The Union labour ministry has proposed a new employment policy that, while envisaging creation of 58 million jobs in two years, links incentives and credit to a project to the employment it commits to generate. The objective is also to impart skills to 500 people during the 12th plan. All this is also expected to increase incomes of the “working poor”.

Labour minister Mallikarjuna Kharge has circulated the first draft of this policy among various stakeholders, including other Union ministries, states, industry associations and institutes -- the last named will be the links between trained people and the companies.

“We have had five rounds of consultations with other ministries, states and industry associations,” said a labour ministry official. The policy, to now go before the cabinet for consideration, will attempt to find ‘productive jobs’ for 10 million educated youth that enter the job market every year.

The aim is to widen the government’s ‘inclusive economic growth agenda’ to include also the organised sector which employs less than 10 per cent of India’s workforce. And this may drop in relation to output growth in organised industry and trade.

Agriculture, manufacturing, construction, retail trade, tourism, information and communication technology have been identified as potentially the biggest employers in the medium term.

As a cornerstone, the policy proposes to link fiscal incentives, financial support and credit to the number of jobs created by companies. To that end, the Foreign Investment Promotion Board (FIPB) and the Reserve Bank of India (RBI) will link clearance of investment proposals to job creation. Financial incentives and tax concessions are to have similar linkages with employment, work conditions and social security provided by domestic companies.

The ministry wants banks to grant interest subsidy and easier credit terms to companies that generate more jobs by deploying labour-intensive technologies, equipment and processes.

Infosys human resources director Mohandas Pai endorses the policy move. He said, “I agree fully. For the past 60 years Indian policies have focused on incentivising capital and not labour. We are a labour surplus country and should incentivise employment.”

He said India should have changed its policies 30 years ago and made jobs the top priority. “China has focused its policies on job creation and succeeded. Our wrong policies have led to wastage of capital, gold-plating of capacities, inadequate job creation, low skill development and low consumer demand,” said Pai.

Infosys with nearly 1,15,000 people on its rolls is the second-biggest employer in the IT industry after TCS, which has over 1,63,000. Wipro has 1,13,000 staff.

Pai’s comment on Chinese policy is pertinent. That country factors in work hours generated by every export consignment.

Others in favour of the labour ministry’s initiative include travel & tourism, one of the biggest job generators. As per one study, for every foreign tourist arrival, seven jobs are created.

“Tourism creates more jobs than even IT,” said Karan Anand of Cox & Kings. He said the plan to use the incentive linkage to job creation would help the tourism sector. Cox & Kings employs 800 people in India.

According to the Travel and Tourism Competitiveness Report 2009 of the World

Economic Forum, the industry in India was fifth in 10-year growth as an employer. It is expected to become the second largest employer in the world by 2019. Globally, the travel industry accounted for 6.4 per cent of total employment in 2009. This is expected to rise to 7.2 per cent by 2019.

Kishore Biyani, chief executive officer of the Future group that has 40,000 people, declined to comment on the proposed linkages, not having seen the policy draft. “But we see almost 20-30 per cent growth in new employment this year in our group alone. The government has its own way of looking at things. Every company on its part creates employment opportunity.”

The policy prescription also proposes a sector regulator to ensure that organised large corporate retail houses do not gobble up the livelihood of small vendors and stores. It will also ensure decent work conditions in their businesses.

According to Biyani, every 100 sq ft of modern retail space creates one job. The India Organised Retail Market 2010 report of Knight Frank India says about 55 million sq ft retail space will be ready in Mumbai, the national capital region (NCR), Bangalore, Kolkata, Chennai, Hyderabad and Pune in the next two years. That gives an idea of the potential employment.

Trade is also identified as a growth driver for jobs. The ministry wants duty drawbacks, tax incentives and concessions to be granted in proportion to the number of jobs created by exporters.

The labour-intensive leather industry sees the policy draft as being in the “positive direction”. Habib Hussain, chairman of the Council for Leather Exports, said, “The government must keep in mind the seasonal nature of our sector before announcing a final policy. There is a need to map labour intensive areas and then create infrastructure to help small and medium units,” he said.

With the right policy, he thought, employment in the sector can go up by another one million in five years.

Opponents are aplenty, the engineering sector among them. “We face acute labour shortage due to the rural job guarantee scheme. The centre should extend the scheme to provide labour in export production units also,” said Aman Chadha, chairman of the Engineering Exports Promotion Council. The sector employs 28.86 per cent, or three million, of 10.4 million employed in the organised sector.

Sushil Patwari, chairman of Nagreeka Exports, is against linking export incentives with jobs. Labour policy cannot be linked to export incentives when there is a labour shortage, he said. “Most export benefits are a partial refund of transaction costs and our export interest rates continue to be higher than in other markets,” said Patwari.

Some of the biggest manufacturing houses like Reliance, Tatas and Larsen & Toubro declined to comment. Reliance employs

23,365 people, L&T has 29,000 people on board. There are 3,57,000 staff, including in 80 countries, on the rolls of Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata Communications.

The labour ministry has justified linking easy credit to employment, saying only 5 per cent small and medium enterprises have access to institutional credit. A mere 5.3 per cent of all bank credit goes to micro-enterprises that account for 98 per cent of all enterprises.

The policy also proposed support to enterprises addressing issues like child & bonded labour, environment and gender.

badarinath@mydigitalfc.com

(With inputs from Jayashree Maji, Parul Chhaparia, Sarita C Singh, Yogima Seth Sharma in New Delhi, Riwik Mukherjee in Kolkata and BM Thanuja in Bangalore)