Budget 2017: Govt should announce policies to support sectors with immense job growth potential, says Crisil

As merely few days remaining for the government to present its Union Budget for 2017-18, it should announce policies that support sectors with immense job growth potential resulting in increase in employment despite slipping labour intensity, said Crisil in its latest research report.

The ratings agency on Friday released a report titled 'Budget thrust needed on sectors that can immediately push job creation' which primarily focused on its expectations from Budget 2017.

"The last three years have seen a slow-but-steady uptick in economic growth, but it is likely that this hasn’t been accompanied by commensurate job increase in employment. The sectors that grew fast have low labour intensity and share in overall output," cited Crisil in a note. 

The adoption of technology like automation has resulted in reducing the labour-intensity of many in the industry.

"Policies will, therefore, have to support sectors with large job growth potential such that, despite slipping labour intensity, absolute employment continues to increase. Additionally, the policy focus should also be in preparing the youth for new job opportunities," it said. 

The Government of India will present its Union Budget 2017-18 on February 1 as against the traditional practice of presenting it on February 28. 

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According to Crisil, three sectors have grown way faster than the country's gross domestic product (GDP) in the last three years but have not created adequate employment. 

Three sectors namely-1.financial services, real estate and professional services; 2. public administration, defence, and community services, and, 3 trade, hotels and restaurants- have grown faster than the GDP but only trade, hotels and restaurants, which is labour intensive managed to create jobs but its share in total output is low at approximately 12%. 

In contrast,  other fast-growing sectors, despite having a larger share in output, have low labour intensity of 2-3. In short, despite a pick-up in GDP growth, fewer employment opportunities are likely to have been created in the past three years, it said.

In order to increase employment opportunities in the country, the ratings agency expects the government to announce policies in the sectors in the upcoming budget.

"Policy support can also can be in the form of easier labour laws, providing physical infrastructure, mitigating power shortages, and facilitating reasonable terms of credit and taxation laws," Crisil said.

It believes that the government's policy support in the Budget 2017 has to be mix of both that is short-term as well as long-term focus. 

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Crisil in a note said," For immediate benefits, the forthcoming Union Budget should chose to support sectors hit hardest by demonetisation, and those that are more labour intensive, such as the small and medium enterprises segment, and also construction." 

For the government, pushing the roads sector has always helped in times of crisis, it further noted. 

The ratings agency expects the government to continue with its spending on construction of rural roads to increase employment opportunities resulting in rise in consumption.

"In the last two years, too, the current government has sharpened focus on rural road construction through the Pradhan Mantri Gram Sadak Yojana (PMJSY). The last Budget saw a 25% on-year increase in allocation, over and above a 52% increase in the fiscal before, and also fast-tracking completion of road projects. Continued increase in government spending on rural roads, given its high employment intensity, can be a consumption kicker," it said.  

Moreover, it expects the government to announce policies in the budget for low-cost housing whereby resulting in creation of jobs. 

From the long-term perspective, it expects the government polices to reduce overemployment in agriculture by providing opportunities outside of the farm sector. 

Crisil expects the government to push the manufacturing sector by emphasising on ‘Make for India’, along with improving export competitiveness and, design policies to push growth in labour-intensive services sectors such as trade, medical and education services, community and social and personal services. 

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