J & K Column

EMPLOYMENT STRATEGY FOR JAMMU & KASHMIR

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VOL. XXXVII NO. 45 PAGES 40 NEW DELHI 9-15 February 2013 ` 8.00

T he high economic growth in the coun-try over the last decade has created

tremendous employment opportunities foreducated youth in major cities of the coun-try and even in tier 2 cities. Looking intothe future, there is a high demand forskilled youth in 8 – 10 fast growing sectorsof the economy, which includes servicesector and manufacturing sector. There isa great window of opportunity for skilledyouth of the country. The state of Jammu& Kashmir has also shown high econom-ic growth. However, it has not been ableto meet the aspirations of the populationparticular the youth in the state.To establish the broad contours of theproblem it is important to estimate theemployment- unemployment numbers forwhich there are two main sources name-ly the National Sample Survey Office(NSSO) and the District Employment andCounselling Centres (DECC) in J&K.According to the NSSO, the labour forcein J&K increased from 4.01 million in1999-00 to 4.37 million in 2004-05 whilein this period the work force increasedfrom 3.94 million to 4.27 million falling alittle short of the increase in labour force.In 2004-05 the state had around one lakhunemployed persons and in 2007-08 thisnumber was higher at 1.3 lakhs. Howeverthe DECC data shows a much higher fig-ure of unemployed at 4.48 lakhs inNovember 2009 and 5.89 lakhs in March2010. The variations in the two sets ofdata could be due to conceptual andmethodological differences. It may thus

be useful to view the NSSO number ofunemployed as the baseline number forstrategizing on the number of jobs thatneed to be created and the DECC num-bers regarding ‘job seekers’, as the aspi-rational ceiling number. An ‘Expert Group’ was set up by thePrime Minister in the context of a needto enhance the employment opportunitiesin the State of J&K and to formulate ajobs plan involving both the public andprivate sectors, especially for the youth.The report suggested a two prongedapproach to employment generation (a)identify sectoral initiatives for growthand employment generation and SpecialIndustry Initiative for J&K (SII-J&K) (b)increase employability of youth byimproving skills through improvingaccess to education and focus on place-ment oriented training SkillEmpowerment and EmploymentInitiative for J&K (SEE-J&K) . In case ofthe latter i.e. to improve the skills of theyouth and create employment, the ExpertGroup suggested a number of initiativesof which the scheme, “Skill,Empowerment and Employment inJammu & Kashmir” (SEE J&K) is animportant one.SECTORAL INITIATIVES(i) Agriculture and Animal Husbandry-Focus areas in agriculture are micro proj-ects for assured irrigation, upgrading soiltesting facilities, engage agriculturalgraduates agricultural extension effortand a basmati rice mission. In the case of

animal husbandry, a highly labour inten-sive sector, increased public investmentin the poultry/dairy sector and improvisedagronomic practices for quality fodderproduction to increase the growth poten-tial of the sector. To undertake these, spe-cial allocation under the Rashtriya KrishiVikas Yojana has been suggested.(ii) The highly labour intensive livestocksector with its capacity to cater to thepoor and absorb large number of skilledand unskilled workers is important to theJ&K economy. With productivity increase,this activity has the potential to augmentagricultural incomes and increased publicinvestment in the poultry sector.(iii) Horticulture – Horticulture sector inJ&K accounts only for 13% of the netsown area but contributes 45% of state’sagricultural GDP. It has been growing inimportance contributing to nutritionalsecurity, land productivity, employment,exports and farm incomes. Important ini-tiatives are investments in rejuvenation/replanting of orchards, innovative use ofbiotechnology, public investment in post-harvest infrastructure including food pro-cessing and creation of a network of stateof art mandis or modern marketplaces.(iv) Tourism – Tourism sector with itspotential for employing people across theskill spectrum and positive externalitiesfor other sectors, like handicrafts, hand-looms and transport occupies an impor-tant place in development and employ-ment strategy of J&K.

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The Government performs diverse func-tions ranging from defence of the coun-

try and maintenance of law and order in thecountry to promoting economic develop-ment and delivering social services likeeducation and healthcare. Clearly, theGovernment needs a significant amount offinancial resources for delivering all theseservices. It mobilizes these funds from thecountry’s resources mainly through taxes,fees/ service charges and borrowings.Tax Revenue and Non-Tax RevenueGovernment Revenue can be divided intotwo categories: tax revenue and non-taxrevenue.Tax Revenue: Tax refers to the moneycollected by the government through pay-ments imposed by legislation. Non-Tax Revenue: Non-Tax Revenuerefers to revenue of government raisedthrough instruments other than taxes suchas fees/user charges, dividends and profit ofPSUs, interest receipt, penalty or fine etc. Direct and Indirect TaxGovernment revenue through taxation canbe broadly divided into Direct Taxes andIndirect Taxes.Direct Tax:Those taxes for which the tax-burden cannot be shifted or passed on arecalled Direct Taxes. What this means is:any person, who directly pays this kind of atax to the Government, bears the burden ofthat particular tax.Examples include corpora-tion tax, personal income tax and wealth tax.

Indirect Tax:Those taxes for which thetax-burden can be shifted or passed onare called Indirect Taxes. What this impliesis: any person, who directly pays this kind ofa tax to the Government, need not bear theburden of that particular tax he/she can ulti-mately shift the tax-burden to other personslater through business transactions ofgoods/ services. Indirect Taxes includeCustoms Duties, Excise Duties, Service Tax,Sales Tax and Value Added Tax (VAT).Indirect tax on any good or service affectsthe rich and the poor alike. Unlike indirecttaxes, direct taxes (i.e. Corporation Tax,Personal Income Tax, WealthTax etc.) arelinked to the tax-payee’s ability to pay andhence are considered to be progressive.Corporation Tax: This is a tax levied onthe income of Companies under theIncome Tax Act, 1961.Taxes on Income: This is a tax on theincome of individuals, firms etc. other thanCompanies, under the Income Tax Act,1961. This head also includes otherTaxes, mainly the ‘Securities TransactionTax’, which is levied on transaction in list-ed securities undertaken on stockexchanges and in units of mutual funds.Wealth Tax: This is a tax levied on thespecified assets of certain persons includ-ing individuals and companies, under theWealth Tax Act, 1957.Customs Duties: It is a type of tax leviedon goods imported into the country as well

as on goods exported from the country. Excise Duties: It is a type of tax levied onthose goods, which are manufactured inthe country and are meant for domesticconsumption. Sales Tax: It is levied on the sale of acommodity, which is produced/importedand being sold for the first time. Service Tax: It is a tax levied on servicesprovided by a person and the responsibil-ity of payment of the tax is cast on theservice provider. Value Added Tax (VAT): VAT is a multi-stage tax, intended to tax every stage ofsale of a goods where some value has beenadded to the raw materials; but taxpayersdo receive credit for tax already paid on theraw materials in earlier stages. Division of Taxation Powers betweenCentre and StatesThe Constitution of India provides a cleardivision of the roles and responsibilities ofthe Central Government and StateGovernments, which has translated into adivision of expenditure responsibilities andtaxation powers between the two.In India, the power to levy taxes and dutieshas been divided among the Governmentsat the three tiers, i.e. Central Government,State Governments, and Local Bodies.This division follows specific provisions inthe Indian Constitution.

Central Government has been vestedwith the power to levy: Income Tax

(except tax on agricultural income, whichthe State Governments canlevy),Customs duties, Central Excise,Sales Tax and Service Tax.

State Governments have been vestedwith the power to levy: Sales Tax (taxon intra-State sale of goods), StampDuty (a duty on transfer of property),State Excise (a duty on manufacture ofalcohol), Land Revenue (a levy onland used for agricultural/ non-agricul-tural purposes), Duty on Entertainmentand Tax on Professions.

Local Bodies have been empowered tolevy: tax on properties (buildings,etc.), Octroi (a tax on entry of goodsfor use/consumption within areas ofthe Local Bodies), Tax on Markets andTax/User Charges for utilities likewater supply, drainage, etc.

The system of Sales Tax levied by StateGovernments has now been replacedwith Value Added Tax (VAT). Distribution of Revenue collected inthe Central Tax System As required by the Constitution of India, aFinance Commission is set up once everyfive years to suggest sharing of financialresources between the Centre and the States, a major part of which pertains to thesharing of revenue collected in the CentralGovernment Tax System. At present, the

Know your Budget Series

TAXATION- CONCEPTS AND TRENDS--Pooja Rangaprasad

[The following write up is about the report of Dr. C. Rangarajan Committee set up by the PrimeMinister to formulate a Jobs Plan for Jammu and Kashmir, particularly the youth, involving bothpublic and the private sectors.]

Continued on page 40

Continued on page 40

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EMPLOYMENT STRATEGY FOR ...Continued from page 1This sector with large employment potential requiresimproved connectivity, development of tourist circuits,comprehensive review of security restrictions inLadakh, training youth in the hospitality and adventuretourism sector and creating an integrated online tourismportal in PPP mode.(v) Handicrafts – The handicraft sector in J&K occu-pies an important place, employing 4-5 lakhs artisans,179 major craft clusters and revenue generation of overRs. 1000 crores. To boost growth in the sector some ini-tiatives are small carpet production centres, develop-ment of a cluster for embroidery and crafts, building atangible “Kashmir” brand image and design and enforcetraceability norms.(vi) Micro, Small and Medium Enterprises (MSME) -Focus on improving access to finance by reviving theJ&K State Financial Corporation (JKSFC), increasingthe scope of central employment scheme (PMEGP) andpurchase preference for government procurement(vii) IT&ITES/BPO - Long term strategy for success inthe sector would require peace, connectivity, vibranthospitality sector and skilled manpower. An immediate‘quick win’ strategy would be to connect all the districtson a priority basis, an operational SWAN network, sim-plification of procedures to encourage private invest-ments and creating infrastructure in terms of SoftwareTechnology Parks.Skill Development and Direct Employment India’s growth trajectory has used the skills of the edu-cated middle-class to boost services ranging from ITand software to, airlines, banking, hotels and telecom-munications. In J&K, the long drawn militancy and thedisturbed political environment have eroded the skillbase of the youth in the state. Besides, this problem ofskill gap is sharper in J&K due to the lack of private sec-tor initiative in industry which is often an important driverfor skill acquisition.Skill Empowerment and Employment for J&K (SEEJ&K) : SEE J&K Scheme is a placement linked, marketdriven skill training programme for J&K youth.MoRD will be the nodal agency to implement theScheme in J&K. The Swaranjayanti Gram SwarozgarYojana (SGSY) Scheme, which is currently implement-ed by MoRD and which forms the basis of this Scheme,is limited only to rural BPL youth. The proposed schemefor J&K will be a Central Sector Scheme, and will coverall youth: from rural and urban areas, and, BPL and non-BPL category. This scheme will cover 1 lakh youth fromJ&K in the next 5 years and will be implemented throughcompetent training providers, from the private sector andnon-profit organisations. The scheme will cover trainingfor salaried employment as well as self-employment. It isestimated that 70% funds will be used to providesalaried employment linked training, and the remaining30% for self-employment linked training. The trainingproviders for placement linked skill training will give a 75percent placement guarantee for the trained youth.Placement for youth will be provided all over the country,within J&K and outside. Under SEE J&K Scheme, differ-ent training strategies will be used for diverse groups ofyouth- school dropouts, dropouts of XII class level andthose who have had college education. The J&K Scheme will follow a bottom-up approach, tai-lored to move the J&K youth from the unorganized to theorganized labour market and generate self-employment.The scheme in the first year upto March 2012 was treat-ed as a year of experiment. Special Industry Initiative (SII-J&K)J&K has a large talent pool of youth who are well edu-cated but are unable to find employment due to lack ofsoft skills or lack of practical/hands-on training. Toengage the youth, one initiative could be to identify 10-20 companies across industry sectors to partner with aneducational institution and run special training programsto enhance employability of 8000 youth per annum inJ&K over a five year period. This would translate to40,000 youth in J&K becoming employable in varioussectors across India. This could be operationalizedthrough a scheme to be executed in the PPP mode with

50:50 cost-sharing between the government and the pri-vate sector. The companies would organize training indifferent sectors of industry with the training durationbeing determined by the needs of the particular sector. Aparallel exercise would be initiated to promote self-employment of Kashmiri youth. The local institutionalpartners who have agreed to participate are KashmirUniversity and the Islamic University for Science &Technology. A specific scheme to do this was submittedto the Expert Group by Infosys Technologies whichenvisaged the creation of a Special Training Program(STP) in collaboration with IIIT Bangalore to enhance theemployability of science and engineering graduates inJ&K to become “Software Industry Ready” and thus“Employable” by providing technical and behavioralskills relevant to the field of IT. To increase the access ofthe youth to educational opportunities the Expert Grouprecommends four initiatives - first, a Special ScholarshipScheme for J&K (SSS J&K), second, faculty develop-ment programmes and third, initiative by Delhi PublicSchool and fourth, special initiatives by Indira GandhiNational Open University (IGNOU) for J&K.Special Scholarship Scheme for J&K (SSS-J&K)(i) The state must increase the number of institutions ofhigher education in J&K but in the short run there is aneed to encourage the J&K youth to take advantage ofthe educational opportunities in the rest of the country.One way to do this is to give financial support through aspecial scholarship scheme for J&K (SSS J&K). On theone hand, the scholarships would enable the youth tooptimize their full academic potential and turn to produc-tive activities, while on the other they would give the J&Kyouth an opportunity to interact and bond with theircounterparts from the rest of the country. The scholar-ship scheme, which is in addition to the existingschemes, would be applicable for courses in allGovernment Colleges/Universities, EngineeringInstitutions, Medical Colleges and some select privateinstitutions to be identified by the government on thebasis of some objective criteria. Students from J&K whoget admission in these institutions through the normalselection process would be eligible for scholarships,subject to a parental income ceiling of Rs 4.5 lakhs perannum. The Expert Group recommends that 5000scholarships per annum may be awarded. Out of thetotal, 4500 scholarships (90%) could be for generaldegree courses, 250 for engineering (5%) and 250for medical studies (5%). This will benefit 25,000students. Besides, the state government must also takeactive steps to utilize the existing government scholar-ship schemes.(ii) If the capacity of the educational institutions in J&Kis to be built up, it is essential to enhance the faculty skillset. One important dimension to this is the interaction ofthe academicians with the industry to understand theirexpectations of entry level student skills. An interest-ing example of this connect is the FacultyEnhancement Programmes (FEP) conducted by theInfosys Development Centres which have trained4900 faculty members from engineering institutions.The other initiative is by the Directorate GeneralEmployment and Training (DGET) which has conduct-ed ‘Training of Trainers’ programmes in ITI’s. The statemust actively leverage these programmes to expandtheir scope in J&K. (iii) Ministry for Minority Affairs (IC) has made a sug-gestion that private schools and educational institutionscould be persuaded to accommodate children fromJammu and Kashmir. An offer to (a) bring together rep-resentatives of schools and academic institutions tomake a commitment and (b) persuade the Delhi PublicSchool and the 150 odd schools that carry the name toset aside as many seats as are required to meet such acommitment. (iv) IGNOU, a pioneer in open and distance education

has a large presence in J&K and has helped a numberof students to resume their education in places that havebeen adversely affected by the disturbances. IGNOU

has agreed to launch an interactive platform for register-ing students in J&K for job placements. They will estab-lish Regional Placement Cells (RPC) in Srinagar andJammu which will provide a platform for prospectiveemployers to communicate with job seekers of Jammu,Srinagar and Leh through virtual job portal, job fairs,placement drives and walk-ins, provide career specificcounselling and guidance, carry out competency map-ping of all job aspirants, identify skill gaps and assessand certify existing skills of the youth for vertical careermobility and lateral professional movements. The RPCwould have members from local educational institutions,IGNOU centres, industry representatives and studentsand will forge partnerships with the J&KEntrepreneurship Development Institute and variousChambers of Commerce and Industries. MoreoverIGNOU will also enrol youth from J&K in an AyurvedicTherapy Training Programme which is currently beingrun for the North East states.TRAINING (i) Training Content: The Project ImplementationAgency (PIA) has to ensure appropriate content, withinputs from the industry to ensure employability as percurrent industry practices. Course/curriculum shouldpreferably be designed jointly with prospective employ-ers/industry. Training and course content into local lan-guages has to be ensured to enable better absorption bythe youth who may not have exposure to English.(ii) Skill sets: The objective of the program is to impartskills necessary for regular employment, so that the ini-tial salary is not less than the prescribed minimumwages. In addition to technical skills, soft skills are alsoto be imparted to beneficiaries to face transition chal-lenges of moving from an agrarian backdrop to theindustry environment.(iii) Training Partners: Partnership with training agen-cies and employers which have aptitude and capabilityto conduct training and placement of youth after certifi-cation acceptable to the industry is solicited.(iv) Course Duration: The course duration will rangefrom 1-3 to 9 months. Courses of short duration of up tothree months will be preferred so that the opportunitycost of being away from productive work opportunitiesduring training period are minimized.(v) Certification and Assessment of trainees:Independent certification and assessment by third partyagencies acceptable to the industry or employers is manda-tory to ensure high quality standards and employment.(vi) Trainee accommodation: Wherever necessary,boarding & lodging facilities are to be provided to thetrainees by the PIA so that youth in remote locations canbe covered. In other cases, trainees are to be providedwith to and fro transport and food.(vii) Mobilization and Selection of Trainees: All thetrainees in the age group of 18-35 years with requisiteaptitude depending upon the trade or job requirementsare to be selected from families, as per the list main-tained by the District Employment and CounsellingCenter/ State Government. In addition, the PIA will takeappropriate awareness and publicity campaign in localelectronic/print media, conduct road shows, and organ-ize meetings for spreading awareness of the schemeand for enrolling youth. (viii) Preliminary Screening of Candidates: Thetrainees mobilized have to be put through an assess-ment process or other basic screening tests to assessthe need and aptitude that are fundamental to the tradesin which training is to be imparted and also to reducemidcourse/ post training dropout of candidates beforeplacements. (ix) Attendance and Identification of Trainees: Bio-metric devices will be installed to monitor attendance.Each trainee will be provided a Unique Identification(UID) card to avoid double counting and overlapping. (The article is a compilation by the editorial team ofEmployment News.)

TAXATION-CONCEPTS AND...Continued from page1from all Central taxes – excluding the amount collectedfrom Cesses, Surcharges and taxes of Union Territories,and an amount equivalent to the cost of collection of cen-tral taxes – is considered as the shareable / divisible pool ofCentral tax revenue. In the recommendation period of the13th Finance Commission (from 2010-11 to 2014-15), 32percent of the shareable / divisible pool of Central tax rev-enue is transferred to States every year and the Centreretains the remaining amount for the Union Budget. Tax-GDP RatioGross Domestic Product (GDP) is an indicator of the sizeof a country’s economy. In order to assess the extent ofgovernment’s policy interventions in the economy, some ofthe important fiscal parameters, like, total expenditure bythe government, tax revenue, deficit etc. are expressed asa proportion of the GDP. Accordingly, we need to payattention to a country’s tax-GDP ratio to understand howmuch tax revenue is being collected by the government ascompared to the overall size of the economy.

India’s Total Tax- GDP Ratio (Centre and States combined) (Figures in %)

YEAR TAX-GDP DIRECT INDIRECT RATIO TAXES-GDP TAXES-GDP

2001-02 13.39 3.11 10.282002-03 14.08 3.45 10.632003-04 14.59 3.86 10.732004-05 15.25 4.23 11.022005-06 15.91 4.54 11.372006-07 17.15 5.39 11.772007-08 17.45 6.39 11.062008-09 16.26 5.83 10.432009-10 15.50 5.84 9.662010-11 (RE) 16.46 5.87 10.602011-12 (BE) 16.64 5.99 10.65

Note: RE – Revised Estimate, BE – Budget Estimate; Source: Indian Public Finance Statistics 2011-12, Min. ofFinance, Govt. of India (Series to be contined)(The author is with Centre for Budget and GovernanceAccountability (CBGA), New Delhi based policy researchand advocacy organisation. e-mail; happy@cbgaindia.org)