finance
Over the last decade, particularly excluding 2021 and 2022, Indian media and social platforms have intensified discussions concerning job losses. These conversations are highlighted by alarming predictions from financial analysts about insufficient job creation within the nation. To understand the roots of this pressing issue in one of the world's most populous countries, it is essential to trace the history of job generation from pre-1947 colonial times through post-independence.
During the colonial period prior to 1947, both white-collar and blue-collar job markets in India faced severe crises during the 1930s and 1940s due to the global recession, World War II, and oppressive colonial exploitation. These conditions led to extreme economic hardship for approximately 98% of the population, culminating in devastating famines.
After gaining independence, Indian policymakers adopted the Soviet economic model, establishing core government industries such as steel, cement, pharmaceuticals, and tractors, while also constructing large dams for food security. These initiatives not only set the impoverished nation on a path to growth but also created millions of jobs in core and non-core sectors. This marked the emergence of the globally recognized Indian middle class, largely supported by job creation and the flourishing of small and medium enterprises, alongside the agricultural sector.
The Indian socialist economy experienced its first contraction in job generation during the early 1970s, as unemployment rose among both middle and working classes. This trend mirrored similar contractions in other socialist states, such as the USSR, China, and Yugoslavia, attributed to population growth and employment saturation in the public sector. Although India managed to weather some of these challenges post-nationalization of banks and industries until 1995, the landscape shifted dramatically from 1996 onwards.
With an increase in private investments, particularly in the IT, health, and construction sectors, the job generation crisis was effectively addressed. National and state governments began to divert responsibility for job creation, leading to a significant decline in government obligations. This trend persisted until 2019, even though employment sector growth began to dwindle following the global recession in 2008. The domestic and overseas job markets performed well until 2022.
However, in 2023, the situation worsened as economic instability, particularly in the USA, Canada, and Europe, led to medium-scale layoffs in the IT and banking sectors. As these economic pressures infiltrated the domestic market, the middle class—traditionally the engine of the national economy—began to struggle, facing wage stagnation, high inflation, and job insecurity. This demographic, often laden with debt and ambitious aspirations for housing, education, healthcare, and better lifestyles, now finds itself trapped between the 10% wealthiest individuals and the 60% lower working class, who benefit from various government subsidies.
The financial difficulties faced by the middle class are particularly pronounced in major cities due to the impact of inflation. This economic strain is now extending to tier 2 and tier 3 cities, poised to affect rural areas if the domestic economy does not improve promptly.
In India, employment encompasses both full and semi-employment, with many jobs providing insufficient wages to support families. The middle class has historically enjoyed more stable employment in government and, to some extent, private sectors, thanks in part to the rise of the IT industry. However, the lower working class often finds itself in semi-employment, necessitating multiple income sources for family sustenance.
Consequently, the middle class finds itself on the frontline of significant economic challenges, with limited immediate relief in sight. The recent economic slowdown has had a substantial impact on sectors such as real estate, FMCG, automotive, and private education, all of which rely heavily on middle-class consumers. Meanwhile, the lower working class, while also affected, is less directly tied to these economic shifts.
A critical issue to consider is the structure of the Indian economy compared to export-driven economies like China, South Korea, and the USA. India's economic growth has predominantly been self-sustained, relying on a robust agricultural and small-scale manufacturing base, which has historically provided resilience against economic downturns. Approximately 70% of the rural and semi-rural economies depend less on exports and more on agriculture, which remains a strong pillar against recessionary forces.
Furthermore, sectors such as health services, construction, retail, and maintenance offer considerable employment opportunities. Despite the challenges faced by the middle class, job creation in secondary markets, particularly in IT, healthcare, pharmaceuticals, engineering goods, and agro-products, is expected to continue accommodating displaced workers and new job seekers.
In summary, while the prospects for immediate recovery may appear bleak, the domestic financial situation for India may not be as dire as in other nations, despite lower per capita income levels.