Truth Regarding Lack of Employment Due to Unavailability of Liquidity

Niranjan Hiranandani, managing director of Hiranandani group wants urgent action on liquidity. “The lack of liquidity in the market is the biggest problem in India and when you talk about employment if you can’t improve the liquidity situation, growth is just a number,” he says.

The reason behind the unemployment and underemployment in a country like India is the deficiency of the stock of capital in relation to the needs of the growing labor force. A nation’s stock of capital can only be enhanced by increasing investment which, in the absence of any underutilized resources, requires additional saving on the part of the community. The concern of the traditional economists was to ensure that the rate of capital formation was kept sufficiently high so that employment opportunities were successively enlarged to absorb the additions to the working force of a country as a result of population growth. This is also one of the problems that a country like India is facing today. In recent times, the labor force in India has been growing at more than 2 per cent per year, yet our rate of investment expressed as a percentage of our stock of capital has not been growing at a fast enough rate so as to keep pace with the growth of population.

Whereas many private sector prefers to invest in high evolving capital plants and equipment on the basis of technology developed in labor-scarce western countries. It is argued by them that the alternative labor-intensive techniques have low productivity and low surplus-generating capacity. However, the important reason for the use of capital-intensive techniques has been the availability of cheap capital. Even firms in modern small industry sector which were expected to generate large employment opportunities have also tended to use capital-intensive techniques of production.

The Experts Like Dr Niranjan Hiranandani, who is being in real estate industry  recommended that stability on employment largely depends on what will revive the white collar job market that required close observation wish lists on economic policy – boost consumption, ease liquidity, further liberalize rules that govern entrepreneurship, incentivize manufacturing etc. No one expects a quick turnaround, meanwhile job market numbers look more and more grim. Manpower Employment Outlook survey shows only 13% of companies in the country plan to hire more people in the July-September quarter, down from 16% in the same quarter

Another reason for the slow growth of employment in the organized sector has been the existence of unduly rigid protective labor legislation which makes it very difficult to retrench a worker who has been employed for 240 days. Labor legislation is so much rigid that it is even difficult to close down the unit and quit the industry. Thus, this excessively protective labor legislation induces private entrepreneurs to prefer the maximum use of capital in place of labor.