Politician - a villain of middle class

Since the economy began its downward push three years ago, our economic pundits, particularly those in the government, are not very forthcoming with facts about its impact on jobs and employment in ordinary middle class households.

When asked, one hears the usual chatter about how the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is uplifting the rural poor with 100-day work, but hardly anything about the Kapoors and Srinivasans and Chatterjees next door, who have already spent lakhs of rupees to put their children in one of those mushrooming engineering colleges or business schools. They have gambled on what starry-eyed journalists call the `India story'.

It has been a bad gamble, which will surely hurt just too many losers. In 2009 alone, a total of 1.66 million boys and girls were enrolled in the country's mostly private engineering colleges and another 181,277 in B-schools.

The number is still growing. Unfortunately, as they have been flooding the job market in ever enlarging waves, the doors of factories and businesses are shutting down everywhere, be it at home or abroad.

In the `socialist 70s', the jobless BAs were so common place that they weren't even noticed. However, college degrees in that era were both useless and inexpensive. But now the BTechs or MBAs are proving to be equally `useless', that too after humungous parental investments.

The ministry of labour has calculated that, leaving alone dole-seekers under various welfare schemes, the labour force should go up from 520 million in 2009-10 to 574 million in 2014-15. That calls for an addition of 11 million jobs each year. It includes all kinds of workers -from engineers to skilled workers and even the unskilled.

The `Annual Report to the People on Employment,' published by the ministry, says that for so many jobs to be added annually, which works to a 2.5% employment growth on an average, there are two conditions that must be met: (a) the GDP must grow at 9%, and (b) the employment elasticity (the proportionate change in employment after a unit proportionate change in economic growth) must be 0.29, as it was in the period between 1993-94 and 2004-05.

But India seems to have long since turned the page on sustaining growth at 9%. While the Prime Minister's Office has cut its forecast to 8.2% this year, US investment banker Morgan Stanley has given only 7.2%.

Nor is employment elasticity expected to hit the 0.29 mark, as there is little hope of revival of the labour-intensive and export-oriented sectors like textiles and garments or diamond cutting and polishing, badly hit as they are by the severe credit crunch in Europe and the US.

The report's authors have worked out contingencies for declining employment elasticity. If it falls to 0.25, it is said, the economy must then grow 10% to accommodate the newcomers to the labour market.

If it drops as low as 0.20, the economy must then zip 12%. In short, to keep India's growing numbers of skilled youngsters in employment, the government must do a Deng Xiaoping act now. It will be of no use to avoid the crisis in middle class existence by pontificating about `inclusive growth'.

Till recently, the phenomenon of jobless engineers and MBAs was somehow masked by continuing growth of Information Technology (IT) and BPO jobs. Of the total salaried jobs of 979,000 created in 2010-11, IT and BPO accounted for 665,000. For these jobs, there is only bad news now.

Many foreign banks (like Santander, the British bank) are now refusing to renew their call centre contracts with firms in Bengaluru or Pune.
Instead, they are hiring companies in their own countries.

In the US, rising unemployment has brought down the hourly call centre wages to $14 which, with the extra value for the customer hearing the familiar twang from the other end, is much for employers to celebrate about. For voice BPOs still offshore, the destinations are the Philippines and Cairo, both known to be offering good language skills at affordable price.

It is difficult to guess when the steep admission fees and tuition at private engineering colleges and B-schools will start dropping to keep pace with the falling returns. But a lag is expected before the market corrects itself.

If India fails to capture the high growth trajectory anytime soon, it will have to live with a middle class having its hope belied of becoming an achiever from an aspirer, all in a single generation. It amounts to asking the mall scouting youth today to imitate their papa's and mom's ways of saving the last coin for the rainy day and not knowing if Versace is a cat or a dog.

A drastic fall in people's self-esteem breeds anger in the public mind that may express itself in several ways. Historians (CA Bayly) have shown how the loss of status of the Bais Rajputs of Awadh or the Muslim Rohillas from the north of Delhi, who had served in the Muslim armies for centuries, drove them to rebellion in 1857.

In the context of modern India, the urban petit bourgeoisie tasted its hour of glory for the first time in the past decade when, thanks to a respectable economic growth of around 7% in the first decade of the 2000's, its children grew into affluent adults.

Maintaining the pace requires even faster growth. But instead of pressing harder on gas, we've jammed the brakes. It has created a middle class discontent more widespread than ever, with everything heard in the street about corruption in places high and low sounding absolutely credible.