, Pakistan even took the initiative of inviting the cricketing teams of US and China so that Afghanistan and Pakistan could be in the finals. But the plan failed because India scuttled it and offered cricketing facilities to Afghanistan in India.

We must launch a strong protest against Indian role in Afghanistan cricket and raise the issue in the next UN General Assembly meeting. After all, what are we waiting for? Will we now have to put up with the ignominy of playing a test match against Afghanistan in India? It’s time that Pakistan stood up for its interests and exposed India’s commencement of the new Great Game in Afghanistan.

I watched the Afghanistan cricket team’s test match live from the spectator stands in Bengaluru’s Chinnaswamy Stadium. As Ratan Malli mentioned on Twitter, someone from Pakistan will soon write about how this new engagement is reflective of “India’s meddling in Afghanistan” and “how India is using Afghanistan to foment unrest against Pakistan”. This article has been written to help elements from the Pakistani military-jihadi complex in their endeavours. They can freely copy-paste from here. No citation needed. Only use #satire.

 

India Needs an Aggressive China Insurance Policy

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What should India’s conduct with China look like? This question is on the minds of a lot of people in India’s foreign policy circles. I currently have a two-part answer to this question:

Part 1: Assuming that yogakshema for all Indians is defined as the national interest, India’s asks from China would be: peace on the borders and investments in the Indian economy. From a Chinese perspective, these asks are extremely beneficial too. Peace on the Indian border allows them to concentrate their efforts towards challenging the US in the South China Sea. And India is perhaps the only market with the scale and the stability to promise returns on Chinese capital currently flowing to weaker economies.

Part 2: Part 1 is insufficient because China’s recent movements – in Maldives, Nepal, and Doklam – are indicative of its tendency to eschew a mutually beneficial path and pick an openly hostile front instead. To prevent this switch, India needs to invest in I call an Aggressive China Insurance Policy. The motive of this policy is simple: should Xi Jinping’s China get aggressive with India, India should have readily available capacity to inflict significant pain to China in return. The insurance “premium” for this policy includes a variety of measures:

  1. Establish contacts with the key members of World Uyghur Congress and other such organisations.
  2. Shift the focus of “Act East/Look East” to one country — Vietnam.
  3. Offer Trump deals that can deepen the US-India engagement.
  4. Sponsor studies that puncture the “Chinese Leaders Do No Wrong” narrative.

This two-part policy can help India modulate its relationship with China.

India’s Economic Growth Rate is Overstated

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In a brilliant article in Mint, Rajeswari Sengupta, Assistant Professor at IGIDR, has shown that India’s real GVA growth rate is around 5% and not 7.1% as the CSO claims. The reason is the use of deflator in converting the nominal GVA to Real GVA.

In nominal terms, GVA increased by 7.9% in the third quarter (October-December) of the fiscal year 2015-16, below its usual level of 10-15%. This increase translated into a 7.1% real growth, because the deflator reportedly increased by only 0.7%.

Could India’s inflation be so low? In effect, the CSO is saying that despite India’s booming economy, producer inflation is lower than that of the recession-wracked economies of the West, or even that of Japan, which has been wrestling with deflation since the 1990s. This is not plausible.

It does seem extremely fishy that an emerging economy, growing at 7% (5%?) can have an inflation of 0.7%. The article then goes on to explain why this might be the case. In the absence of a credible deflator figures for all sectors, the CSO approximates it by using Wholesale Price Inflation as a proxy. This can be extremely problematic as the WPI has been on a downward trend in India and there is also significant divergence between the WPI on one hand and the deflator and CPI on the other. This divergence has been occurring since 2014 at least and I had written about it earlier.

If we were to use better proxies for the deflator instead of the WPI, like the CPI in services and IIP for manufacturing, we get a real GVA growth rate for the third quarter at 5% instead of 7.1%. The figure of 5% seems a bit more in tandem with reality.

Bangladesh seeks India’s support on Rohingyas

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Bangladeshi PM Sheikh Hasina was in West Bengal yesterday where she sought India’s help over the Rohingya exodus issue. She expressed hope that countries will pressurise Myanmar government so that Rohingyas would be able to return to their country.

What should India be doing to help? We had this to recommend:

New Delhi must focus on ensuring that Bangladesh is successful in hosting, managing and, once the crisis passes, repatriating the refugees back to Myanmar. Bangladesh is an important neighbour and Sheikh Hasina is a pro-India leader — it is in India’s interests to ensure that she emerges politically stronger as a result of her courageous stance on this issue.

The Bangladeshi prime minister has invested tremendous political capital in the ongoing crisis. The ‘Rohingyas-are-a-terror-risk’ narrative that has dominated the Indian discourse finds resonance in a many Bangladeshis as well. And yet, Sheikh Hasina’s government has chosen to respond in a calm, calculated, and generous manner in responding to the immediate humanitarian crisis.

India’s policy response must cover several dimensions. First and most urgent is the matter of providing humanitarian relief in an adequate and timely manner. Operation Insaniyat is a good starting point. Under the first effort of this relief operation, an Indian Air Force (IAF) plane reached Chittagong on 14th September with 50 metric tonnes of relief assistance. It is further reported that India aims to provide 7000 tonnes of relief materials to Bangladesh. In 2008, India’s Ministry of External Affairs created a separate budget line for international disaster relief, allocating US$10-30 million a year on such efforts since then. The time is right to make Bangladesh the focus of India’s disaster relief efforts over the next few months.

Second, India must enlist the support of South East Asian countries in managing this humanitarian crisis in the common neighbourhood. Myanmar is a member of ASEAN and, so far, both the grouping and individual member-countries have yet to make significant contributions to managing the conflict and the fallout. Indian diplomacy must enlist the support of Malaysia, Singapore, Indonesia and Thailand to weigh in politically on their ASEAN counterpart in Naypyidaw to stem the crisis, and extend financial support to the relief effort.

Third, Indian government can also help channelise money and technical assistance to Bangladesh from Indian NGOs and corporate donors. The Bangladeshi government has also started biometric identification of all Rohingya refugees. This project is expected to take many years to complete. The Indian government can offer its help in this exercise as well.

Finally, the Indian armed forces must cooperate with their Bangladeshi counterparts to better secure the maritime and littoral areas, and engage in joint rescue and relief operations. Intelligence and security cooperation between the two countries is also necessary. [Pragati, 25 Sep 2017]

 

 

Kowtowing to Chinese Maritime Power Is Not a Good Strategy

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I came across an essay titled China is Not Alone in Adding to the Indian Ocean Woes in the Economic & Political Weekly’s 28th April edition.

The article makes three points regarding maritime power in the Indian Ocean region. Each of the three points deserve closer scrutiny and hence this post.

The first point is that maritime power rests not just on managing the maximum number of ships and submarines but also on the control over maritime finance and particularly on maritime services. In the author’s words:

War vessels and merchantmen are the two most visible elements of power at sea. However, the marine service industry, the most important arm of maritime power generally remains obscured. The marine service sector regulates and organises the diverse maritime cluster. This silent force operates in the realm of marine manufacturing, marine legal services, engineering, and technology, and supports the charter, insurance, sale, and purchase of maritime assets. It also determines freight and cargo rates. It is this sector that helped Britain sustain its empire for another 75 years, after the US had become the centre of international manufacturing by the 1870s.

This is a point well made. Given that India’s current approach does not factor in the significance of maritime service industry, effectiveness of India’s exercise of maritime power will continue to be limited in the short-term.

The second point is that India should not solely be focused on China’s maritime expansion in the Indian Ocean:

We are afraid of the Chinese empire-in-the-making while being oblivious to the dangers that the existing American empire poses to the Indian Ocean region. We are so bothered about the Chinese developing a base in Djibouti, but have been oblivious of the fact that France and the US already have a base over there… We do not know how Chinese hegemony will work in the future, but we know the exploitative and heinous character of the French and the British Empires. The question is, why are we not as afraid of the West as we are of the Chinese?

From a realist perspective, this argument makes sense. Increase in power of the other states affects India’s ability to achieve its own objectives. The law of the jungle is indeed the nature of international relations but even so — and this is what the article misses — a bigger animal eats the smaller animal only when it is hungry. And as things stand, there’s only one state with the hunger for expansion in Indian Ocean. So, India must swing on this issue with the US and other powers to restrict the most imminent threat. This collaboration is also necessary to address the first point — building a maritime ecosystem (including a maritime services industry) of its own.

The third point the article makes is:

We cannot move ahead on the presumption that the Chinese empire will be bad. Who knows, it may be a little better and more peaceful than the wretched, iniquitous world that Anglo-American capital has created. The Indian navalists must be a little more judicious and not allow the Indian Navy to be used as a projectile to counter China.

Now this argument is far removed from reality. There is enough evidence to suggest that a Sinocentric world order will not align with India’s quest for yogakshema — peace and prosperity for all Indians. For a start, look at the way China has alienated — simultaneously and purposively — a new generation of peoples in all of its neighbouring countries. Then look at how the Chinese Communist Party has imposed one language on a diverse set of its own peoples. And finally, just glance at its social credit system to see the Chinese vision for the future.

Of course, the US conduct on the liberal international order that it carried forward from Europe has hardly been untainted. But the failings of the US cannot not be used to give a free pass to China.The reason is that irrespective of what the US does, India is fundamentally aligned with the norm of a liberal international order, for its own national interests. We must question the US when it deviates from this norm. But in a Sinocentric world, this norm itself will cease to exist.

This is what I wrote in Pragati a few days ago:

Legitimacy for the Chinese way of reordering the world is constrained by an essentially hierarchical Chinese worldview — one that divides the world between ‘civilisation’ and ‘non-civilisation’ depending on the extent of sinicisation a region has gone through. This makes the idea of a Pax Sinica a repulsive proposition to most states, let alone illegitimate. So, even if China were to become the most powerful state in the world, it is unlikely that it will become the most authoritative actor.

 

 

Who’s More Powerful in Asia: US or China?

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The Lowy Institute’s new Asia Power Index makes for intriguing reading. For starters, it offers a good definition of power.

“Power is defined as the capacity of a state or territory to direct or influence the behaviour of other states, non-state actors, and the course of international events. It is the capacity to impose costs and confer benefits that shape the choices of others.”

The authors then assess the overall power of 25 key Asian states based on their weighted average across eight specific measures of power. These are:

  • Economic resources
  • Military capability
  • Resilience
  • Future trends
  • Diplomatic influence
  • Economic relationships
  • Defence networks
  • Cultural influence

The findings offer much food for thought. For instance, while the US and China are neck-and-neck on the measure of economic resources, there is a serious gulf between them with regard to military capability. Add to that the fact that while the US tops the defence networks measure, China ranks a low eighth. This is indicative that despite China’s rapid military upgradation and attempts at projection of might, Beijing is a long way off from catching up with Washington.

The two surprising areas where China trumps (pun intended) the US, however, are diplomatic influence and economic relationships. While the latter in Asia is understandable, one wonders whether the former is merely about Donald Trump’s America First approach or is a systemic change underway.

China also does rather well on the measure of resilience, which includes threats to internal stability, scoring 85.9 to the US’s 91.4. In the short-term, I’d agree with the authors on that. But I’d contend that Xi Jinping’s personalised control over the Party-state structure poses a serious threat to long-term stability.

India, meanwhile, ranks 4th in the overall assessment, just a shade behind Japan. And there’s some very good advice being offered for New Delhi to rise up the table, i.e. focus on converting its sizeable resources base into strategic gains and improving defence networks.

India-China Collaboration on Railway Line in Afghanistan?

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After the Xi-Modi Wuhan summit, there is a lot of buzz around the possibility that India and China might take up a joint economic project in Afghanistan.

This prospect has got many people excited. All prominent news agencies have reported this and yet there is little clarity on what exactly this project is all about. The MEA’s press release on the Wuhan summit in fact does not mention Afghanistan at all. The MEA spokesperson has been quoted in Times of India saying that the identification of this project is still in progress. The Hindu’s report vaguely mentions the possibility of a road link to Chabahar from Aynak via Hajigak.

But Praveen Swami in Business Standard has the most clear view about what this project might be. He writes:

Earlier this week, President Xi Jinping and Prime Minister Narendra Modi agreed to explore joint China-India work on a railway line in Afghanistan, with one spur carrying Mes Aynak’s ore to Torkham, and over the Khyber Pass into Pakistan; the other in a great north-western arc, into Hairatan.

I created this google map to understand how this railway line might look like. Please note that this is only an illustration – I have no more details other than the above article.

Based on the May 4, 2018 report in the Business Standard [Click to expand]

Won’t such a project pass through Taliban-controlled areas? What is the security situation like in the areas that this railway line might pass through. To check that out, I overlaid the Jan 2018 BBC illustration showing areas under Taliban/government control over the route map. That looks as follows.

The speculated railway line pass through areas with Taliban presence [Click to expand]

The areas marked in brown are under full-Taliban control. Areas in grey are in full government control. The orange areas are government-controlled areas having open Taliban presence. The darker shade indicates higher risk (attacked at least twice a week). Lightest shade of orange represents areas that are attacked once in three months on an average.

As is clear from this graphic, India, China, and the Afghan governments have a tough challenge ahead of them if they are serious about this project.

The Lure of the Government Job

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The Hindustan Times carried a piece on April 22nd which said that the Indian Railways is set to carry out the world’s largest recruitment drive, one that will fill ninety thousand vacancies from a pool of 2.5 crore applicants.

What struck me most was this seemingly innocuous quote by one of the applicants:

I am anxious for a job and a regular income.

This rather simple statement fits into a hypothesis we have developed over the last few weeks: employment can affect income in two orthogonal dimensions – through income stimulation and through income stabilisation. Income stimulation happens purely because the budget line of an unemployed individual shifts to the right once she becomes an employee. By income smoothening or stabilisation, we mean that the employee is reasonably certain that she will receive her employment wage over the next few payment cycles. For example, a job like the now famous Pakoda seller demonstrates an income stimulation effect but lacks income stability. A software engineers’s job at a large firm by contrast does better on both income stabilisation and income stimulation.

Now, the simple observation by the railway job aspirant shows that the lure of a government job is that for less well-paid jobs, a government service leads to income stabilisation as well as income stimulation which is not the case with a private job for the same skill level. At least that is how the perception is. And this is essentially the lure of a government job. What this means is that for any meaningful rise in employment in India, private sector jobs will have to compete with government jobs on both these dimensions.